In the Spotlight: Lisa Calhoun, founder of Valor Ventures, Georgia’s first women-owned VC firm

 When I got on the phone with Lisa Calhoun, founder of Atlanta-based Valor Ventures, I was excited to ask her a question I’d seen ricocheting around Twitter:

What’s more important in entrepreneurship, a really good idea or a really talented founder?

I wasn’t satisfied with the answer I saw most often — that the idea doesn’t matter as long as the founder “has what it takes” — because it felt like an easy way for a VC to justify investing only in people who “look like” founders, i.e. white dudes.

But Lisa’s answer made me realize I — and everyone online — was asking the wrong question.

“It’s a false question,” she said. “The real thing to pay attention to is if it’s the right market. If it’s the right market, you can work with a pretty good founder and a pretty good idea.”

This answer reflects Lisa’s no-B.S. approach to investing. As the first woman to found a venture capital firm in Georgia, she has developed an investment process that identifies and develops overlooked talent in the hypergrowth software industry.

Twice a year, Valor Ventures hosts an event they founded called Startup Runway, which gives early-stage entrepreneurs an opportunity to pitch their business to compete for a $10,000 grant. That grant comes with no equity and no strings attached whatsoever. I asked Lisa about this program, and her unique approach to investing. Read on for an edited transcript of our discussion!

You made it clear that the $10,000 grant from Startup Runway is not an investment, since there is no equity taken. Why did you create this program?

At the stage of founder we’re sourcing at Startup Runway, the big issue the founder is often facing is that they can’t quit their day job. Maybe they’re the breadwinner. So we went with an amount, $10,000, that could cover a couple of months of rent and food for a family. If someone is hanging onto their day job, but they have traction, then maybe they just need a little runway to go on a few sales meetings. They could run at sales for a couple months, and then they could replace that income they have from their job.

Startup runway is a 501c3 nonprofit. We give away $10,000 checks twice a year to help promote a collaborative ecosystem of underrepresented founders. Some of them we hope, later, to be able to invest in. When that time comes, we hope we will have been able to be part of their journey.

Because many people don’t have the privilege of being able to live off of savings for a few months, right?

I had direct experience with that in my own world. When I was starting my previous company, Write2Market, my brother said, ‘You can stay in my basement if you want to start your company there.’ That did help me. I moved into his basement and I rented out my house. That’s what got me to have a company that was able to create wealth. I saw what a difference ‘gap money’ makes.

Why does Valor Ventures exclusively invest in software companies?

It has a lot to do with my background. I’m sure every investor goes with what they know. I know the early growth paths of software companies. But it’s also about the business model of software. It allows for non-linear scale not related to headcount. It’s a more scalable wealth-creation tool than any business model I’m aware of.

Do you not work with companies producing a physical product? Why not?

Production is a linear scale—make one, sell one. Software is capable of being made once, and sold to many.

What’s your investment process like?

Valor’s process starts with a one-on-one conversation about why they’re doing what they’re doing and why it’s going to change the world.

It’s a really important part of our founder profiling — to make sure that they’re so in love with the business they’re trying to build, that the very dream gives them the energy to keep going.

And if their passion doesn’t come through there, that’s a problem. And in their life story, you can hear how long they’ve been working on it, and whether they’ve been people who stuck with things that followed that thread. And why they didn’t if they didn’t, also matters.

I do think pitch showcases are valuable and have their place. It’s a good format for a lot of entrepreneurs to share what they’re working on. I personally love pitch events. I go to hundreds of them. I love learning about businesses. But I spend most of my time one-on-one with entrepreneurs, hearing about what they’re building.

What’s more important, a really good idea or a really talented founder?

That’s a hero-centric question, asking if it’s the founder or the idea. The reality is less hero-centric. There are many companies that become great because of a great market. In a great market, many decent ideas with reasonable, rational teams, work. The investor needs to be very informed about at least one or two markets, and then they can evaluate if that founder is a good fit. And they don’t have to be the perfect fit, if they’re still pretty good — high integrity, high energy, often it’ll be ok.

The market is a huge part of the equation.

How do you evaluate the talent of a founder separately from their pitch and their idea?

I try to figure out the central core of their personal journey. What their motivating factor is. What’s the thing they would do if no one paid them? And I like to look at the track record of their life. How they’ve made decisions. What are they rotating around? That helps me understand if they’re going to stick with this.

So for example in the ICO (initial coin offering) boom, a lot of people who were drawn to the excitement and high stakes were suddenly building blockchain companies — not because they like crypto, but because they’re just drawn to the energy of a crisis. You can see it in the history of the founder.

What made you want to start a VC firm?

The root of what led me to create Write2Market — to help tech companies scale and grow — is the same at Valor. I want to buy a piece of a founder’s business at a fair price and work side-by-side to grow that piece into something 10 times more valuable or more. That’s what investing is for me.