Today I get to share a transcript of my conversation with John Zeratsky, co-founder and General Partner at Character Capital, where he supports technology startups with capital and sprints. Earlier this year, Character Capital announced their $52M Fund 2, which they quietly raised from their Limited Partners. With his unique background in developing the Design, Foundation, Brand, and Name Sprints, I wanted to learn more from John on how the tools he developed have helped him build Character Capital.

John is also the bestselling author of Sprint, Click, and Make Time, and has reached millions with articles in The Wall Street Journal, TIME, Harvard Business Review, Wired, Fast Company, and other outlets.

John is a former Design Partner at GV (Google Ventures), where he developed the Design Sprint and supported many of GV’s most successful investments, including Slack, One Medical Group, Flatiron Health, Blue Bottle Coffee, and Gusto. Previously, John was a design leader for YouTube, Google Ads, and FeedBurner, which was acquired by Google in 2007.

Fundraising is as much about storytelling as it is about performance. Crafting a narrative that resonates with LPs is what sets great managers apart.

On Wednesday, November 12 at 2P ET, Sydecar and I are hosting our second pitch workshop, back by popular demand. In this small-group session, we will guide an interactive discussion designed to help emerging managers sharpen their pitch and communicate with clarity and conviction.

The live Zoom session will be off the record and conversational, offering space to exchange feedback, workshop your story, and learn from real examples.

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Topics We Covered

Benedikt: Many of the Sprint frameworks you have developed follow a common goal, a common telos: crystalizing your intuition.

Intuition is a word we oftentimes shy away from in the “GP-LP” world. If you emphasize the value for intuition too much, you communicate your reliance on something that won’t always be right and dependable. Simultaneously, if you don’t talk about it at all, you run the risk of being perceived as someone who is ignorant to the fact that Venture is a people business, which requires a strong “gut” by default.

Intuition is clearly something that you think is worth starting fundamental business processes with. What do you think about the importance of intuition in Venture? Do you think intuition is important to being a great Emerging Manager, or a great investor in general?

John: I think anytime you’re operating in an environment of uncertainty, you have to take action in order to generate information, right? You have to do something so that you can learn something. If you just sit in your room by yourself thinking about how a company is going to be successful or not, you’re not going to gain any new insights that you didn’t already have. Sort of like training an LLM. You start, you do something, you provide feedback, you do it again, you do it again, you do it again. Eventually it begins to resemble, insight or intuition.

The reason why I think intuition is so valuable in investing and in building a business is that it increases the quality of each step that you take. It increases the quality of each action that you take in the market, which hopefully makes the information you get back that much more valuable.

And there’s a couple of things we’ve learned about intuition from being investors but also from having worked on product design and marketing for 20, 25 years, which are also very uncertain pursuits. One is that you need to crystallize what your intuition is saying. You need to actually be clear about what you believe is true. Investors do this through memos and tangential processes.

When we work with founders in sprints, we’re asking them to crystallize that intuition through something we call a founding hypothesis. Here’s what we believe is true. Through the ideas that they prototype and test with customers.

So if you’re gonna rely on intuition, you need to crystallize it, you need to write down what it is. But the other side of it is equally as important, which is that you need a systematic and structured way to keep track of what happened when you applied that intuition. You came up with something you believed was true, you did something with it, you made a decision, but what happened? Were you right? Did it work?

Benedikt: One more intuition-focused question: when you talk to a founder, are you the kind of investor whose green light goes off first and you spend your due diligence stress-testing your “Yes”. Or do you start with a default no, and over time get to a yes?

John: I personally tend to be an optimistic person who really connects with people and am inclined to see their point of view and to really get on board with what they’re saying and get excited about what they’re doing. But I’m also very tough when it comes to quality of product and marketing.

So, I am likely to feel very strongly about the team based on their insights and how uniquely suited they are to the challenge and that sort of thing, but I am likely to be more critical about what they’ve built so far because I’ve just done so much product design and so much marketing that I am just a tougher judge of that.

One of the benefits of having a partnership is that everybody brings a different attitude or perspective into it. There are three partners on our team and we would each answer this question differently. What looks exceptional to me may only be excellent for one of my partners or vice versa.

Every time we meet with a founder, we capture what we believed was true in a scorecard, and then as we go through our process of diligence, we’re updating those scores. And then we’re able to look back on both the investments that we did and the investments we didn’t do and see: how did reality compare to what was essentially our intuition, our crystallized intuition?

We’re also able to do that longitudinally for a single company. We often invest two, three, four times in the same company over its life, and so being able to look back and say, “Hey, we thought they were really strong in this element, turns out we were wrong about that,” we’re able to update our intuition, we update our understanding, and that hopefully influences our decisions to follow on, to participate, how we support that company in the future.

