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Introducing Leadout Capital I:

Leadout Capital

Leadout Capital

May 16, 2019

・ 6 min

Today, I am proud to announce Leadout Capital I, which just closed with over $27M to invest in pre-seed and seed stage software-driven companies. My partner Bennett Surajat and I decided to form the fund because we fundamentally believe that there is massive financial upside and customer value in finding and supporting diverse teams with unique founder-market fit. This is because these “non-obvious” founding teams represent the new, differentiated ideas and approaches defining the next generation of impactful technology companies serving valuable, overlooked markets.

At Leadout, we identify, vet and invest in gritty, resilient people building great company cultures that generate differentiated products. We support founders who have a track record of overcoming adversity and finding innovative ways to win. Their unique approach stems from founder-market fit — a deep empathy with the audience for whom they are building, and the belief that the best way to build these products is by assembling teams that are culturally empathetic and philosophically aligned with their end customers.

As a former professional road cyclist, my experience training and racing with the best and at the highest professional levels inspired both the firm’s name and approach. In cycling, a well-executed “leadout” formation serves to protect the sprinter throughout the race so she can break out of the entire field at peak velocity and sprint for the win at the finishing line. Similarly, Leadout’s companies count on our help to build the right culture and focus on the right traction so they can unlock the next round of financing that sets them up for long-term success.

Opportunity & Inspiration:

The move over the past several years by some venture capital firms to hire more diversity into their decision-making teams is a good sign of things to come. However, they also underline big hurdles that remain — the venture capital industry is a monolithic group that is more likely to invest in founders the same way it invests in its future hires: generally more of the same. According to #Allraise, women remain deeply underrepresented in VC: only 11% of US VCs are women and only 7% have equal gender representation (source).

We are at a moment in time where diversity and inclusiveness are at the forefront of public consciousness. And these next generation entrepreneurs need a different kind of high-conviction backing at the early stages of company building that is scarce in the marketplace. We look to support teams that value cognitive diversity, which can be defined as differences in perspectives and how one processes information and apply a rigorous method to test business hypotheses from various angles. We help them with recruitment, customer-centric product development, business model strategy and innovation, and fundraising.

As diverse fund managers ourselves, we have the networks to attract and surface founders who see opportunities in the market from which they hail that others do not. Our experience as operators positions us to better work with founders early on to build organizations with inclusive, resilient cultures that attract differentiated talent and foment breakthrough innovation. This really matters to us, and it is resonating with a next generation of founders who are intentionally seeking out sources of capital and experience that is itself diverse and “non-obvious.”

In some cases, we will partner with teams that are being overlooked because they don’t look like, or act like, what traditional venture has learned to look for in pattern recognition. In other cases, we will back founders that do fit “the traditional mold,” but who are looking for investors like us, who can support them in building inclusive cultures to attract and allow diverse talent to thrive, talent which is optimal to developing new and truly differentiated products. We believe there are great returns to be garnered by this approach.

Early Highlights:

In “letting our legs do that talking,” we are proud to highlight two of our most recent partnerships with companies whose founders, team and market represent our values.

Founded by Mariel Reed and Aaron Hans, CoProcure seeks to optimize public procurement. Local U.S. governments can potentially save $300B+ of taxpayer dollars through purchasing efficiencies. Regulations require that governments make purchases only after conducting a competitive bidding process. CoProcure is building a marketplace of competitively-bid contracts that can be legally and readily reused by government buyers, saving time and money for buyers and drastically reducing sales cycles for vendors.

Pawscout is founded by Andrea Chavez and Aaron Lamstein. Pawscout is a network to connect pet owners to keep track of their dogs and cats, set up walks and common play areas and make the neighborhood pet-safe. This mobile, community-driven product is resonating with communities of pet owners across the country and the pet industry is huge.

Team:

Core to our approach is the belief that you are only as good as your team. This is as true in business as it is in bike racing. And it is as true at Leadout as it is in the companies with who we work.

We are a partnership, an operating and advisory network, and a stellar group of LPs comprised of gritty and resilient founders. We are founders, CEOs, CTOs, operators, leaders, doers and listeners. Our community hails from companies such as Apple, Amazon, Cloudera, Dropbox, Envoy, Facebook, Fare, Google, ipsy, Microsoft, Nextdoor, Niantic, Nvidia, Pinterest, Shoprunner, Slack, Square, Stripe, Uber, VMware, Wealthfront, Wix, as well as sports, government, research and academia. We are grateful that members of our community who are talented and seasoned executives in the technology industry, our “Mavens,” are willing to provide mentorship to Leadout portfolio companies on building products and businesses. Everyone under the Leadout umbrella is philosophically aligned with our thesis and actively helps enable our differentiated approach.

We all do better when all of us do better.* We believe that our industry can do better to make both financing and company-building support more democratically available to all founders. We all have our own biases, but we are working hard to make sure that we are not blind to good ideas and good execution. We believe in the value inherent in diversity, wide network persistence and accessibility, and expanding the size of the market of new ideas, products and leaders. Real and enduring change requires more new entrants pursuing this value.

In particular, I’d like to thank Melinda Gates, Reid Hoffman, Megan Smith and Jon Winkelried for their early and significant support of us and our efforts to bend the arc in our industry.

We hope you will join us.

* We are and have been inspired by the rising tide of the effort to democratize access to venture capital. Below are the links to some of our biggest influences and a solid reading list: