Alex:
Hello everybody. My name is Alex. I’m very, very glad to be here today because we are not doing what I usually do, which is sit down with a couple of people from the worlds of startups and talk about numbers and money and all of that. Instead, today we’re going to talk about relationships and in particular, the relationship between board members and founders and how they evolve over time. But thankfully you won’t just be hearing from me. We do have two excellent people with us today, Tracy, Navin thanks for being here. How are you doing?
Navin:
Very well. It’s a pleasure to be here.
Alex:
No, I’m really looking forward to this. I think that this is not a topic we talk about enough out loud. I know that founders talking amongst each other, so do venture capitalists, but I think that the actual relationship building between long-term partners is actually under discussed. Maybe the only thing in the world of startups it’s actually under discussed this year, but I want to go back in time to start to set a little context for everyone who is maybe less aware of the Poshmark story, then the three of us are. So Tracy starting with you. Can you tell everyone how you ended up moving to California and then joining the Poshmark founding team?
Tracy:
Yes. I grew up in a New York area. I was very interested in fashion and that was my world. And I came out to the Bay Area to really partner with a really strong technology and business team. And so came to San Francisco and networked around. And this is where the origin story and Navin comes in, really early as I did not know that the Bay Area did not have a whole bunch of fashion folks. There are none. And so as I met, I ended up meeting my co-founder and we still work together today, Manish, and it was via Navin and his firm that really put those two pieces together.
Alex:
Yeah. And that’s why this is so interesting to me because often founding teams meet their investors. But in this case, Navin your crew had an active role in that. So tell us just a little bit about how that all kind of came together.
Navin:
Absolutely. So Manish and I go back to 2003, 2004, and as he was leaving his last company, he and I started spending time together and looking at what to do next. And one of the areas he was very excited about is building a social fashion marketplace, which would be built on the iPhone, on the mobile thing. But one of the things he recognized is, he’s one co-founder short, where he needs a woman who relates to women fashion, which would be the focus of the company. And that’s where we met Tracy through the network in 2010, introduced them. They spent probably five, six months together, and then they came and pitched us in January of 2011. And that’s what led to the series in financing of the first money of Poshmark, the series in financing in January of 2011.
Alex:
So this is where I want to pick up on a more specific question. I’m curious. What about their pitch was attractive to you? I know that you knew the people, but was it the thesis, the economics, what really drew you in to cut that first Series A check?
Navin:
Yeah. So Mayfield is a people first firm. We believe in people first, market second. We believe people make products, products don’t make people. So it’s all about the people. Then we looked at the problem they’re solving and it was really a pain killer, where you help buyers and sellers of fashion to come together through mobile. The third thing we look at is, they were shifting from search based e-commerce to discovery-based e-commerce based on social and the market for fashion is a trillion dollars. So if you scratch the surface and get to 1% of the market, you’re $10 billion in GMV. So that’s what led to us getting excited about funding the Series A at Poshmark, but it started with people and ended with people.
Alex:
So Tracy, now I want to know a little bit about the early relationship building between you and Navin. I know a lot of startups have monthly board meetings when they’re very, very young, some do quarterly, some are a little bit less frequent. How did you guys go about in those early days, getting the level of trust you’d want to have with your earliest investors?
Tracy:
Sure. I’m going to answer that but first. I just want to take a small detour and add to what Navin just said. We can look back 10 years with rose colored glasses. And the truth of the matter is the world was very different when we were pitching Poshmark at that Series A to Navin and his firm. And I want to give Navin a lot of credit because it wasn’t just the market and what we’re going after and all the things that make business sense. What we were pitching was quite, quite innovative. And I think that if you just looked at the idea itself, it might’ve been really hard to wrap your head around committing and investing to what Poshmark is today. And I do think the people first nature of Navin and Mayfield really helped us come together because he could see the passion and the partnership and the team and really behind not just the great idea, but how we really felt like we were positioned to solve it. So I just wanted to put that in there. And now remind me your question again, please.
Alex:
Essentially building the early relationship. Once you were an operating company board meetings, how were you guys trying to get close essentially in relationship sense? Because things are hardest when your company is the youngest.
Tracy:
Yeah. I think one thing a lot of founders miss with their investors and board members is that they are part of your team too. And that, especially in the early days when you don’t have a lot of people to lean on, and a lot of people who deeply understand what you’re trying to build, your investors and your board members are there with you. If you take them with you on your journey and it’s up to you to form that relationship. So in the early days of Poshmark, Navin was another team member, he was someone that we bounced ideas off of. He gave us support when we needed it, intellectual, financial, emotional, all of the type of support that founders need in the early days. So I wouldn’t say it was just about board meetings. Those are kind of the official ways to connect. For us, team is everything and culture is everything. And that’s how we approached our early relationship with Navin and Mayfield.