A typical cadence is that either Eli or I will take an initial meeting with a founder and we will decide whether we want to ask the founder to take another meeting with the other one of us. But we won’t say anything about it. We won’t say, “Hey, I just met this really amazing founder, great idea”, because we don’t want to create narrative bias. We don’t want the other person going into that meeting thinking, oh, this is really cool. So we simply say, is this worth the other person meeting with, “yes” or “no”? That’s a little bit of a signal on its own of course, but we don’t provide any qualitative judgments about the opportunity. And then in parallel, we each take our notes, we each capture what we believed to be true in our scorecards, and only once we’ve both done that do we have an internal conversation and then we’ll decide on next steps from there.

Benedikt: Let’s talk more specifically about Character Capital. One of the first things that will stand out to any Limited Partner is that you are a hands-on GP to the founders you back. The Importance of being a value-add investor is something that opinions are split on. Whether or not a GP’s hands-on support to the founders they back is a net positive to the fund and founder is something people have different opinions on.

How important is it to you for founders and Limited Partners to know that you and your co-GPs directly work with the founders you back? 

Has how you help founders been a critical part of your conversations with Limited Partners? And have you found it to be something that has compelled your LPs to invest? If so, do you think Emerging Managers should lean more into how they can practically help their founders?

John: If we zoom out for a second and we think about the classic “four verbs” of venture investing — sourcing opportunities, deciding which ones to invest in, earning the ability to write the check, and supporting those companies — people use different words for that sometimes, you know, find, pick, win, help, whatever. But if you think about those four, value-add traditionally sits in the support bucket. It’s about: “how do we make our companies more successful?”

We embraced our sprint methods and our books in our strategy as a way to connect all of that. Not just to help founders after we invest, but to help us earn the right to invest in the first place. From a business strategy point of view, it’s like what Richard Rumelt talks about: good strategy is about identifying a unique advantage that would be difficult or impossible for your competitors to replicate and then leveraging that in everything that you do.

For us, it’s not just a value-add. At this point, we’ve run these sprints with over 300 teams and thousands of people have read our books and run the sprints on their own. It’s taught at universities. We’re very confident that it actually helps companies be more successful. But from a strategy perspective, what’s perhaps even more important is that it’s well known, it’s respected, and founders know about it. Operators know about it.

We did an interview on Lenny’s Podcast recently, and he opened by saying, “Everybody working in product knows about the design sprint.” That kind of awareness allows us to connect with founders often before they’re even fundraising, certainly before many other investors. It gives us a unique point of view when we’re deciding what to invest in, both initially and in follow-ons. Whether we’ve run a sprint with that team or not, having run hundreds of sprints gives us pattern recognition and language that we can apply when we’re evaluating new teams.

I think LPs take notice of that. It’s not just a story about being helpful. It’s a differentiated strategy. It’s something real and visible and, to your point, it’s something they can actually underwrite. And like you said, LPs are split on whether value-add really matters. We know that. But I think for us, the reason it resonates is because it’s not abstract but operationalized. There’s an actual process, a discipline, and results that we can show.

Over time, though, that matters less. I think this is true for any business relationship. There’s something that gets people’s attention in the beginning, but over time, other things start to matter more. As we’ve transitioned from Fund I to Fund II, the uniqueness of our sprints and books still matters, but what our LPs value most now is trust. They know we do what we say we’re going to do. They’ve seen our performance. They know founders like working with us.

We’re definitely doing a lot of other things with founders too. The sprint is just the most visible and structured expression of how we help. We get involved in fundraising, recruiting, product, go-to-market and all the usual things. But we focus our messaging on what’s unique, because that’s the thing that’s better, not just different.

And the truth is, the sprint method is a really strong how for a lot of other kinds of work. When we help a founder with fundraising, we’ve created what we call a Pitch Sprint, a method to help founders figure out how to tell their story.

So, yes, LPs have definitely been compelled by that. But I think what really sustains those relationships isn’t the method itself, but that they see it’s real, consistent, and aligned with who we are. We don’t just talk about helping founders. We’ve built our entire process around it.

Benedikt: One thing I always love to talk to General Partners about is the importance of naming their firm. I watched you and Jake talk about the naming process behind Character Capital. What does the name mean to you and how important has the name been when it comes to communicating to LPs what your firm stands for?

John: Character was actually an old name — a name from a project going all the way back to when we were at Google Ventures that we didn’t use. I think maybe Jake wrote it down during the sprint, either Jake or I did, because we’d been carrying it with us. That’s one of the great things that can happen in a sprint, because it’s not a brainstorm where you’re valuing new ideas, you can bring old ideas back to life, which is really effective.

We loved Character because it speaks to the people who are involved in building new businesses and to the nature of the relationship between those characters and people. It also speaks to visual design and typography, as well as the symbolism of computer science, where symbols and icons mean other things.

