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Why Should the Investor NPS Score Exist?

I’ve written about product-market fit on numerous occasions including in the context of metrics, pricing, PMF mindsets, just to name a few. And one of the leading ways to measure PMF is still NPS – the net promoter score. The question: On a scale of one to ten, how likely would you recommend this product to a friend?

As investors, while a lagging indicator, it’s a metric we expect founders to have their finger always on the pulse for their customers. Yet how often do investors measure their own NPS? How likely would you, the founder, recommend this fund/firm/partner(s) to your founder friend(s)?

Let’s look for a second from the investor side of the table…

Mike Maples Jr. of Floodgate pioneered the saying, “Your fund size is your strategy.” Your fund size determines your check size and what’s the minimum you need to return. For example, if you have a $10M pre-seed fund, you might be writing 20 $250K checks and have a 1:1 reserve ratio (aka 50% of your funds are for follow-on investments, like exercising your pro rata or round extensions). Equally so, to have a great multiple on invested capital (MOIC) of 5x, you need to return $50M. So if you have a 10% ownership target, you’re investing in companies valued around $2.5M. If two of your companies exit at $200M acquisition, you return $20M each, effectively quadrupling your fund. You only need a couple more exits to make that 5x for your LPs. And that’s discounting dilution.

On the flip side, if you have a $100M fund with a $2-3M check size and a 20% ownership target, you’re investing in $10-15M companies. Let’s say your shares dilute down to 10% by the time of a company’s exit. If they exit at unicorn status, aka $1B, you’ve only returned your fund. Nothing more, nothing less. Meaning you’ll have to chase either bigger exits, or more unicorns. But that’s hard to do. Even one of the best in the industry, Sequoia, has around a 5% unicorn rate. Or in other words, of every 20 companies Sequoia invests in, one is a unicorn. And that means they have really good deal flow. Y Combinator and SV Angel, who have a different fund strategy from Sequoia, sitting upstream, have around 1%.

Erik Torenberg of Village Global further elaborated in a tweet:

And, Jason M. Lemkin of SaaStr tweeted:

Why does a VC’s fund strategy matter to you as the founder?

A fund with a heavily diversified portfolio, like an angel’s or accelerator’s or participating investors (as opposed to leads), means they have less time and resources to allocate to each portfolio startup. The greater the portfolio size, the less help on average each startup team will get. That’s not to say you shouldn’t seek funding from funds with large AUMs (assets under management). One example is if you have an extremely passionate champion of your space/product at these large funds, I’d go with it.

I wrote late last year about founder-investor fit. And in it, I talk about Harry Hurst‘s check-size-to-helpfulness ratio (CS:H). In this ratio, you’re trying to maximize for helpfulness. Ideally, if the fund writes you a $1M check, they’re adding in $10M+ in additive value. And based on a fund’s strategy (i.e. lead investors vs not, $250K or $5M checks, scout programs or solo capitalist + advisory networks, etc.), it’ll determine how helpful they can be to you at the stage you need them.

If you were to plan out your next 18-24 months, take your top three priorities. And specifically, find investors that can help you address those. For example, if you’re looking for intros to potential companies in your sales pipeline and all a VC has to do is send a warm intro to their network/portfolio for you, bigger funds might be more useful. On the other hand, if you’re struggling to find a revenue model for your business, and you need more help than one-offs and quarterly board meetings, I’d look to work with an investor with a smaller portfolio or a solo capitalist. If you’re creating a brand new market, find someone with deep operating experience and domain expertise (even if it’s in an adjacent market), rather than a generalist fund.

While there’s no one-size-fits-all and there are exceptions, here are two ways I think about helpfulness, in other words, value adds:

  1. The uncommon – Differentiators
  2. The common – What everybody else is doing

The uncommon

Of course, this might be the more obvious of the pair. But you’d be surprised at how many founders overlook this when they’re actually fundraising. You want to work with investors that have key differentiators that you need at that stage of your company. By nature of being uncommon, there are million out there. But here are a few examples I’ve seen over the years:

  • Ability to build communities having built large followings
  • Content creation + following (i.e. blog, podcast, Clubhouse, etc.)
  • Getting in’s to top executives at Fortune 500 companies
  • Closing government contracts
  • Access/domain expertise on international markets
  • In-house production teams
  • They know how to hustle (i.e. Didn’t have a traditional path to VC, yet have some of the biggest and best LPs out there in their fund)
  • Ability to get you on the front page of NY Times, WSJ, or TechCrunch
  • Strong network of top executives looking for new opportunities (i.e. EIRs, XIRs)
  • Influencer network
  • Category leaders/definers (i.e. Li Jin on the passion economy, Ryan Hoover on communities)
  • Having all accelerator portfolio founder live under the same roof for the duration of the program (i.e. Wefunder’s XX Fund pre-pandemic)
  • Surprisingly, not as common as I thought, VCs that pick up your call “after hours”

