Investing as a Startup Operator to Gain Breadth
Investing as a Startup Operator to Gain Breadth
Jan 12, 2023
Sydecar
Some of the best startup operators are generalists who wear multiple hats. They have to play multiple roles, dive into new areas of expertise, context switch, and push themselves beyond comfort. They become great at working across a wide range of skills and find this best unlocks their potential.
However, as companies mature, responsibilities are divided and roles are specialized. The startup operator is faced with a paradox of expertise: the more closely a person is immersed in an industry, role, or company, the harder it can be to see new patterns, prospects, and possibilities. To keep reaching new knowledge, startup operators can turn to investing. By investing into early stage companies, they regain exposure to a wide variety of professional experiences, company dynamics, and strategies. These experiences in turn inform the challenges they face. Their portfolio creates a wealth of knowledge that they can tap into for their work as a startup operator or future investments.
This power of diversified experiences is clear for Carey Ransom, who has worked across various roles in startups, is an investor, and is the Founder and Managing Partner of Operate, a venture studio that invests capital and a world-class team into product-centric entrepreneurs building data-centric software companies. We chatted with Carey on his experiences as a startup operator and investor, and how the studio model allows him to synergize his experiences.
Sydecar (SC): How did you first get into startups?
Carey Ransom (CR): I got into startups almost 25 years ago. My first experience was on a startup team within an existing software company where I got to observe how quickly things could move.
I really liked that, so then I went to a smaller company, and then an even smaller company where I was effectively a co-founder. I realized that very early stage was my sweet spot.
There's a difference between someone who has to be a founder and someone who's generally entrepreneurial. There are people who have to be the founder. It has to be their idea. I tend to be more entrepreneurial. I like to be around an interesting idea that I can contribute to in some way, but I don’t need to be in charge.
After doing this for eight or nine years, I realized I’d been almost everyone. I've been CEO, I've been the SDR, I've been the CFO, I've been the product manager. So then I thought, “How do I do work with a whole bunch of founders in parallel?” And that's how I ended up starting Operate.
SC: Why did you choose a studio model vs a traditional venture fund?
CR: We called it a venture studio because we wanted to have flexibility for whatever we wanted to do, whether we start a company or lead a seed round.
This model has allowed me to go super wide, which is best for my personality and skill set. I’ve seen more companies than most people I’ve met, and I’ve seen that there are always multiple different answers to any question that comes up at a startup.
SC: How does Operate use SPVs?
CR: We initially used a fund structure so that we could just do a diversified pool. But then we started to see that there were cases where either the company needed more money than we were willing to invest out of the fund or we wanted to own more of these companies through a follow-on investment. SPVs were the perfect tool to accomplish what we wanted to do.
Today, we have 25 portfolio companies and our relationship with each one is totally unique. We deploy capital and provide services in a way that makes sense for us and our companies. That’s where SPVs came into play, because they allow us to have this level of flexibility with how we deploy capital.
We'll continue to use SPVs because there is some amount of balance that we need in a pooled fund. For example, if we have a $10 million fund, we don't want one investment in there to be half of that. But, we will have companies where we need SPVs as a way to increase our amount invested or ownership.
SC: How do you evaluate investment opportunities?
CR: The market says put a pitch deck together, pretend like you have it all figured out, and then go convince the market to give you money… so that you can go figure it out.
I take the total opposite approach. You pitch me as a founder, and I say “Look, I know you don't have it figured out, so let's not play this game. Let's have a real conversation about who you are, what you've learned, what you're trying to learn.”
We feel like we're pretty self actualized. We know where we can help or can’t help, so we want to have an honest conversation with founders. With this approach, you're putting yourself in the position to have the best outcome and to provide the most value to these companies.
SC: How do you see the industry evolving? Do you envision more studios popping up?
CR: I don’t necessarily see that. You've got to have a real stomach for a venture studio. People don't know how to invest in these yet. People want structure and predictability, and studios don’t have that, so it's almost counterculture to venture.
I've told a lot of people the best way to do this is to fund it yourself. Or you can have a single LP who is captivated by your vision. The most interesting studios that I've met have a single LP funder, or they're funding it themselves.
Given the choice, I would fund it myself because I know how much value we've stacked and created in the last two and a half years. The funny reality is that we're going to get to a place where we can fund it all ourselves; that'll be the point at which everybody else wants to pile in even more.
