How can we bring creativity back to the boardroom?

“Mandates commoditize entrepreneurship” the CEO of an early-stage software company recently told me over email as we were trading notes on suggested early-stage venture capital firms he could talk to about his current raise. I admit, I was a bit shocked when I read this. But then I realized that I felt challenged, inspired, and even grateful for their honesty.

I haven’t stopped thinking about this “mandates commoditize entrepreneurship” mantra for a week now. It’s really stuck with me – especially in an environment where it feels challenging to find a quality company to invest in – and I keep turning this around in my head trying to figure out the deeper meaning. I’ve come to the conclusion that it’s actually about creativity – that when investors set too strict guardrails or too narrow boundaries for what types of companies they can invest in, this not only limits their opportunity for returns but also creates a vacuum that sucks out the creativity found in the minds of entrepreneurs and their business. And this creativity is what inherently created the company and the value of the company in the first place. 

Creativity is the reason entrepreneurs – and the companies we invest in – even exist. Call me soft, but I strongly believe in the beauty of creativity, and unfortunately, that beauty and creativity is so often lost in the spreadsheets, models, go-to-market plans, and org charts that we as investors get stuck in the weeds reviewing and analyzing. Yes, we have to be good stewards of our firm’s investment capital, while making investment decisions that we have reasonable confidence will achieve the desired returns for our own investors, but I also believe that we can do all of these things while still keeping an open mind, allowing space for creativity in the investment analysis and due diligence process, and doing our best to ensure that entrepreneurship does not ever feel like a commodity. 

The role of an investment mandate (from an investor perspective)

Most VC and PE firms today have some sort of investment mandate, often outlined in their Limited Partner Agreement, and then further defined by the Investment Committee. From an investor perspective, this mandate helps guide sourcing and qualifying new investment opportunities, otherwise we would be throwing spaghetti against the wall to see what sticks and we all know how messy that can be (I certainly know, as I gave my nine-month old daughter spaghetti and marinara sauce for the first time this week, and even when cut into teeny tiny bite sized pieces it still ended up everywhere). 

Mandates also help firms build expertise investing in specific industries, stages, or in backing certain types of founders. By investing in companies with similar characteristics, investors can learn what works and what doesn’t work to help these companies scale and exit, and thus they can be more helpful to future investments that share the same qualities as past portfolio companies. Yes, pattern recognition can be applied to investing, and that is also why VC and PE firms often back the same founders time and again. 

I’m on the investment team at a growth equity firm called Plymouth Growth (meaning we sit between venture capital and private equity and we try our darndest to take the best of both worlds to inform what we do), and when our investment team comes across a company raising capital, the first things we suss out are quantitative.But there is much to be said about the qualitative nature - or as I like to call it, the vibes - of the first five minutes of an intro call with a CEO. Candidly, we look first at the company’s scale or ARR, growth rate, EBITDA or cash burn, and revenue retention. These guard rails help us take the thousands of companies that come across our desks each year and turn them into qualified leads for our investment pipeline. We can’t look at tens of thousands of opportunities, so our criteria helps narrow that pool into something more manageable. This is actually quite similar to how business development reps or account executives screen and qualify sales leads. Startups have ICPs (ideal customer profiles), and so do we as investors. 

So then, what does it mean to commoditize entrepreneurship, and how might VC and PE firms be contributing to that?

Why entrepreneurship might be at risk of commoditization

Commoditization happens when something becomes so normalized that it becomes perceived as interchangeable. This nearly always results in the devaluation of that something, whether it be a good, a service, or even possibly – god forbid – an entrepreneur. The impact on the value of the something that becomes a commodity is a direct result of the commoditization; allowing competition based solely on price, and not based on differentiated or distinct qualities. We all know from Econ 101 that examples of commodities include gasoline, electricity, livestock, and corn (oh hey, Midwest represent!). 

So then if you’re talking about entrepreneurship becoming commoditized, that feels extremely risky. And disheartening. Is it possible that entrepreneurship is at risk of commoditization? Do investment mandates standardize startups, making one startup CEO interchangeable with the next? 