The common

Packy McCormick, who writes this amazing blog called Not Boring, wrote in one of his pieces, “Here’s the hard thing about easy things: if everyone can do something, there’s no advantage to doing it, but you still have to do it anyway just to keep up.” Although Packy said it in context to founders, I believe the same is true for VCs. Which is probably why we’ve seen this proliferation of VCs claiming to be “founder-friendly” or “founder-first” in the past half decade. While it used to be a differentiator, it no longer is. Other things include:

  • Money, maybe follow-on investments
  • Access to the VC’s network (i.e. potential customers, advisors, etc.)
  • Access to the partner(s) experience
  • Intros to downstream investors

That said, if an investor is trying to cover all their bases, that is a strategy not to lose rather than a strategy to win, to quote the conversation I had with angel investor Alex Sok recently. As long as it doesn’t come at the expense of their key differentiator. At the same time, it’s important to understand that most VCs will not allocate the same time and energy to every founder in their portfolio. If they are, well, it might be worth reconsidering working with them. It’s great if you’re not a rock-star unicorn. Means you still get the attention and help that you might want. But if you are off to the races and looking to scale and build fast, you won’t get any more help and attention that you’re ‘prescribed’. If you’re winning, you probably want your investor to double down on you.

Even if you’re not, the best investors will still be around to be as helpful as they can, just in more limited spans of time.

Finding investor NPS

You can find CS:H, or investor NPS, out in a couple of ways:

  • The investors are already adding value to you and your company before investing. Uncommon, but it really gives you a good idea on their value.
  • You find out by asking portfolio founders during your diligence.
  • Your founder friends are highly recommending said investor to you.

Then there’s probably the best form of validation. I’ve shared this before, but I still think it’s one of the best indicators of investor NPS. Blake Robbins once quoted Brett deMarrais of Ludlow Ventures, “There is no greater compliment, as a VC, than when a founder you passed on — still sends you deal-flow and introductions.”

In closing

“How likely would you, the founder, recommend this fund/firm/partner(s) to your founder friend(s)?” is a great question to consider when fundraising. But I want to take it a step further. NPS is usually measured on a one to ten scale. But the numbering mechanic is rather nebulous. For instance, an 8/10 on my scale may not equal an 8/10 on your scale. So your net promoter score is more so a guesstimate of the true score. While any surveying question is more or less a guesstimate, I believe this question is more actionable than the above:

If you were to start a new company tomorrow, would you still want this investor on your cap table?

With three options:

  • No
  • Yes
  • It’s a no-brainer.

And if you get two or more “no-brainers”, particularly from (ex-)portfolio startups that fizzled off into obscurity, I’d be pretty excited to work with that investor.

Photo by Laurice Manaligod on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

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#unfiltered #44 Le Raison d’Etre for Social Experiments

social experiment, curiosity

Over the past few weeks, a number of people have independently asked me, “What do you hope to accomplish with your social experiments?” And “What are you hoping to solve through your social experiments?”

Usually when people ask, I say things like, “Helping the world feel a little smaller, closer, and a whole lot more meaningful.” Or “Helping strangers become friends in minutes.” While it’s all true, I came to that conclusion after I started. Yet, the real reason I started was simply out of curiosity. I didn’t have an end goal in mind. I didn’t have a hypothesis I was trying to prove. Frankly, I just had a yearning knowing I’d find answers, but not knowing what kind of answers I would find.

For the longest time, I felt pressured to give a reason. Particularly, one that was results-oriented. In a world, where outcomes speak for themselves, I felt that a genesis starting from pure open-ended curiosity wasn’t enough. The reasons I gave were less for others, but more for myself. This self-inflicted feeling of inadequacy. Infinitesimally small, but still lurking around.

Walter Isaacson‘s recent interview with Tim Ferriss led me to introspect once again. Known for his incredibly intricate studies on the lives of Steve Jobs, Leonardo Da Vinci, Benjamin Franklin, just to name a few, and most recently, Jennifer Doudna, he said:

“Be curious about everything. All walks of life. Arts, and sciences, technology, and the humanities. That’s what Steve Jobs did. He had one foot in the arts, another foot in technology, and he did not make a distinction between those two. That’s what Leonardo’s Vitruvian Man is about. It’s a work of art, and it’s a work of science, and he didn’t make a distinction between those two. And for Jennifer Doudna, she doesn’t make a great distinction between the life sciences and the humanities. And by being curious about all things, she’s about to see the patterns in nature.”