Navin:
If I could add, right. I have a firm belief when founders are working with founding investors, is the role of the investors to invest in relationships, not transactions. You need to spend a lot of time with the founders in aligning your mental models and assuring them you will be their safety net and you will be loyal to a fault, but at the same time, you’ll practice radical candor. There you’re going to care deeply but challenge directly, and that healthy balance where they know they’re looking out for you. And it’s not only the board meetings where you spend time with them. It’s all the offline time you spend with them, ends up building a healthy relationship and ends up building the foundation off a built to last company.
Alex:
Yeah. But it feels like you guys had a lot of time, and one thing I think we’ve seen in the more recent venture capital world and startup world in the last 12, 24 months has been an acceleration of everything. Even just due diligence has gone from months to weeks to days to now I’ve heard from some investors, hours. So it seems to me, there’s this demand by the market to get to trust so much sooner. Navin, can you get to a comfortable level of trust with a founder pre-investment these days given how fast things are going? Or is that not as important to you?
Navin:
No, it’s extremely critical and there’ll be a lot of investments we won’t be able to do because we don’t know the founders or we are not able to spend quality time with them. Our belief is getting aligned on the mission, the values, and the culture is critical. And if somebody is only interested in our money, it’s not a good fit for us. So we are a firm, which is people first, we believe in investing in relationships and not transactions. And we have to invest time before we invest money. So we’re not in any rush, right. Business building and venture is a marathon, it’s not a sprint.
Alex:
Tracy. I want to ask you about this from the other direction, because Poshmark went through a number of rounds before it went public. And so you had to add, I presume a good handful of people to the board as you went along, did you put the same amount of time into kind of getting to trust with each board member as you did with Navin in the early days?
Tracy:
Well, there’s never, time is a finite resource. So I would say Navin got a head start with many years with us, but I would say that the approach is the same. We think that culture is one of the strongest pillars of the Poshmark brand, whether it’s external to the company or internal to the company. And as I said before, we really think that our board and our investors are part of the team that can help us get to this crazy lofty vision that we have. And so as we added more members to the team, it’s part of building culture. So if you say that the founders and Navin were at the beginning, right. But we had a dream that was much bigger than just us. And so, as you add people, it’s like, well, what can this person add? And what can that person add? And how as a collective team, do we get stronger and stronger as we go? And so that was the approach. In addition to fundraising that we took, as we built out the board.
Alex:
I want to double-click on that really quick, because I’m just thinking about how many startup CEOs telling me that they were juggling multiple term sheets when they’re raising their next round. So it seems like if you’re a founder, money isn’t the problem instead of kind of probably finding cultural fit slash trust within an investor is probably more important than ever given that there’s so many different fundraising options, Tracy.
Tracy:
Well, listen, if you’re lucky enough to have options, then I would opt for culture. Cash is king, and you have to keep your company alive, right?
Alex:
Yeah.
Tracy:
And if you’re building a solid business and you’re building it methodically, then you should hopefully have some options. So I would try to go for all of it, but you do have to make trade offs.
Alex:
Okay. Navin I want to move this back to you for a second, because I’ve heard about somethings that investors are doing during the pandemic because it’s shaken up the ability to get coffee and so forth with people. And I’ve heard about venture capitalists, playing video games with founders to establish a deeper relationship. Virtual HQ’s are a big thing. So are those the outliers that I’m hearing about when it comes to kind of founders and board members getting closer or are those things relatively common when it comes to really trying to get to trust for early stage company?
Navin:
I think it’s a hybrid. Some people and some venture firms are getting complete comfort doing this virtually. And then there are firms like us, which are using a virtual model where you start building a relationship and start having conversation with founders, or then you figure out how you can over them on a socially distant hike, how you can get them to your home. How can you get to the bottom of who they are, what their dreams are, what their passion is and figure out, you’re a services firm at the end of the day, how are you going to help them achieve their dreams and mission? So I think it’s a hybrid model, but every firm is different, right. One has to be comfortable with what their business model is. You need to believe in your model, your north star and follow that. And to me, since business building is a marathon. It’s not a sprint, spending that time upfront is so critical, so critical. And I tell the founders, don’t just get gamed by what the VC’s saying, go check them references on them, whether virtually or, and you can go on LinkedIn, you can go on PitchBook and see who they are. Really understand because entrepreneurs are going to have choices, really understand who’s going to be with you when things don’t go well.
Alex:
Right. Or who’s going to take credit for it all if things do go well, which is another particular issue we don’t have time for today. Tracy, I want to go back to you and talk about board diversity. One thing that I keep hearing a lot about is bringing on increasingly diverse voices to cap tables. And I’m curious amongst your founder friends, how much does that come into play when it comes to selecting net new board members for companies as they scale?
