Sometimes the nontraditional route leads to the best results. Zach Coelius, the managing partner of Coelius Capital, started out as an entrepreneur. Over the past two decades, he founded a bunch of companies, and after a successful exit from one of those, he fell into the world of angel investing via syndications.
And after some time in that world, his connections led him to VC, but not as part of a group. Organically, Coelius’ connections and reputation let him function as a solo general partner (GP).
In this column, I’ve compiled nuggets that Coelius shared with me about his experience in getting his foot in the door, as well as how to leverage favors and the strategies he’s found most useful as a solo GP.
Focus on founders first
If you want to become a VC, you’d better ingratiate yourself with some VCs, right? Not necessarily, Coelius says.
The problem is that most entry-level investors go to VCs first. But unless you’re a VC’s best friend, they’re probably not giving you good quality deals. Investors are keeping the best deals for themselves, and unless you have a sizable chunk of change to kick in, you probably won’t have access to the cream of the crop.
Don’t have a trust fund or riches from a successful exit ready to spend? Coelius has a better — and cheaper — suggestion: Make friends with founders. Then help them out.
In the end, it all comes back to relationships. The more you can help VCs, founders, and the startup community as a whole, the more you’ll build your name.
This requires lots of networking, but if you can bridge the gap between founders and VCs, you’ll be doing the founder a big favor. And if you’ve been helpful at a critical time, you’re more likely to reap the rewards and get included in the deal.
But don’t make it a quid pro quo. No one likes being bound by a strict agreement. Instead, it’s more of a “you get what you give” situation. Founders don’t want to feel like you’re pinning them down, so keep it casual.
This leads to his next big tip:
Offer and leverage favors
Want a friend? Be a friend — to both founders and VCs.
Being friends with a founder involves helping them out with their pain points, such as finding capital. Being friends with a VC involves sending them the best deals you find on the market. And right there is an opportunity to make all the difference for both parties.
Coelius explains this in more detail: “Usually when I first meet a founder, I’ll help out a little bit. Then, if they want more, they’re gonna come back for more. And then I’m like, ‘Great, you want my help? I need to be an adviser,’” he says.
Even if a relationship doesn’t turn into an advisership, Coelius feels there’s value in helping founders in other ways.
“I’m always happy to make capital introductions for good companies. If a company is good [and] I think that the people that I’m sending it to will be excited that I’m sending it to them, the VCs are going to say, ‘Thank you for sending me this deal.’ Then I’m doing a favor for my friends who are VCs,” he said.
In turn, Zach is often invited to get a percentage carry on the deal, and that’s how he turns relationships into his own personal gain.
It’s common in the industry to have someone ask to “pick your brain,” which is sometimes code for “provide free consulting.” According to Coelius, you shouldn’t do that. Use whatever free information or resources that person offers, but when you ask someone for help with something, offer something in return. It could be as simple as an email intro to a vendor or client, or help with finding funding. Either way, it’s important to be useful, not a drain.
“If you’re out there doing favors for people where it doesn’t cost you much, sending an email, making a connection, giving them some advice or doing something that’s super valuable to them (but doesn’t cost you a lot of time), you can pay it forward all day long,” Coelius says.
“That has come back in spades for me in terms of access to deal flow and getting to be in the right rooms.”
Don’t just raise — deploy
When you’re trying to prove yourself as a solo GP, it might feel like building the highest dollar fund is the most important thing. Coelius argues that you should do the opposite: Rather than stockpiling money for an impressive final number, he says new solo GPs should deploy.
The more funds you deploy, the more companies you help become successful. As they grow from that success, they’re likely to seek another round of funding. And if you did a good job helping them with their first raise, they’ll probably come back to you for a second raise.
“Try to figure out how to get access to capital to build a track record, and then leverage that to do more. Over time, the track record accumulates, but I can keep deploying and keep doing the work,” he explains.
In the end, it all comes back to relationships. The more you can help VCs, founders, and the startup community as a whole, the more you’ll build your name. Leading with relationships, not transactions, will facilitate beneficial transactions for all parties involved.
Lean into the strange
Picture this: A founder pitches you an idea and your first instinct is a quick “no way.” But the idea keeps resurfacing in your mind. It sticks with you, and you catch yourself adding little “what if” scenarios to the concept.
Coelius recommends paying attention to these sticky ideas — even if they’re not perfect at first glance.
“It turns out that the decisions I make at the edges have tended to be where my biggest outcomes are,” he says.
Coelius brought up a conversation he had with Uber’s co-founder and former CEO, Travis Kalanick. He told Kalanick what a great idea Uber was but had to point out what issues he’d face with the taxi lobby. Kalanick responded with, “I’m a fighter,” and indeed, he proved to be one.
“It taught me a lesson: When you see a company that has the potential to add an incredible amount of value, but there are some idiosyncratic reasons why you don’t think it will work or something that makes it weird . . . Those are the things you really should lean into,” he says.
Zach also invested in MUD\WTR, a CPG mushroom tea company, even though he knew nothing about consumer packaged goods. He reached out to friends who did have CPG experience, and all of them encouraged him to take the deal. Even though mushroom tea might seem like a bad deal on the surface, it’s been a big success for Zach — and another pro for picking deals that might seem unusual.