It’s funny that it took a message from someone else for it to resonate, no matter how many times I’ve told myself the same message. While I can’t even begin to compare my selfish curiosity to the greats of Doudna, Jobs or Da Vinci, but like them, I start from a state of open inquiry. I, a humble traveler, merely enjoy the meandering adventure my curiosity leads me on. As my French high school teacher used to say to us all the time, “Bon voyage!”

Photo by Joseph Rosales on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

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A Strategy to Win Versus A Strategy Not to Lose w/ Alex Sok

For a number of friends and founders I’ve chatted this with, I’ve been a big fan of the concept of “winning versus not losing”. Ever since I heard back in 2018. In an interview with Tim Ferriss, Ann Miura-Ko of Floodgate said, “This is probably the hardest piece – knowing the difference between a winning strategy versus a strategy not to lose. […] Not losing often involves a lot of hedging. And when you feel that urge to hedge, you need to focus. You need to be offensive.”

There are a few great examples of what differentiates winning and not losing from both Tim and Ann in that interview. For instance, a lack of focus by going after two different market segments is a strategy not to lose. “The reason why that’s really hedging is you have two completely different ways of selling to those organizations and you’re afraid to pick one because maybe you have some revenue in both.”

My college friend recently connected me with entrepreneur, designer, angel investor, Alex Sok. Both of us found unlikely common ground in using sports analogies to relate to building a company. Me, swimming (e.g. here and here). Alex, football. Specifically, American football. Having been a quarterback for his school’s football team back in the day, he said something quite fascinating, “You can’t win in the first quarter, but you can lose in the first quarter.” And you know me, I had to double click on that.

I was previously under the assumption that you only needed a strategy to win, but not to lose. But as all generalizations that start with the word “only”, I was wrong. And Alex contextualized it for me – that sometimes you do need to think about how not to “lose”.

Winning versus not losing

“You can’t win in the first quarter, but you can lose in the first quarter.”

Throwing the ball deep for your running back to make the touchdown is a strategy to win. On the flip side, if you don’t convert on the third down, you’re going to lose. You may not win, but if you don’t, you could very much lose. Not all mistakes carry the same gravitas. Some mistakes can be detrimental; most mistakes aren’t. Just because you’re making sure that you convert on the third down does not mean you can’t still swing for the fences.

For founders, losing in the first quarter is akin to:

  • Burning through your seed funding in six months;
  • Hiring four professional executives before you get to product-market fit;
  • Not talking to your customers;
  • There is no one in the room who can tackle the biggest risk of the business (i.e. no engineer when you’re building an AI solution, or no one who can do sales when you’re an enterprise tech company)

You’re still aiming high, but that doesn’t mean you should burden yourself with an astronomical burn rate.

“Game plans will have to vary depending on your market or product. Key fundamental traits that increase the probability of failure will always be present. It’s important to identify which ones matter most in relation to the game plan,” says Alex. “A tough defense or go-to-market means being more focused on identifying which channels to pursue and then doubling down if it works out.”

On the flip side, “an aggressive defense or burgeoning industry might mean taking more chances but setting up plays wisely to take advantage of their aggressive, risk-taking nature. This will force the defense to settle down and play you more honestly. In startup terms, that might mean steady progress and growth with a few deep shots to achieve escape velocity from your competitors.”

Not to get forget about winning

You’ve probably heard of the saying, “If you want your company to truly scale, you have to do things that don’t scale.” Especially in the zero to one phase. From idea to product-market fit. Many of us in venture break down the early life cycle of a company by zero-to-one and one-to-infinity. The first “half” is doing things that don’t scale. Figuring out what frustrations your customers are going through. Getting that pedometer up on the street yourself. Daniel Kahneman wrote in his book Thinking, Fast and Slow, “Acquisition of skills requires a regular environment, an adequate opportunity to practice, and rapid and unequivocal feedback about the correctness of thoughts and actions.”

Here are a few examples:

In the early days of Airbnb, Brian, Joe, and Nathan used to visit early Airbnb hosts with a rented DSLR to photograph their houses.

For Stripe, the founders manually onboarded every merchant to deliver “instant” merchant accounts. Of course, the Collison brothers took it a step further to mint the term “Collison installation”. Usually when founders ask early leads “Will you try our beta?”, if people say yes, then they say, “Great, we’ll send you a link.” Rather, Patrick and John said, “Right then, give me your laptop” and set it up for them right then and there.

At Doordash, they found restaurant menu PDFs online, created landing pages, put their personal number out there for people to call, and personally executed deliveries within the day.

To get his first 2000 users, Ryan at Product Hunt wrote handcrafted emails to early users and reporters to grow what started off as an email list.

