As a former dot-com-era founder, SignalFire CEO Chris Farmer had a feeling a downturn was coming. So he prepared for it by investing in startups early and focusing his firm’s work on helping portfolio companies develop and execute strategy.

Farmer started preparing at least three years ago for a potential downturn. He started trading “valuation risk for execution and technology risks,” he told me.

• For one, he shifted the company’s series B fund to a series A fund, and its seed fund to a pre-seed fund. Now, the firm’s “not sitting on a bunch of stuff we way overpaid for.”
• SignalFire also looks at “macro environment impacts” on industries. For example, the firm invested in health tech when the pandemic “blew the doors off” hesitancy toward telemedicine.

SignalFire runs like a tech company rather than a VC firm. The company has a C-suite, as well as engineering and data science teams.

• Employees have the opportunity to provide hands-on guidance to early-stage companies. Farmer called it “the ultimate sandbox.”
• And it seems like the model is working. Among SignalFire’s partners are former tech execs, including from Netflix, Stripe and Dropbox.

Hands-on advising can be a big draw for startups, he said. With funding rounds becoming less and less frequent, startups will want to partner with funds that are “going to be with you in the trenches."

Read the full Q&A with Farmer here.

— Nat Rubio-Licht