Some of the best startup operators are generalists who wear multiple hats. They have to play multiple roles, dive into new areas of expertise, context switch, and push themselves beyond comfort. They become great at working across a wide range of skills and find this best unlocks their potential.
However, as companies mature, responsibilities are divided and roles are specialized. The startup operator is faced with a paradox of expertise: the more closely a person is immersed in an industry, role, or company, the harder it can be to see new patterns, prospects, and possibilities. To keep reaching new knowledge, startup operators can turn to investing. By investing into early stage companies, they regain exposure to a wide variety of professional experiences, company dynamics, and strategies. These experiences in turn inform the challenges they face. Their portfolio creates a wealth of knowledge that they can tap into for their work as a startup operator or future investments.
This power of diversified experiences is clear for Carey Ransom, who has worked across various roles in startups, is an investor, and is the Founder and Managing Partner of Operate, a venture studio that invests capital and a world-class team into product-centric entrepreneurs building data-centric software companies. We chatted with Carey on his experiences as a startup operator and investor, and how the studio model allows him to synergize his experiences.
Sydecar (SC): How did you first get into startups?
Carey Ransom (CR): I got into startups almost 25 years ago. My first experience was on a startup team within an existing software company where I got to observe how quickly things could move.
I really liked that, so then I went to a smaller company, and then an even smaller company where I was effectively a co-founder. I realized that very early stage was my sweet spot.
There's a difference between someone who has to be a founder and someone who's generally entrepreneurial. There are people who have to be the founder. It has to be their idea. I tend to be more entrepreneurial. I like to be around an interesting idea that I can contribute to in some way, but I don’t need to be in charge.
After doing this for eight or nine years, I realized I’d been almost everyone. I've been CEO, I've been the SDR, I've been the CFO, I've been the product manager. So then I thought, “How do I do work with a whole bunch of founders in parallel?” And that's how I ended up starting Operate.
SC: Why did you choose a studio model vs a traditional venture fund?
CR: We called it a venture studio because we wanted to have flexibility for whatever we wanted to do, whether we start a company or lead a seed round.
This model has allowed me to go super wide, which is best for my personality and skill set. I’ve seen more companies than most people I’ve met, and I’ve seen that there are always multiple different answers to any question that comes up at a startup.
SC: How does Operate use SPVs?
CR: We initially used a fund structure so that we could just do a diversified pool. But then we started to see that there were cases where either the company needed more money than we were willing to invest out of the fund or we wanted to own more of these companies through a follow-on investment. SPVs were the perfect tool to accomplish what we wanted to do.
Today, we have 25 portfolio companies and our relationship with each one is totally unique. We deploy capital and provide services in a way that makes sense for us and our companies. That’s where SPVs came into play, because they allow us to have this level of flexibility with how we deploy capital.
We'll continue to use SPVs because there is some amount of balance that we need in a pooled fund. For example, if we have a $10 million fund, we don't want one investment in there to be half of that. But, we will have companies where we need SPVs as a way to increase our amount invested or ownership.
SC: How do you evaluate investment opportunities?
CR: The market says put a pitch deck together, pretend like you have it all figured out, and then go convince the market to give you money… so that you can go figure it out.
I take the total opposite approach. You pitch me as a founder, and I say “Look, I know you don't have it figured out, so let's not play this game. Let's have a real conversation about who you are, what you've learned, what you're trying to learn.”
We feel like we're pretty self actualized. We know where we can help or can’t help, so we want to have an honest conversation with founders. With this approach, you're putting yourself in the position to have the best outcome and to provide the most value to these companies.
SC: How do you see the industry evolving? Do you envision more studios popping up?
CR: I don’t necessarily see that. You've got to have a real stomach for a venture studio. People don't know how to invest in these yet. People want structure and predictability, and studios don’t have that, so it's almost counterculture to venture.
I've told a lot of people the best way to do this is to fund it yourself. Or you can have a single LP who is captivated by your vision. The most interesting studios that I've met have a single LP funder, or they're funding it themselves.
Given the choice, I would fund it myself because I know how much value we've stacked and created in the last two and a half years. The funny reality is that we're going to get to a place where we can fund it all ourselves; that'll be the point at which everybody else wants to pile in even more.