Similarly, in football, teams often spend the first half of the game feeling out their opponents. Their strengths, their weaknesses. And the back half, doubling down on where your opponents fall short on. While not your opponents, founders should be spending the first half feeling out their market. Be scrappy. Nothing that’ll make you lose in the first quarter, but make mistakes. Give your team and yourself a 10-20% error rate. One of your greatest superpowers as a small team is your ability to move fast. Use it to your advantage.

Paul Graham once wrote, “Tim Cook doesn’t send you a hand-written note after you buy a laptop. He can’t. But you can. That’s one advantage of being small: you can provide a level of service no big company can.”

In closing

Alex said, “In order to be a dominant offense, you have to force the defense to cover every inch of the field.” If you only throw long, then your opponents will only need to cover long. If you only throw to the left, they only have to cover left. But if you have a diversified strategy, your opponents will have to cover every inch of the field. And to win, all you need is for your opponents to hesitate for half a second. And with a laser-focused strategy, that’s all you need to break through against your incumbents. Your incumbents often have bigger teams, can attract more talent, have deeper pockets, and the list goes on.

As a small team, you’re on offense. You can’t cover every inch of the field, and neither do you need to. You just need to be a single running back who makes it past a wall of linebackers. To do that, you need focus. As Tim Ferriss recently said on the Starting Greatness podcast, “the biggest risk to your startup is your distraction.” And it’s not just you and your team, but also the investors you bring on. Sammy Abdullah of Blossom Street Ventures wrote that the question you need to be asking yourself about your investors is: “Are you going to distract me from running the business and will you be candid with me when I have a problem?”

Focus. If you’re focusing on everything, you’re focusing on nothing. You have no room to hesitate, but it’s exactly what you want your competitors to do. That half a second on the field is about two years in the venture world. Or until you can find your product-market fit. Until you reach scale. Until you reach the “one” in zero-to-one. ‘Cause once you’re there, you just need to put your head down and run. And it’s the beginning of something defensible. Of something you can win with.

If you’re curious about taking a deeper dive on product-market fit, I recommend checking out some of my other essays:

Photo by Joe Calomeni from Pexels

Thank you Alex for helping me with early drafts of this essay!

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

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#unfiltered #43 Do I Like to Write?

writing, how to start a blog

An investor I had recently been put in touch with asked me this past Monday if I like to write. I thought it was a peculiar question at first. But it strangely kept gnawing at me as the week went on. While I can’t say for certain that it was that investor’s intention, it became a forcing function for me to reflect on my motivations.

If you’ll believe it, I used to hate writing. With a capital H. I used to dread when a teacher or professor would assign us essay prompts for homework. Many of my college and high school friends can probably attest to that fact. More so, I was the world’s best procrastinator. Ok, “best” might be overselling myself. But I had a track record for deferring my 10-/20-page essay until the night before it’s due. It was the antithesis of fun. I knew exactly what my professors sought. All I had to do was put the puzzle pieces together. Frankly, writing was a necessity to survive my academic career, not one I’d seek out as a passion.

It wasn’t always that way. In elementary school, I loved writing poetry. An exploration of my inner creativity, unrestrained by the educator’s whip. I also took part in school poetry competitions. As time went on, writing lost its sparkle, between book reports and persuasive essays.

Before this one, I started two other blogs. Neither of which lasted past three months. Both of which I started back in college. Looking back no one asked me to start a blog, much less three blogs. But looking back, I attribute each time I started a blog to the professors I had. Particularly by their rare ability to make learning fun and contagious. It was much less the content of each class, but rather, the fact that we graduated each class armed not with just answers, but with two other faculties I found indispensable over the years:

  • The ability to ask nuanced questions,
  • And the ability to find answers and questions to answer those questions.

My senior year in college I had a third catalyst for writing. As you guessed, also inspired by my professor for a class I didn’t have many expectations for when I signed up, despite hearing glowing reviews from my friends. That year I began writing in journals every day. There is no catch. There are no cheat days. We just had to ideate at least once every day. No matter how long or how short it took, once a day keeps the demons away. At the same time, outside of a promise of commitment, there were no rules. There were no rubrics. No one would grade us on how and what we wrote. Full, uncontrolled creative liberty.

It took me about three months. Slowly, but surely, the spark returned. Over time, journaling evolved into blogging. The best part is I don’t even know what the next stage of my Pokemon evolution will look like. I won’t go in depth here on how I journal these days, but if you’re curious…

Over the past year, I’ve had an increasing number of friends and readers reach out to me and ask me how writing comes so easily to me. It sure didn’t in the larger arch of my life. And not, it doesn’t… not always at least. Some days it takes longer than others. But just like how I wake up and exercise first thing in the morning, journaling is a muscle I am training every day, if not multiple times a day. Whether it’s in my journal or on my Google Keep app or on a Notion page.

