The Full-Stack VC – Madrona Venture Group

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AUTHOR: Matt McIlwain


The term “full-stack” developer has grown in popularity over the past several years. The term generally means that a developer can code on the back end/server-side and the front end/ client-side, and they have a broad mix of coding and developer skills that can help build the WHOLE APPLICATION. Modern web and mobile applications that rely on quick interactions between end users and back-end services, such as cloud and data processing, gave rise to the need for full-stack developers – someone who brings a deeper understanding, point of view, and skills to build an application through all layers of the computing stack. In this modern era of company building, developers aren’t the only ones that need to have full-stack capabilities.

Having spent over 25 years helping founders build amazing companies, the Madrona team believes that a full-stack venture capitalist is someone who digs in and helps entrepreneurs build the WHOLE COMPANY over a long period of time. Founders and entrepreneurs develop their skills and capabilities from day one of their companies, and they need partners with a broad set of resources to help them grow as leaders and scale their companies. Put another way, the full-stack VC and the perpetually learning founder represent a “founder-investor” fit that every founder strives to find.

Having spent over 25 years helping founders build amazing companies, the Madrona team believes that a full-stack venture capitalist is someone who digs in and helps entrepreneurs build their company over a long period of time.

What does it mean to be a full-stack VC?  There are four core elements: company-building skills, long-term capital, high engagement, and good judgment. These elements represent the empathy of an early-stage focused VC, the judgment and discernment around discovering and scaling product-market fit, and the trust built by making decisions and learning together over many years.

Company-Building Skills: Most founders are building a company for the first or second time. Even with their immense talents, they benefit from investors who have seen around the corner, anticipated future challenges, and helped mitigate them. The VCs with prior operating and advisory experiences, along with some specialized skills, are likely best at serving these founders and their companies. Some specialized skills are functional, like expertise in product management, engineering, go-to-market, or business development. Other skills are situational, like operating plan development, people management and navigating M&A scenarios. There is also significant value in understanding a domain, like cloud computing or fintech, and having deep relationships and learnings within a sector. Having investors and board members who possess a mix of functional, situational, and domain skills, and have the self-awareness to know their strengths and weaknesses, are good indicators of a full-stack VC.

Long-term Capital: Investors and venture capital firms can have very different private company investing strategies. Some investors are angels or seed-stage focused and largely bet on people and the belief that those founders have “founder-market fit” for the problem they are trying to solve. But some of these investors do not have durable funding sources to support a company’s long-term needs. Other investors are mid-stage focused and are looking for companies that have achieved “product-market fit” and are starting to grow systematically. Finally, there are later-stage/crossover investors who are primarily financially driven – focusing more on financial metrics and the ability to achieve liquidity over time.

Full-stack VCs span these stages of investing and supporting companies from the earliest days. They reserve capital to support those companies over the long run. They can make a seed or Series A investment and then invest their pro rata in all stages of those same companies. Those durable financial resources give the founders confidence that their investors will have capital and value-add resources to support them in any market cycle. These venture firms don’t need massive funds (in fact, large fund size can make it easy to “get lost” in a portfolio) and they want to remain aligned with ambitious founders on capital efficiency. Sufficient capital from your early VCs also attracts strong follow-on investors that want to syndicate with early-stage investors that have the resources to build companies over time. Structurally, full-stack VCs and their firms align their economic incentives and outcomes with entrepreneurs who are committed to focusing on long-term value creation.

High Engagement: Successful founders and executives want the autonomy to run their business, but they are also hungry for proactive partners that add value and are available to engage with the company’s strategic needs. A full-stack VC is willing to roll up their sleeves and be available to teams over many years and across many stages of the company’s evolution.

A full-stack VC is willing to roll up their sleeves and be available to teams over many years and across many stages of the company’s evolution. 

A high degree of interaction and a shared context around strategy, people, and culture builds trust. Knowing your venture capitalist (and their firm) has a proven track record of adding value through the highs and lows of company building dramatically increases the alignment around achieving your goals. It is also important to have personal chemistry between founders and their lead investors because a genuine trust relationship leads to quality decision-making and just having fun together along the way.

Good Judgement: No one has “seen it all,” so skills, experience, and engagement can only take the full-stack VC so far. They also need good judgment. Amazon has a phrase for these people — they are “right a lot.” They combine experiential learning, unlimited curiosity, and the ability to “connect dots” in a way that produces advice worth listening to. In our experience, this good judgment usually comes in the form of thoughtful questions, candid observations, and clear framing of problems that help executives think through a hard situation so they can make the best decision based on the information and perspectives at that time. And the best partners approach each decision and the resulting outcomes as a learning opportunity to assess and incorporate into future decision-making objectively.

Full-Stack or Stage Specific VC? Both!

The private investing market has seemingly forced a false choice in some founders’ minds around their investing partners as they grow from early- to mid- to late-stage companies. That false choice is between receiving deep company-building support and operating help or having access to large amounts of capital. The full-stack VC unshackles the visionary founder from this artificial choice because their whole strategy is to get involved early, build trust, and ensure that capital and stage-appropriate company-building capabilities are available throughout. Madrona is not alone in having a full-stack VC strategy and mindset. In fact, we especially enjoy partnering with amazing founders and syndicate investors who share that mindset. And we recognize that companies need different kinds of investors — with a core group that is closely aligned and in your corner as you build the company.

Madrona is most excited to be part of the company-building journey from the formative months and years of a business. Founders are the true customers in assessing and finding full-stack VCs who share your vision for founder-investor fit. When a founder finds that fit, truly special and rewarding experiences and outcomes happen!

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