Betting on non-traditional founders requires a non-traditional approach.

Silicon Valley has a type. That type has been the same for decades - male (89%), white (72%), Silicon Valley based (35%), and Ivy League educated (13.7%). It’s no surprise this type is very similar to the profile of most venture capitalists (male, white, Silicon Valley based, Ivy League educated). When I first started Crescent Ridge in 2012 after 6 years of working at a (male-run) VC, it didn’t take long to notice I didn’t look like one of them. Yes, I was intimidated and unsure of myself. But it was those doubts that drove me to see opportunity where others saw risk, and develop a differentiated approach around that perspective.

In 2012, the San Diego startup ecosystem was just starting to emerge. There was an early group of founders and community champions passionate about putting San Diego on the map, and in true San Diego fashion they welcomed me into the ecosystem like I was an old friend. I was amazed by all the talent, skill, tenacity, and passion San Diego entrepreneurs had. But why wasn’t anyone investing down here? That was the question which posed the most unique opportunity, and challenge. The exciting part about seeing opportunity where others see risk is there’s no competition. The downside is there isn’t any collaboration, and good companies often don’t get the funding they should to grow. 

This is the thing about not having access to capital - it can either kill you or make you better. It was a few years in that I realized the companies in my portfolio that were the most successful were the ones who were able to balance raising just enough money to focus on how to build a business that ultimately wouldn’t be reliant on capital for its success. This is exactly the approach Collin Holmes, CEO of Chatmeter, took to building his business. Collin had founded Chatmeter in 2009, 4 years before we met. Collin did a lot of things right, which allowed him to be hyper efficient with the capital he did end up raising.  The 3 tactics below highlight a few of the many things Collin did differently in his non-traditional approach to building, scaling, and ultimately exiting Chatmeter.

1. Deep understanding of the problem: Having been in marketing and product development for a decade before breaking off on his own, Collin was in a unique position to understand the opportunity in local, mobile search. Raising only a small friends and family round, Collin spent the first 4 years learning about the market which was rapidly changing. 
2. Ability to listen & adapt to the market: Collin’s first hypothesis was that SMB owners were the most desperate for his solution. But he realized that acquiring and retaining them was incredibly expensive and difficult, so he pivoted to mid-market and enterprise businesses with hundreds of locations. They had the same pain point as SMB owners, but their mindset was slightly different, making it a better match.
3. Scaled at the right time: I was always impressed by Collin’s ability to put the long-term health of the company ahead of short term growth. There were multiple times Collin could have raised more money, expanded customer focus, hired faster, but had the discipline to do it only when the company was ready for that. 

Because of his focus, customer-centric approach, and resourcefulness, Collin was able to own the majority of his company at exit. According to Collin, "The financial benefit of not raising money until we had success was that both me and my employees kept more of the company so we had a bigger payday upon that exit."

With the focus on other types of non-traditional founders in the last few years (women, diverse founders), we’ve seen the above tactics are still important to build a strong foundation for entrepreneurs who look and think differently. For all those who don’t fit the Silicon Valley's “type” - it’s no longer a disadvantage to be overlooked… in fact, it can be your most powerful competitive advantage.