That said, I think I’m far less coherent as a speaker than as a writer. I’ve had friends and mentors tell me over the years in conversation, “David, you’re not making any sense.” Unfortunately, in more occasions than I would like, I have a feeling of cognitive dissonance when speaking, which I am actively working to mend. After all, I can only hide behind the veil of asynchronicity for so long. Ironically, I’ve been engaging in more and deeper synchronous conversations than asynchronous over the course of the pandemic.

Luckily, I also haven’t gotten writer’s block yet ever since I began this blog. But there have been certain weeks where I’ve been frustrated at the quality of my journal entries. Enough so, that it never makes it onto this blog. So it goes to say, I never run out of ideas; I just sometimes run out of ideas I think are nuanced enough to share. After all, it’s why I started the #unfiltered series. George Orwell once said, “If people cannot write well, they cannot think well. And if they cannot think well, others will do their thinking for them.”

In closing

I never started this blog with the intention of tracking viewership growth. But I’d by lying if I said I wasn’t grateful and elated to see the reception of some of my essays. On days when readers reach out and say thank you, I really believe the sky’s the limit. When I reach out to people I look up to and they mention in our conversation that they enjoy the content I write, I struggle to contain my smile.

My swim coach once asked me semi-rhetorically, “David, why d’ya like to swim?” To which he followed up and said, “You like to swim because you’ve won.” While in terms of numbers I’m still far from “winning”, this modest scope of reception so far only compounds upon my creative joy.

When I pursue any endeavor in my life, I always ask myself: Are there skills, relationships, and/or enjoyment I build that transcend the pure outcome of this endeavor? (Or two cousins of this question here and here.) For this blog, yes. And it boils down to three reasons:

  1. I write to think. It’s a process of self-discovery. On the flip side of the same token, it’s to prevent my prefrontal cortex from atrophying.
  2. Creative joy. There’s something just so satisfying when a blank canvas turns into a cohesive illustration of my mind’s entropy.
  3. And knowing that, no matter how miniscule, it’s inflected a handful of people’s lives upwards. That, and knowing that every so often, somebody out there will smile as they read this.

Photo by Aaron Burden on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

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#unfiltered #42 The Miracle that Catalyzes the Hero’s Journey

In the venture world, the word timing is thrown around in a very canonical way. Many investors and founders mythologize the concept of timing around a business. While there is some science and data that might be able to point in the general direction, success is a lagging indicator of timing. And arguably, the only way anyone can really determine if the timing is right or not is in hindsight. Investors that said they knew the exact timing of the market may just be attributing their success to survivorship bias.

To analogize it, it’s the same as knowing when to invest in the market or in a particular stock. Everyone wants to buy at the lowest, sell at the highest. Your ROI is positively correlated with the sell price, and negatively correlated with the buy price. But when is the lowest? No one really knows for certain. We can guesstimate a timeframe with reasonable confidence, but that’s the best we can do. The same is true for measuring timing in the market. Yet there is one thing that I’ve come to learn in my years in the venture world that’s as close as you can get to the “true” timing of the market. A miracle.

Let me explain.

One miracle

Every startup needs one miracle to succeed. One. No more. No less. Elad Gil said in an interview with James Currier at nfx, “Every startup needs to have a single miracle… If your startup needs zero miracles to work, it probably isn’t a defensible startup. If your startup needs multiple miracles, it probably isn’t going to work.” He further elaborates, “If you have more than one, you have compounding small odds and that means you’re very, very likely to fail.”

Before that miracle, if you’re truly creating a revolutionary business, by definition, you’re in the non-consensus. You have more non-believers than you do believers. If it were an obvious business, then everyone would do it. If everyone does it, economically-speaking, the ROI is low. In a situation, where every kid sells lemonade with the exact same recipe by the street corner, everyone is fighting for the exact same customers. Eventually, it’ll lead to a race to the bottom.

That single miracle is going to be that trial by fire. The true test of grit and founder obsession. That trial, whenever it is, predictable or not, determines if your product will stay a niche idea (and possible fizzle into obscurity) or a business that will change the world. For you and your business, that miracle could have been catalyzed by the pandemic, the GME short squeeze, ’08 recession (if you’re an older business), the inauguration, or something yet to come. The question is: How do you respond in the face of adversity?

Why is that miracle important?

