A group of founders and investors excitedly piled into a party bus on a recent Sunday morning — giant bags of Mendocino Farms sandwiches in tow — to drive an hour east of San Francisco to a tiny airfield in Contra Costa County.
Soon enough, each was strapped to a licensed professional and screaming into the wind as they hurtled 16,000 feet toward the ground.
The whole outing — skydiving, bus, sandwiches — was hosted by Z Venture Capital and startup Aviato as a sort of extreme icebreaker — one that’s becoming increasingly common in Silicon Valley.
“What’s changed in the social construct between founders and investors is that if you have a lot of choice, you want to solve for fit on many different levels,” said Eric Bahn, general partner at Hustle Fund, who attended the event to spend social time with founders. “When you do an activity like skydiving, people naturally get into a more vulnerable state, and you can understand them better as people.”
With competition among investors more fierce than ever as they battle to find the precious few companies they believe are worth a bet, they’re pulling out all the stops to find ways to drag founders out from behind their computers and meet face-to-face.
The wildest perks include private jet travel to music festivals, opulent beachside retreats, and courtside basketball tickets.
Gone are the days when investors and founders would grab coffee or a casual drink to feel each other out. Silicon Valley is now home to thousands of VC firms with vast amounts of capital ready to deploy toward the AI boom.
While household names like Andreessen Horowitz and Sequoia Capital have no problem getting the best founders to pick up the phone, lesser-known investors are employing grand tactics to write checks to startups that might become the Google or Meta of the AI age.
At the same time, San Francisco has dozens of AI startups on every street gunning for venture capital dollars. Faced with an abundance of companies — only a handful of which will bring in windfalls — investors are using new types of social events as shorthand personality tests to suss out if the team would be a good fit for their portfolios.
“Taking capital from a venture fund, it’s like getting into a marriage,” said Josh Constine, a VC at SignalFire, who sees in-person interaction as a way to dig into a founders’ psyche, sense of grit, and an origin story that goes beyond the LinkedIn profile. (Constine is also a contributor to The Standard).
It’s true — there’s no business bonding experience quite like the near-death jolt of jumping out of a plane. Or cage diving with sharks, which the group discussed as an option for their next adrenaline-chasing adventure.
But Constine emphasized that in-person interaction doesn’t have to come from outlandish activities. His approach is to organize scrappy yet inspiring events, like themed trivia competitions and a founders gallery night celebrating the intersection of technology and art. Bahn, too, said the ways in which VCs engage with current and prospective portfolio companies have changed since the pandemic. Dinner dates have largely been replaced with hikes, poker nights, and novel one-off events.
Bahn sees that shift as a good thing. It’s generally more fun for him, and he has found that after they’ve shared formative experiences, founders broach challenging subjects with him sooner. As a onetime founder himself, Bahn likes that today’s entrepreneurs have more discretion in who invests in their companies.
“It’s nice to see the pendulum is in the founders’ court,” Bahn said.
Eric Zhu, the teenage cofounder of analytics startup Aviato (yes, it’s a “Silicon Valley” reference), who has received funding from Bahn, ticked off a list of the activities he’s been treated to by investors, including glitzy parties and boar hunting on one prominent funder’s Texas ranch.
Zhu said the most outlandish attempts to sign up founders come from the VCs trying to grow their reputation in the Valley.
“Tier 1 funds don’t have issues attracting founders, but there are tons of Tier 2 and Tier 3 funds doing things to get founders’ attention,” said Zhu. He knows founders who have been flown on private jets to Las Vegas clubs, given VIP tickets to Sacramento Kings games, and shuttled to swanky wine tastings in Napa. “I think it’s somewhat working.”
Of course, these types of attractions are offered only to those considered to be hot bets. Other founders remain stuck bum-rushing investors at public events or camping out at Blue Bottle in South Park, hoping for a brief encounter.
Happy hours are dead
In 2019, 10 venture capital funds based in the U.S. raised more than $1 billion. By 2022, 35 funds had crossed that threshold, according to PitchBook.
C.C. Gong, a consumer tech and AI investor at Menlo Ventures, said the sheer volume of cash available has motivated her to approach her job differently from investors in previous eras.
“People joke about the value-add investor, but talk to any founder who’s had a really good investor, and it does make a difference,” said Gong.
Part of that is thinking about how to seed relationships with current portfolio companies and prospective founders. One of her strategies is hosting one “creative event” a week, such as a sailing trip on the San Francisco Bay, poker night at her apartment, or a topic-specific hackathon.
She’s found that having original ideas for events brings high-caliber founders and investors together and helps with recruiting. It also does the work of getting folks to actually leave their house.
“I don’t do happy hours,” said Gong. “The best founders don’t have time to go to a pure networking event. They can raise money in a second from whoever they want.”
Michelle Fang, who heads community for San Francisco VC firm Headline, agrees. Her firm moved from the Transamerica Pyramid into a former military barracks in the Presidio because the space allowed it to host unique ways to meet with founders.
Considering that dozens of events take place every week in San Francisco, Fang said, her job is to plan events that are worth founders’ time and attention. Recently, she organized a pottery class for industrial founders, a perfume-making event, and intimate dinners in Headline’s specially designed dining room.
“People come for value first, and then they find belonging along the way,” said Fang, whose job was created just over a year ago in response to changing social preferences in Silicon Valley.
Matthew Rastovac, founder of the AI agent startup Respell, which was recently acquired by Salesforce, said he noticed that the pandemic “broke the social contract of saying yes.”
“It’s always a ‘maybe’ now,” Rastovac said. One offer that got him to “yes” was a flight to Bali and a two-week beachside retreat from a famous tech CEO who invested in his company.
When he was starting out, Rastovac said, the bar for him to break his grindcore routine to attend a social event was extremely high, since there was always so much work to be done.
Indeed, today’s founders are working around the clock to make it big during the AI boom. What’s more, as AI makes “tiny team” startups more efficient, they simply don’t need the vast amounts of capital that startups of the past required to hire hundreds of employees.
“If investors want face time, they have to plan novel things,” Rastovac said. “It’s that simple.”