Tracy:
Well, it’s what you intention. So for us, that’s very important, particularly because what we have built and what we continue to build is something new and it hasn’t been done before. And so we do really benefit from various voices and perspectives. And so bringing on board, Jenny Ming, who is a retail veteran to help us think through scaling Poshmark, beyond where we are today, bring onboard Serena Williams, who is a powerhouse entrepreneur, fashion label producer. And also just how to build brands and to connect with audiences is a perspective we had, but she brings so much more there. And so since we’ve added some different voices to the table, the conversations have come to life and have changed. And so I’ve seen firsthand, not just in building diverse teams, but also like I said, your board is part of your team. So having that perspective has been very helpful for us in the later years.
Alex:
Yeah. So Navin, I want to take this back to you for a second, because you were talking earlier about going on distance hikes with people, having them over your house, kind of presuming a lot of locational proximity, that you’re going to be nearby. A lot of VCs also talk about pattern matching and trying to figure out kind of what might work based on past results. And I wonder if those things don’t in a sense accidentally discriminate against more diverse founders who may not be in the Bay Area, for example, or who may not have the exact same kind of like pattern matched background. So how do you go about building trust with founders who may not fit the kind of usual rubric that you see or that you’re kind of most comfortable with to kind of get out there and invest in more diverse people?
Navin:
Yeah. And I think in today’s world, right. Like there is easy ways to check founders. You’re only one or two degrees of separation away from them based on common connections. But then we have a strong conviction of embracing the unconventional, the different and the unusual. And we believe it’s often the founders who don’t come out of central casting that have the grit necessary to succeed against seemingly insurmountable odds. And at the same time, we have another belief that great people evolve. Almost no one comes into the job, but all the skills and experience they need, this is where our role as a coach, as a VC can help them grow as long as they are continuous learners. So the amount of time you spend, it may not be physical, you can reference check them, but have candid conversations and say, what drives you? What are you looking for? What does success look like for you? Have you made tough decisions? How do you value teamwork? So I think it’s more of a psychology test and it may feel we have an x-ray on founders where we look at who they are rather than looking at their metrics and really studying them and making sure these are the people we want to invest our time and money in and help them grow and achieve their dreams.
Alex:
Navin I want to stick with you for one more. We’re a little bit short on time. So I’m going to squeeze in a couple of quick ones here. I was actually playing video games with a Midwest based seed stage VC last night. And we were talking about when to leave boards and I wanted to bring this to you because he said that he doesn’t really stay on boards past Series A, that’s not really his domain of expertise and so forth. So how do you as a founder or maybe as a different board member, remove board members over time as maybe the company evolves past their expertise without breaking the trust that you had as a group and they were active on the board itself?
Navin:
Yeah. So I think let’s look at the Poshmark situation, right. I have such a close relationship with the founders. I’m going till the end. IPO is just a financing event. I’m there for as long as they need me, today we are the largest shareholder, a year from now we may not be. Where the services from our job is to help them, but there’ll be other where more independent board members can fulfill the need. Then we can post the ideal. Then you transition, but we are loyal to a fault. We are committed for the long run, but it’s all dependent on the founders because if they need something that may feel that I can’t offer you step back. But if he can offer that you continue on the journey. So it’s a collaborative decision rather than just saying I did the Series A, I need to stay on it.
Alex:
Got it. Tracy does that square with your experience as a founder? Does that make sense?
Tracy:
It does and all your questions tied together. It’s, if you can build your board to want to have you win as the number one goal, then all of this just comes, right. And everything else, it might be ups and downs, but these decisions are easy when you have the same goals in mind, when you get into a lot of trouble. And a lot of the horror stories that I hear is when those goals are not aligned and that was never a mindset to begin with. It was more about, I need cash, let me have a cash infusion. They looked at their board members as transactional people and not as a person, what does this person want to see from me, et cetera.
Alex:
Yeah. So we have time just for one more, Tracy, I’m going to leave us with you. So thinking about more red flags, just for all the founders out there who are listening in right now to us, what would you say are a couple of things to watch out for that are potential negatives and maybe even some positives amongst board members, as they go out there to raise more capital and pick their board member team.
Tracy:
So I think there’s a simple thing that a lot of people don’t do as you are raising money, as you are looking to add to your board, do you want to spend a Saturday afternoon with this person? Do you like them? Can you trust them? We have really good instincts. We can decide that you’re talking about short investing or due diligence timeframes. We know within five, 10 minutes, whether we think we can trust someone. And so we have this skill, use that skill and apply it during this circumstance. And I think it’ll serve you quite well.
Alex:
Okay. Well, Navin, Tracy, sorry. We have to wrap it up there and throw it back to Toronto. I had a bunch more, but sadly that’s all the time we have. Thank you much.
Navin:
It’s a pleasure being here.
Tracy:
Thank you.