Tim Ferriss once said, “Your superpower is very often right next to your wound, like your biggest wound. […] They’re often two sides of the same coin.” If you can survive and conquer that trial, the miracle – your superpower – becomes one of your strongest moats. The lessons you learned, the trust you (re)built, and the legacy you begin to construct. Those lessons – those earned secrets – while not impervious, will ideally be incredibly hard to obtain for others without walking through fire. A metamorphic journey from a vulnerable caterpillar to a beautiful monarch. What Joseph Campbell calls the “hero’s journey“.

And in the longer time horizon, that you are no longer just the protagonist of that miracle, but that you are also a producer of miracles for others. You are then capable of minting miracles systematically. Be it your customers, your team members, and your investors.

Why #unfiltered?

You might be wondering why I tagged this essay as #unfiltered. Frankly, it’s a new unrefined hypothesis that I’ve been playing around with. While it’s been inspired by others, I believe there’s more nuance I still need to uncover as well. That I’ll need to test a bit more to see if it can be a more robust thesis.

Going forward, I will continue to ask founders questions like:

  • What is the origin story of this idea?
  • If you were to fail in 18 months, what would be the most likely reason why?
  • Conversely, if you were to wildly succeed in that same time frame, what would be the biggest contributor?
  • Why are you a different person today than when you started this business? Who/what catalyzed this/these change(s)?
    • Examples of who: customers, team, partners, investors
    • Examples of what: black swan events, market trends, socio-economic habits, new technologies, an inflection point in your life when you faced impossible odds, failures, etc.

But I’ll be particularly looking for the earned secret among a miracle of adversity. Simply put, I’m looking to hear this song play in the background. The beginning of a mythical legend in the making.

Cover photo by Jon Ander on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

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Should you get an MBA as a founder?

library, should i get an mba, entrepreneurship

Over the years, the silver screen sure has mythologized the dropout founder – from Steve Jobs to Bill Gates to Mark Zuckerberg. While students who choose to dropout will continue to wow the world, and I believe it (otherwise, I wouldn’t be working with Danielle and Mike at 1517 Fund, if I didn’t), reality isn’t nearly as black and white. A Quora user requested my answer to this question recently. Why do business schools not make world class entrepreneurs? It presumed that great academic institutions, mainly B-schools, were no longer capable of minting world-class founders. Admittedly, it’s neither the first, nor will it be the last time I see or hear of it.

The MBA grads

I met a Fortune 100 executive last year who said that it was because of her Wharton MBA, that she catapulted her career in artificial intelligence and machine learning. Specifically, it was because of the research she did with her professor, Adam Grant, that led to opportunities and introductions down the road. On the same token, David Rogier of MasterClass met his first investor at the Stanford GSB. In fact, it was his business professor who wrote that first check, just under $500K.

Business schools are amazing institutions of learning, but admittedly most people go for the network and the brand. On the same note, I would never go as far as to say that business schools don’t mint world-class entrepreneurs. If we’re going by pure valuation, there’s a study that found a quarter of 2019’s top 50 highest valued startups had MBAs as founders.

And here are a few more founder names among many, not even including some of the most recognizable CEO names, like Satya Nadella (Microsoft), Tim Cook (Apple) and more.

  • Tony Xu and Evan Moore of Doordash
  • Michael Bloomberg of Bloomberg
  • Steve Hafner of Kayak
  • Aneel Bhusri and Dave Duffield of Workday
  • Jeremy Stoppelman of Yelp
  • Mark Pincus of Zynga

Having grit and having a business degree don’t have to be mutually exclusive. I work with founders who come from all manners of educational backgrounds: high school dropouts, college dropouts, BA/BSs, MBAs, PhDs, MDs, JDs, home schooled, and self-taught. At the end of the day, it doesn’t matter what kind of education someone has. What matters is what they do with the education.

What an Ivy League dean once told me

Back when I toured the US to decide which school to SIR (statement of intent to register) to, I met the dean of an Ivy League school. I thought he was going to spend our 20 minutes trying to convince me to come to his school. But he didn’t. Instead he said, “David, it doesn’t matter which school you choose to go to. While I would be honored to have you attend ours, what matters is what you do while you’re in school. You could choose to just take classes here or you could go to a CC, but choose to be a member of 5 clubs, 3 of which you take leadership positions in. And if I were to look at you in four years, I’d be prouder of the latter person you chose to become.”

Capping the risks you could take

When I graduated from Berkeley, I also came out with a certificate in entrepreneurship and technology. While I still believe to this day that no class can really teach one to be entrepreneurial, I learned quite a bit of the institutionalization around entrepreneurship – what exists in the ecosystem, some of the risks involved and how to hedge those bets. Yet, my greatest lessons on entrepreneurship didn’t came from a textbook. But rather, the risks I took outside the classroom. Because each time I made one, I internalized it.

