Jason Kraus has an extensive background on both the venture capital side and as an entrepreneur. He was an associate for the venture arm of a private family office, reviewing hundreds of pitch deck presentations to filter companies for the investment team. Additionally, he served as a screening committee member for the Boston Harbor Angels and now partners with the CEO of the Boston Harbor Angels group, Ziad Moukheiber, on the EQx Fund.
As an entrepreneur, Jason started his own startup consulting firm, Prepare 4 VC, to bring the investor’s perspective to startups and help them get funded. Prepare 4 VC helps entrepreneurs create business plans, financial projections, slide deck presentations and investor pitches to get the funding they need to bring their company to the next level. He has also co-founded several companies in the FinTech space focused on helping connect startups with crowdfunding and crypto investors.
Jason holds a MSc in Management in Entrepreneurial Leadership from Babson College and a BA in Economics and Math from Colgate University. He is active in the startup community hosting events as Chapter Director for StartupGrind sponsored by Google for Entrepreneurs, with 7000 members in Boston and 1,000,000 members across 400 chapters worldwide.
Portfolio ventures that are going great need almost no support, and the ones that are in the bottom aren’t worth helping. Apart from the two extremes, what do you do about the ones somewhere in the middle? How do you decide how much effort to put into them?
Our investment philosophy is a people-first approach, focusing on investing in strong leadership teams that run the startups we invest in. Our focus on helping the entrepreneurs in our portfolio is relatively similar across companies, we introduce people to the startups that are valuable as potential customers, partners, or investors, we share and promote company news and social media to our network, and we offer an outside perspective and advice to our startups as needed.
How do you balance your time between (1) sourcing quality prospect ventures (2) doing due diligence for prospective investments and (3) helping current entrepreneurs? Which of these are you comfortable outsourcing to principals/analysts and which do you absolutely have to do yourself?
Most of my time is spent talking and meeting with new people and figuring out where we can add value to each other. Some are prospective deals, some serve as diligence meetings for prospective deals and some add value to our current portfolio.Our fund is two partners, we do not use principals/analysts and instead leverage our trusted network including deal flow and diligence from the Boston Harbor Angels, a strong network we tap into for co-investment, and an ever growing pipeline of inbound direct pitches.
Our fund is two partners, we do not use principals/analysts and instead leverage our trusted network including deal flow and diligence from the Boston Harbor Angels, a strong network we tap into for co-investment, and an ever growing pipeline of inbound direct pitches.
Many GPs are good investors but don’t master one of the core skills – adding value as a board member. What do you think are some tricks to a productive relationship with founders? What should the culture be for the board and CEO for a quality relationship?
The board is in place for suggestion and direction from a birds-eye view offering perspective from all of the other ventures they have been involved with as well as making sure the stakeholders in the business have a voice at the table. The CEO is responsible for the day-to-day management, leadership and implementation.
It is crucial to every board that the relationship be clear and transparent and avoid the two extremes we have seen cause problems in startup ventures: being the cheerleader board with not enough oversight like WeWork and Theranos or being the board with an adversarial approach that fires a strong leader like Steve Jobs. The key is maintaining distinct roles, transparent communication and creating an environment where both successes and failures of the business can be discussed.
How do you solve important conflicts with CEOs, such as lack of alignment on exits, strategy, or just the CEO being in denial about things like performance? Does the resolution begin with a private conversation or with involving other board members in a decision?
Start these conversations early and look out for red flags in the diligence process. Every investor has a set of exit scenarios or company growth strategies that are right for them that may be different from another set of investors.
Make sure there is alignment going in and that the CEO is honest about their expectations and open to feedback from investors. One of the most important elements of any investment decision is having a CEO you are comfortable working with and building a business with, this can be deal breaker if interests are not aligned.
When raising money from LPs, what is the thing you emphasize the most when “selling” the fund? Past returns? Team expertise (domain and/or entrepreneurial expertise)? Unique angle?
We emphasize our team expertise and deal flow, showcasing a strong portfolio that we have put together to date.
Our unique angle comes in the fact that we think of our investments as a portfolio of entrepreneurs and we are able to showcase our access to a select group of serial successful entrepreneurs, corporate leaders and recognized startups that give LPs the comfort that we have a repeatable model for future successful investments.
Key Lessons from Jason
- People-first. Market and product are important, but assessing the quality of the founding team should be your biggest priority in due diligence for investments;
- Leverage your network. Versus trusting on analysts of principals to do due diligence and deal sourcing, Jason does all the heavy lifting himself, leveraging his network;
- Maintain board transparency and avoid extreme scenarios. As a board member, avoid being an extreme cheerleader or an extreme detractor. Establish honest communication and transparency and give authentic insights;
- Be comfortable and aligned with the CEO from the due diligence stage. It’s fine if investors and the CEO don’t see eye to eye on every single detail, but watch out for big red flags and lack of alignment on a macro level. And unearth these issues in the due diligence stage so you don’t find out about them too late. Start conversations early and with transparency;