Rebecca Lynn doesn’t believe in first-mover advantage.
“Never be a first mover,” says Lynn. First movers bear the burden of proving that a market exists, she says. “You’re paying to get consumer awareness of that market. You’re fighting this uphill battle. You’re spending a ton of money to prove out the market—and by the time you finally prove it exists, you have an aging tech stack. Why not let somebody else break that pick? You watch where the puck is going, and then come in with a better product and better marketing as a second mover.”
It’s advice Lynn has gleaned from decades of experience on the operations and investing sides of the table. Lynn never planned to be a VC—a first-generation college kid from the Midwest, she spent her early career in the late ’90s at Procter & Gamble. In 2007, right before the Great Recession fully materialized, she ended up taking her first venture gig at Morgenthaler Ventures. The very first term sheet she gave out was for financial services company Lending Club in 2009.
“Always keep an eye on the macro,” Lynn says. “So, when Lehman crashed, that’s what made Lending Club a great deal. Without the crash of Lehman, we wouldn’t have invested in Lending Club. But there was this macro opportunity where suddenly their product just nailed it. They were doing peer-to-peer lending and, before the crash, it was a good idea. Then, the market goes down in flames, and even if you have an 800 credit score, you can’t get a loan. It created this opportunity where they had a clear runway ahead of them.”
In 2014, Lending Club would become the biggest tech IPO of the year. Since then, she’s also been an early investor in Doximity, Luminar, FutureAdvisor, Check, and Casetext. Now, twelve years after cofounding Canvas Ventures (spun out from Morgenthaler Ventures in 2013), Lynn is spinning out on her own, launching new firm Canvas Prime as a solo GP, she exclusively told Fortune.
“We got a lot of guidance from our LPs that they liked my strategy and results,” she says. “And I had really, from a top-down level, wanted to focus more for years. Because focus—that’s the Kool-Aid we tell our entrepreneurs to drink: Focus, focus, focus, execution, execution. Make a decision, and make it fast. Because not making a decision is also making a decision.”
“I think the days of the mid-market, generalist fund are absolutely gone,” says Lynn. “They don’t work. Smaller funds outperform, and here’s a number: Specialized funds have 37% higher returns than generalist funds… And when we did the bottom-up analysis on where we made money for our investors, it was blindingly clear we made money in fintech, digital health, and AI—and that was it.”
In a lot of ways, Canvas Prime is about remembering that it’s important, and necessary, to say no.
“You just can’t be an expert at everything,” Lynn told Fortune. “What we tell the CEOs all the time is that knowing what to say no to is the most important skill set you can develop. So, it’s all about having focus and clarity on what we need to cover, how we need to cover it, who we need to hire, and what we need to build out to be helpful to our companies.”
See you tomorrow,