To do great things, you have to first dream big and act on those big dreams. By definition, big dreams entail high degrees of risk. High risk, high reward. And with risk, you’ll make mistakes. So one of the rules I live by is that I will force myself to make mistakes – many mistakes – more than I can count. But my goal is to make each mistake at most once. Jeff Bezos once said, “If you can’t tolerate critics, don’t do anything new or interesting.”

Equally so, there’s a joke that Andy Rachleff, founder of Wealthfront and Benchmark, shares with the class he teaches at the Stanford GSB. While it pertains to VCs, I find it analogous to founders and mistakes, “What do you call a venture capitalist who’s never lost money on an investment?”

“Unemployed.”

But, what institutionalized academia does help you with is provide you a platform to make mistakes. Without the downside. Capped downsides, but it’s up to you, the student, to realize what could be the uncapped upside. Last month I chatted with a VC, who works at a top 10 firm. Our conversation eventually spiraled into her MBA at the Stanford GSB. There she took on projects that put her on the streets talking and building products for potential customers. Her professors taught her the hustle, but it was up to her to apply her learnings. While she chose the VC path after, her experience led her to become a trusted advisor to founders while she was still in school.

In closing

Similarly, world-class entrepreneurs aren’t decided by which school they go to, or lack thereof, but how and why they choose to spend the days, weeks, and years of the short time they have on Earth. And where they practice their entrepreneurial traits.

I would be pretentious to say that you should get an MBA if you want to be founder. Or that you should dropout if you want to be one. If we’re to look at the cards on the table, MBAs are expensive. A $200K investment. Almost half of what might be your pre-seed round. But I can’t tell you if it’s a great investment or not, nor should I. For an MBA, or for that matter, any higher education. I pose the two extremes – MBA (or a PhD too) and a dropout – as I presume most of our calculi’ fall somewhere in-between. Instead, I can merely pair with you with the variables and possible parameters that may be helpful towards your decision. So, I’ll pose a question: Are there rewards you seek in the process rather than just in the outcome (of an MBA/higher education)?

In other words, are there skills, relationships, gratitude, entertainment, and/or peace of mind you build in the journey that transcend the outcome of your decision on the future of your education?

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Don’t Drop the Ball After the First Shot – Following Up Cold Emails

If you’re a regular on this blog, you’re probably no stranger to my essays on cold emails – whether it’s my cold outreach mental model or lessons from replying to spam emails or how I write longer cold emails as opposed to shorter. Yet, I recently realized I’ve shared my thoughts on the pre-game and the game itself, but I’ve yet to write on the post-game. So this essay is dedicated to exactly that. What do you do after you send that initial cold email?

The short answer: If you want to stand out, always follow up. To quote my good friend, Christen on her TikTok, where she shares amazing soundbites of career advice and networking.

The longer answer

I met a founder once who emailed an executive at Disney every business day for almost one year, minus ten days. The caveat is at the top of every daily email he wrote, “If you want me to stop, I will.” Almost a year after he began, the executive took the meeting. And Disney is now one of this startup’s biggest customers.

I met another founder a few years ago, who retweeted tweets from a Forbes’ Midas 100 VC every week for three months, while including his own constructive commentary each time. So, when this founder began his fundraise three months later, this VC set up a meeting with that founder within two hours of the cold email, first thanking the founder for his thoughts over the past few months.

Garry Tan and Apoorva Mehta have both shared this story publicly. Apoorva, founder of Instacart, back in 2012, wanted to apply to Y Combinator. Unfortunately, he was applying two months late. So he reached out to all the YC alum he knew to get intros to the YC partners. He just needed one to be interested. But after every single one said no, Garry, then a partner at YC, wrote: “You could submit a late application, but it will be nearly impossible to get you in now.”

For Apoorva, that meant “it was possible.” He sent an application and a video in, but Garry responded with another “no” several days later. But instead of pushing with another email and another application, Apoorva decided to send Garry a 6-pack of beer delivered by Instacart. So that Garry could try out the product firsthand. 21st Amendment’s Back in Black, to be specific. In the end, without any precedent, Instacart was accepted. And the rest is history.

So, what is the common thread here?

As my friend once told me, “It’s not hard to be persistent. Most people can easily be. But most people aren’t persistent AND considerate.” Persistence is keeping your promises to yourself. Being considerate is respecting and keeping your promises to others – explicit and implicit. Explicitly, if you say you’re going to do something, do it. Implicitly, understand the social context, their schedule, their cognitive load. One of the lines I always add at the bottom (or sometimes at the top) of my cold outreaches:

“If you’re too busy, I completely understand.”