I can see what the CEO who said this to me was getting at: when investors are too quick to judge companies against their own criteria, this forces startups into essentially one of two buckets. The startups either ‘pass’ or ‘fail’ against the investment mandate. Those that fail are tossed back into the stormy waters of trying to raise capital, or worse; ghosted by the firm they pitched to – for the record, we try to never ever do this. 

Those that pass are then put through the ringer of meeting after meeting, data request after data request, until there’s either a term sheet or a tail of blood, sweat, and tears… Okay – this is a very pessimistic take, but I’m trying to understand what it might be like from a CEOs perspective who think mandates commoditize entrepreneurship! 

The strictness of the investment mandate in some way does remove some of the differentiation from the market, in that the startups that get put into the ‘pass’ bucket likely have very similar qualities or metrics to one another, but it doesn’t fully create a commodity out of being an entrepreneur. 

Entrepreneurs, CEOs, and management teams do need to understand that investment firms typically must have some sort of guidelines for what they invest in: this is demanded and often required by institutional LPs. The folks that invest in venture capital and private equity firms want to know, generally speaking, where their money is going, often so they can create diversified portfolios and allocate investments accordingly. There are often buckets and thus venture and PE firms succumb to fitting in the buckets and defining what types of companies the firm puts in their buckets. Just like how CEO’s out raising capital get passed on and told their company is not a fit, so too do venture firms get passed on when out trying to raise capital too.

All of that said, perhaps investment mandates are too restrictive. Differentiation should still always be at the core of what we look for as investors, as that is what tends to drive value; value for customers which results in revenue, growth, and strong retention. A company with a differentiated offering, or even a competitive offering, is certainly not a commodity. 

Dreary deal environment and widening the aperture

Carta’s State of Private Markets: Q1 2025 reporting, which is based on data aggregated from nearly 50,000 priced rounds , found that Q1 of this year saw the lowest deal count by quarter since Q1 of 2018. Carta reports: “Startups completed just 1,122 new funding rounds between the start of January and the end of March, the lowest Q1 total since 2018.”

That is insane. It’s been SEVEN YEARS since the number of new deals being done was this low, that is longer than I’ve lived in the Midwest! No wonder our firm – and every. single. other. firm we talk to – feels like capital deployment in new platforms is slower than usual. 

But I am hopeful that there’s a silver lining here. Maybe the bright spot in this dreary deal environment is that because capital deployment is slower, many firms have no choice but to “widen their aperture”, as someone I recently talked to at a later-stage private equity firm told me they have been doing. Maybe opening our apertures, by expanding the boundaries of our investment mandates,will be good for us because it will benefit the ecosystem at large. Maybe thinking about investment criteria through the lens of being more creative in the companies we invest in, how we meet founders, and how we help support company's growth is exactly what the investment community needs right now. 

Yes, in a sense, widening our apertures is somewhat being demanded by the market. But I’m glad it is, and it’s the kick in the pants we need to bring in more creativity to what we do. Entrepreneurship is not and should never be seen as a commodity. 

Bring back creativity to the board room

Investors demand creativity of the people and companies we invest in, why not demand it within our own firms? Even though the investment team at Plymouth has a particular way of looking at and evaluating companies, we are also challenging our team to be more open to opportunities that fall outside where we have typically invested. Instead of finding reasons to pass on an opportunity, we challenge our team to find reasons to say yes. Simply put, our investment team is trying to be more open-minded. 

In some ways, open-mindedness is the exact opposite of commoditization. You are open-minded when you are willing to consider new ideas, alternatives, and perspectives that are different. A challenge to my fellow investors out there: let’s bring back creativity in the board room. Let’s recognize and value the creativity that it takes to build a business. Let us not forget the blood, sweat, and tears (or rather late nights, frozen pizzas, and drained bank accounts) that often set the foundation for good businesses. 

Let’s try to ensure that our CEOs and management teams never feel like their business has become a commodity. 

‍Michelle Erikson is Vice President at Plymouth Growth. Her role involves assessing the health and scalability of potential investments, and supporting the growth of portfolio companies. Prior to Plymouth, she led marketing for the University of Michigan’s Athletics Department and worked for a venture-backed sports accelerator. While not a Midwesterner by birth, she has adopted us lovingly as her home: she loves Euchre, the Upper Peninsula, and driving by corn fields on her commute.