Ethan Austin, 43, never imagined he’d launch a startup, let alone a venture capital firm. Today, he leads Outside VC, a pre-seed fund that invests in outsider founders building a more equitable financial system, offering $100K-$250K first checks.
Growing up in the 1980s suburbs of Orange County was miles away from anything resembling a tech hub. In fact, he “didn’t know the word startup at the time.”
It wasn’t until law school that the idea of becoming a founder started to emerge. It all began with a seemingly inconsequential opportunity—running a marathon.
During his time dedicated to training, what stood out the most was selecting a charity to raise money for. He ended up picking children’s cancer, but only because the pre-selected list didn’t have an organization for colon cancer – the disease that took his father’s life.
Once he completed the marathon, Ethan wanted to make a bigger impact. Specifically, giving nonprofits an easier way to raise money.
He later met his co-founder, Desiree Vargas Wrigley, and together they aimed to create a way for nonprofits to build websites where they could start fundraising pages. This idea blossomed into GiveForward, an early crowdfunding platform that was eventually sold to GoFundMe.
Now, through Outside VC, Ethan strives to be the kind of investor he wished existed when he was a founder.
“I believe a lot of great ideas will die on the vine if people don’t believe in them early,” he says. “Some of my best investments have been pre-product companies, just ideas, and they’ve grown into some of the biggest companies in our portfolio. I’m not afraid to bet early.”
When it comes to investment, what’s the quickest way to get a yes from you?
There’s a couple of things that need to happen. One, that conversation has to be a “goosebumps” conversation. I’m always looking for people who are extraordinary in their own right.
I care that you’ve—at some point in your life—been the best at something. Not necessarily the best in the world, but the best. It indicates that you have the ability to take something all the way. So, that first conversation has to be electric.
I think the people who get to a “yes” quickly are those with incredibly strong follow-through, who send you all the right information in their investor packets and data room. I love to see a good Q&A.
Putting things in writing ahead of time shows that the person has empathy, is astute, understands the game they’re playing, and isn’t afraid to be transparent. Transparency is essential for partners anyway.
People often compare the relationship between a founder and an investor as a marriage. Do you have any marriage advice?
Like all marriages, communication is key. I think the best way to get the most out of your investor is to be proactive in your communication.
I encourage all of our portfolio companies to send monthly updates. That doesn’t mean they all do, but let’s say you’re in a VC fund with 20 portfolio companies. The VC only has so much bandwidth, so you’re competing for attention.
VCs will want to spend the most time with the founders who communicate proactively, not just when they need to fundraise. The reality is, when you go to raise your next round, most companies in a portfolio aren’t rocket ships.
If you’re not a rocket ship, you’re going to need your investor’s help. It’s hard for an investor to go to bat for you when they don’t know who you are or don’t understand your business deeply—because you didn’t communicate with them regularly.
What is the best way to contact investors without being brushed off?
The best way is always to find someone who can make a warm introduction. If you can do that, it’s ideal. But not everyone has access to that.
If you’re doing a cold email, there are a couple of approaches that work.
One is to keep it super short. Don’t drone on about your product. Instead, highlight the things that catch an investor’s attention: how much traction you have, who your team is. Give them just enough to pique their interest, but not enough for them to say no. Don’t include a deck. All you’re trying to do is create a moment of interest.
The other approach is the exact opposite—and it’s a bit unconventional—but you could write a long email. The key is to make it interesting. The goal of the long email is to avoid being boring.
I recently received one like this. It told an engaging story and narrative. You could tell the person was different and unusual—someone who stood out from the typical crowd. That’s what piqued my interest more than anything else. It was a very long email, but I read the whole thing.
The funding climate is pretty hostile. Do you have any advice on how to succeed?
I’d say there’s still a lot of money in the world. The challenge is identifying the right people. The easiest to identify are the VC firms, but they’re already overwhelmed with deal flow. Their yes rate is, let’s say, 1 percent.
If you can find people who don’t have access to the same volume of deals, your odds of getting a yes become much higher. My recommendation isn’t to pitch more VCs, but to get more creative in who you’re pitching.
About the Author: Tess Danielson is a journalist and writer focusing on the intersection of technology and society.