And then there’s the obvious meaning of Character… it’s a little bit on the nose, and we thought really long and hard about whether we wanted to stand on that and own it. Ultimately, we felt that integrity is such an important part of this business, but it’s something you can’t just say. It doesn’t ring true if you just have it in the headline on your homepage. It’s very difficult to effectively convey that, but by making it part of the name, we could hint at it and that would create the conditions for us to hopefully deliver on it over time.

Benedikt: You quietly raised a $52M Fund 2 in a very difficult time for many General Partners. Can you share a few elements of your fundraising process that you think have helped you get Limited Partners across the finish line and to back your Fund 2?

Also, what was your strategy when it came to guiding potential LPs through the process to backing your fund? What was your communication cadence like, when did you know how to drop some conversations that moved along too slowly, how did you prioritize?

John: ou had this great interview with Matt Curtolo recently where he said: you need to be better, not just different. And that is something that is really important to us. At the same time, the first step in any marketing or sales effort is for people to notice you and to think about you. And I think this is especially true for LPs. When, by definition, most of the products that they’re evaluating are very similar, we sort of view step zero is for us to be noticed, you know, be different, to stand out, just occupy a little space in the LP’s mind.

There are essentially three things that I think worked for us. One is being known for something, and we have been super super focused on being known for our sprint methods and our books and that is probably 80% of what we talk about both publicly and privately.

The second thing is really focusing on places where we can develop authentic relationships with LPs well ahead of a fundraise. Those often begin with either an introduction from another GP that we’ve co-invested with or from another LP who’s already an investor in our first fund.

The third thing is that we invest a lot of  time and energy building relationships with people here in our community in Wisconsin where there is a solid group of allocators, corporates, and private investors.

Over time, as we’ve transitioned from fund one to fund two, we have certainly seen that the uniqueness of our sprints and our books matter less. What matters more to LP are things like trust, and that they know that we do what we say we’re going to do, and our performance, of course.

In terms of the momentum on fundraising, with fund two we focused on our existing LPs first, which creates a sense of momentum since you can go into the official launch of the fundraise by saying “we already have these commitments.” It also empowers those existing LPs to make introductions or to send supporting notes or to be on call for references with new LPs that we’re talking to.

We were not super focused on bringing net new LPs into the process once it had started. We felt that we had built a big enough funnel in the previous three years that we could essentially focus on converting those people.

Rather than playing this scarcity sort of FOMO game, we were able to build momentum over years and then have it crystallize to this moment of like, okay, like, you already know everything about us… you’ve seen us in action.

We keep a list of prospective LPs and send out prospective LP updates. Those are very lightweight updates about companies that have raised follow-on rounds or acquisitions or other interesting things that have happened. And then we’ll travel and use conferences as a point to catch up with those people in person.

Benedikt: Last Question. I always like to say that your fund size is your business model. As someone who is product, customer, and solution oriented, how do you think about what is next for Character Capital, as the firm is growing, and slowly heading towards Fund 3 in the future?

John: Yeah, definitely. As you know, venture firms are really unique in that we truly have two customers. A lot of businesses have multiple stakeholders, but I think to a greater extent than most others, venture firms really have two customers: we don’t exist without both founders and LPs. Each of those groups cares about something different, and we try to spend a lot of time thinking about both.

We actually run sprints internally on ourselves. Both to establish our differentiation and our pitch to founders, and also to LPs. That’s evolved over time, but it hasn’t fundamentally changed. This notion of having a unique advantage that’s difficult or impossible for others to replicate and then leveraging that across everything we do, that’s been the through-line from the beginning.

Our core team recently brought on a fourth person in a programs and community role, but we don’t have plans to add another partner. We’ll stay small and focused. 

There are essentially five variables you can change with each venture fund: type of company, stage of company, number of companies, check size, and ownership. And I think you can only change a couple of those per fund cycle.

If you change all of them between Fund I and Fund II or Fund III, LPs have a hard time trusting that what made you successful before will make you successful again. They might still trust you as a person, but it’s harder to underwrite that allocation decision.

One important addition has been the launch of Character Labs, our accelerator program. We take a group of founders through a series of back-to-back sprints, which gives us the chance to work closely with them before committing larger checks. It’s resulted in more portfolio companies and smaller initial checks, but it complements our overall strategy and is part of our sourcing and evaluation funnel.

So that’s how we’re thinking about growth: keep what’s working, refine it, and expand carefully. The plan for Fund III is more of the same, just at a slightly larger scale. We’ll make all the numbers a little bigger, but right now we’re in an optimization phase as a firm. We have something that’s working, and we want to keep making it better for founders and for LPs without fundamentally changing who we are.