The Emerging Manager Toolbox is Broken

“Web3 fixes this”

At the end of last year, I created the Emerging Manager Toolbox with the goal of helping first-time venture fund managers create leverage through process design and automation. Since then, I’ve experimented with a ton of tools marketed to VCs -- tools that claim to save you time on fundraising, deal sourcing, internal communication, relationship building, and portfolio management. I’ve talked to fund managers and associates about their experience using these various products and services.

I’ve been meaning to update the Emerging Manager Toolbox . But recently, I realized that the Emerging Manager Toolbox didn’t just need a few tweaks or additions: it needed a complete revamp. And that’s because the new Emerging Manager Toolbox is the “Founder-Investor Stack.”

I came across this term in a tweet from Romeen Sheth in reference to a company called Cabal. Cabal refers to itself as “a private workspace for founders to send asks & updates, track contributions, and tap into their shareholder networks.” No shade, but I can’t keep track of the number of companies marketing themselves this way. Everyone is building “better” tools for founders - and VCs seem to be more excited about these tools than the founders themselves.

This makes sense when you think about it. In a frothy market where capital is easy to come by, leverage is transferred from the hands of capital allocators to the hands of those who are receiving funds. In this new world, it’s not enough for VCs to simply ask “how can I be helpful?” It’s not even enough to have a platform team -- this is now table stakes. VCs have to anticipate what a founder might need in a given moment and serve it up to them where they are. Unfortunately, most VCs don’t actually know how to be helpful. Maybe software will solve this for them! 

Don’t hold your breath. As I’ve previously discussed, so much of the software marketed to the venture industry is not built to facilitate collaboration. To the contrary, many of these tools operate as walled gardens; that is, they are built to lock in users by absorbing customer data, creating high switching costs, and making it near impossible to do anything with that data outside of their system. Then, these companies build new products that they can sell to a customer base that is already locked in. They win because it’s simply too painful for these customers to add incremental tools to their stack and unfathomable to take their business elsewhere altogether.

Is this really so surprising? I mean, these tools are catering to an industry that has built on a foundation of insularity and exclusivity. An industry where the winner takes all. But as the venture landscape changes and founders increasingly seek out investors who will be collaborative and provide real value, the walled garden approach starts to look a lot less appealing.  

Cue: web3 fixes this.

IDK, maybe it does.