Some of the best startup operators are generalists who wear multiple hats. They have to play multiple roles, dive into new areas of expertise, context switch, and push themselves beyond comfort. They become great at working across a wide range of skills and find this best unlocks their potential.
However, as companies mature, responsibilities are divided and roles are specialized. The startup operator is faced with a paradox of expertise: the more closely a person is immersed in an industry, role, or company, the harder it can be to see new patterns, prospects, and possibilities. To keep reaching new knowledge, startup operators can turn to investing. By investing into early stage companies, they regain exposure to a wide variety of professional experiences, company dynamics, and strategies. These experiences in turn inform the challenges they face. Their portfolio creates a wealth of knowledge that they can tap into for their work as a startup operator or future investments.
This power of diversified experiences is clear for Carey Ransom, who has worked across various roles in startups, is an investor, and is the Founder and Managing Partner of Operate, a venture studio that invests capital and a world-class team into product-centric entrepreneurs building data-centric software companies. We chatted with Carey on his experiences as a startup operator and investor, and how the studio model allows him to synergize his experiences.
Sydecar (SC): How did you first get into startups?
Carey Ransom (CR): I got into startups almost 25 years ago. My first experience was on a startup team within an existing software company where I got to observe how quickly things could move.
I really liked that, so then I went to a smaller company, and then an even smaller company where I was effectively a co-founder. I realized that very early stage was my sweet spot.
There's a difference between someone who has to be a founder and someone who's generally entrepreneurial. There are people who have to be the founder. It has to be their idea. I tend to be more entrepreneurial. I like to be around an interesting idea that I can contribute to in some way, but I don’t need to be in charge.
After doing this for eight or nine years, I realized I’d been almost everyone. I've been CEO, I've been the SDR, I've been the CFO, I've been the product manager. So then I thought, “How do I do work with a whole bunch of founders in parallel?” And that's how I ended up starting Operate.
SC: Why did you choose a studio model vs a traditional venture fund?
CR: We called it a venture studio because we wanted to have flexibility for whatever we wanted to do, whether we start a company or lead a seed round.
This model has allowed me to go super wide, which is best for my personality and skill set. I’ve seen more companies than most people I’ve met, and I’ve seen that there are always multiple different answers to any question that comes up at a startup.
SC: How does Operate use SPVs?
CR: We initially used a fund structure so that we could just do a diversified pool. But then we started to see that there were cases where either the company needed more money than we were willing to invest out of the fund or we wanted to own more of these companies through a follow-on investment. SPVs were the perfect tool to accomplish what we wanted to do.
Today, we have 25 portfolio companies and our relationship with each one is totally unique. We deploy capital and provide services in a way that makes sense for us and our companies. That’s where SPVs came into play, because they allow us to have this level of flexibility with how we deploy capital.
We'll continue to use SPVs because there is some amount of balance that we need in a pooled fund. For example, if we have a $10 million fund, we don't want one investment in there to be half of that. But, we will have companies where we need SPVs as a way to increase our amount invested or ownership.
SC: How do you evaluate investment opportunities?
CR: The market says put a pitch deck together, pretend like you have it all figured out, and then go convince the market to give you money… so that you can go figure it out.
I take the total opposite approach. You pitch me as a founder, and I say “Look, I know you don't have it figured out, so let's not play this game. Let's have a real conversation about who you are, what you've learned, what you're trying to learn.”
We feel like we're pretty self actualized. We know where we can help or can’t help, so we want to have an honest conversation with founders. With this approach, you're putting yourself in the position to have the best outcome and to provide the most value to these companies.
SC: How do you see the industry evolving? Do you envision more studios popping up?
CR: I don’t necessarily see that. You've got to have a real stomach for a venture studio. People don't know how to invest in these yet. People want structure and predictability, and studios don’t have that, so it's almost counterculture to venture.
I've told a lot of people the best way to do this is to fund it yourself. Or you can have a single LP who is captivated by your vision. The most interesting studios that I've met have a single LP funder, or they're funding it themselves.
Given the choice, I would fund it myself because I know how much value we've stacked and created in the last two and a half years. The funny reality is that we're going to get to a place where we can fund it all ourselves; that'll be the point at which everybody else wants to pile in even more.
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