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Nortman Has Been A Trailblazer Her Whole Life –Her Approach To Investing Remains Unique
After graduating from Princeton in 1997, Kara Nortman pondered two very different career paths: going to work for a nonprofit associated with Ralph Nader or taking a job with Morgan Stanley. She became one of the only women in Morgan Stanley’s private equity group. In the two decades since, Nortman has continued to be a trailblazer on many fronts, from encouraging women to enter the investment field to helping build Los Angeles into one of the most dynamic entrepreneurial environments in the country.
Nortman is a partner at LA-based Upfront Ventures, a VC firm with an amazing track record and a unique approach to working with entrepreneurs because most of the partners are entrepreneurs themselves. In a far-ranging conversation, she focused on elements in the relationship between VCs and entrepreneurs that people rarely talk about, but provide the foundation of success
Look For VCs Who Provide A ‘Safe Place'
Nortman’s first experience with Upfront came from the other side of the table – Mark Suster, Upfront’s founder, provided seed money for a business Nortman started called P.S. XO, an e-commerce company focused on selling invitations and party supplies. She was struck how Suster gave empathy and support during the toughest moments, like when things didn’t go quite right with a key employee or a product launch. “When I was feeling my worst, he gave me the room to find my best.”
“It exposed me to a different partnership structure,” she says. “Our job is to bring entrepreneurs up from low-ego moments, and bring them down from high-ego moments.” As Kerry Bennett, Upfront’s head of marketing, puts it “new ideas are born from big challenges, strong guardrails and hard work” – VCs can be the guardrails.
Entrepreneurs should choose partners who make them feel safe and supported when something goes wrong, otherwise they will always feel alone and be thinking unclearly. “If a VC helps an entrepreneur feel safe in a partnership, the entrepreneur can do their best work, creating room for failure instead of making you feel worse,” Nortman says. “Being kind and being tough are not mutually exclusive."
Work With People Who Share Your Values
Nortman considers the people she invests with as family, and she believes the funding process should be steeped in respect. “Because I’ve been in the position myself, I know how terrible long maybes and false hopes can be,” she says. “It doesn’t help anyone to pretend, so I believe in fast yeses and fast noes.”
Her philosophy is “your return is driven by your winners, and your reputation is driven by how you handle everything else.” Anyone can be nice when things are going well but character is defined as being kind and respectful when things are imploding.
The take away here is that shared values with an investor is an anchor that will steady the entrepreneur during the inevitable rough patches. “You want an investor who still cares a lot six months after the adrenaline rush of the competitive process is over,” Nortman says.
Vetting Partners Is A Two Way Street
Many entrepreneurs spend so much time and effort seeking funding, they fail to examine potential funders closely enough. At first, an interested VC will be the one asking for more data or another meeting. As the relationship progresses, the entrepreneur should perform their own due diligence, Nortman says.
Negotiations over terms will be the first moment of potential conflict an entrepreneur has with a funder – the way the entrepreneur feels about the negotiation will reflect how the future relationship is likely to unfold. The interactions should leave the entrepreneur feeling inspired, rather than nervous and drained – because, as Nortman says, that’s the only way you can sustain yourself in the marathon of entrepreneurship and get to the victory line.
Nortman suggests entrepreneurs should ping mutual connections after researching on LinkedIn to get a sense of what the VC is like to work with. “It’s like dating – the person you bring on as a board member is the most important relationship in your life after your business and romantic partner,” Nortman says. “It’s important that you have a strong dynamic and feel inspired by your funder.”
Follow The Talent – That’s Where The Dollars Flow
In Los Angeles, because the entertainment industry gets so much attention, the vast array of industries that are emerging can be overlooked, such as health care, transportation and enterprise software-as-a-service. Nortman notes that Southern California has an immense amount of talent in emerging fields. “It’s like Norway sitting on top of all this oil – you don’t have to go too far to tap into it,” she says. “This is one of the best places to start a business. The ratio of investment dollars to great talent favors those who are here right now.”
Los Angeles has developed talent that can both incubate ideas and turn those ideas into reality, allowing entrepreneurs to “uniquely develop early stage insights from large traditional industries or a more diverse mix of consumers; uniquely attract talent to live in its diverse neighborhoods (and great weather); and now uniquely attract funding” – a triple play that underscores areas of legendary transformation.
An emerging VC/entrepreneurial ecosystem benefits everyone because it brings investment dollars and creates a talent reservoir that everyone can draw from, Nortman says.
Be Open Minded In Seeking Mentors
Nortman is a life-long learner whose diverse interests and curious mind are evident in everything she does. Famously, she regularly consults with a 21-year-old tech entrepreneur who has been called her “Gen X mentor.” She started the relationship to provide mentorship but quickly found she was getting as much or more from the exchanges.
“We all have limited time,” Nortman says. “But part of the joy of being a venture capitalist is being around smart, scrappy and interesting entrepreneurs. Mentors are made as much as they are born and we can each choose to develop this type of relationship with someone outside our organization as much as we can inside our organization. In a good mentor-mentee relationship, you can learn from each other, develop comfort pushing back on each others thinking and hopefully be vulnerable without concern about whether it may impact a promotion. Over time I find the people I mentor, mentor me just as much and I make sure they feel similarly valued for the energy and learning they bring into my life”
Diversity Starts With Funding
Diversity is a big topic right now, and there is significant evidence to suggest diverse work teams lead to better company cultures and business outcomes. Among other efforts, Nortman is one of 34 senior female investors who founded All Raise, a nonprofit organization dedicated to diversity in funders and founders. She is working to double the number of women investors and growing the number of female founded businesses.
In addition, Upfront has an “inclusion clause” in its term sheets in which entrepreneurs agree to interview one woman and/or member of a population currently underrepresented within the company for every c-level position. Upfront decided to ‘open source’ the language in the hopes that other VCs will use the clause too.
Nortman believes that by inspiring a new wave of female investors, the VC world will gain more perspectives that can only lead to better business – and social – outcomes. As men and women dedicate themselves to remaking the gender ratio, more money will flow to new types of founders, creating vast opportunities that are waiting right now for those with imagination, curiosity and foresight.