Or the variation I shared in my cold email “template”:

“I know you get a hundred emails a day, and if you don’t have any time to respond, I completely understand.”

To take that one step further, sometimes you’re reasonably confident they won’t have time to respond. Big life or career events may make it hard for them to respond, like:

  • New baby/paternity/maternity leave
  • New publication
  • Recently did a (podcast) interview
  • Released some version of viral content (i.e. YouTube video, TikTok, Clubhouse, Twitter, etc.)
  • Founder raising a new round
  • Upcoming product launch they’re a key player in
  • VC raising a new fund
  • Shit hit the fan
  • Anything else the press is actively writing about

If that is your assumption, I add in one more line:

“If you don’t have time to respond, I’ll follow up one week [or whatever other timeframe] from today.”

And once you’ve said it, do it. To save you the time to draft up a follow up email a week later, a hack I use is to just write that follow up email as soon as you send the first email. Then schedule it to send a week from the day you sent the first. Make sure that each follow-up email isn’t the exact same. Show updates on what you learned, found, or thought about, as well as additional value to the person you’re reaching out to. While this hack is the bare minimum of what you can do to follow up, this should never be the ceiling. 9 out of 10 times I find myself going back, cancelling the send, updating the email with my learnings, then re-scheduling it.

Follow up at least twice after you send the initial cold email. But be understanding of their circumstances. And of course, never overstay your welcome. Understand the difference between a soft “no” and a hard “no”. In the circumstances of a soft “no”, recognize the variables that led to it. And reach back out when those variables are not in play, or to your best guess.

In closing

I met a brilliant founder years ago who, at the time, scaled his business to 100 employees, and he told me something that resonates with me till this day. “You can only learn from experience, but it doesn’t necessarily have to be yours.” Though I learned of his saying a few years after, it summarizes why I started my 6-year at least once a week cold outreach streak. To learn vicariously through others’ experiences. And if that was and is the impetus, it’d be a shame if I didn’t see it through to the best of my ability. ‘Cause if I was gonna give up after just sending one email, why start?

As Ron Swanson once said, “Never half-ass two things; whole-ass one thing.” So if you’re gonna start with the first email, you might as well send the next two. If the first shot doesn’t swish, catch the rebound and shoot again. Persistence. And ideally rebound thoughtfully.

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Should you take VC money or just money money?

Not too long ago, I came across a question on Quora that I had to double click on: Why should founders care about VC brand? Money is money, isn’t it? While the question itself seemed to have a come from a less-informed perspective, I found it to be a useful exercise to once again go through the checklist of founder-investor fit.

Money, frankly, is just money. A Benjamin will look the same and work the same as any other Benjamin out there. Assuming you don’t need anything else other than money, I’d recommend other sources of funding other than venture funding, i.e.:

  • (Equity) crowdfunding,
  • Rev share,
  • Angels – high net-worth individuals who write checks in the 1000s to 10s of 1000s of dollars;
    • Also worth looking into, but are representative of the VC model, are super angels and solo capitalists. Many of whom might be leading their own rolling funds (more context) now;
  • SBA Loans;
  • Friends/family – small sums of money, unless your dad is Chamath Palihapitiya;
  • ICO;
  • Government (public) and private grants – really small sums of money, but money nonetheless;
  • Accelerators/incubators – less upfront capital. But the partnerships they have with other startup services save you a lot of money (i.e. AWS, Adobe Suite, etc.);
  • Selling domain names (yes, I have a friend who initially funded his business by doing that, but other than that, I’m kidding);
  • And I’m sure I missed some others out there.

On the other hand, most founders who raise VC funding want something more than just monetary capital, including, but not limited to:

  • Mentorship/advisorship –
    • Ex-operators who can give you tactical advice,
    • Former founders who can empathize with you,
    • VCs who can check your blind side and had previous portfolio founders who have gone through what you’re going through now,
    • People who have access to resources that will aid you on the founding journey (ideally not distract you),
    • And frankly, people who’ll be there for you when you have to make the tough calls,
    • Highly recommend Harry Hurst’s tweet about the CS:H ratio (check size: helpfulness, which I elaborate on here) as a mental model to figure out which VCs depending on fund size/check size can help you the founder the most at the stage you’re at.
  • Network – downstream investors, sales pipeline, potential hires (eng, executives, growth, product, marketing, etc)
  • Brand/PR –
    • If you’re trying to fill up a round, a brand name investor can easily help you fill in the rest of the round with their network and their participation alone. They’ll also help you raise downstream capital – directly or indirectly.
    • It’ll be easier to find customers. With a brand name VC, you also get quite a bit of media attention from Forbes, TC, NY Times, and so on. Customers are more likely to trust you knowing that you’re backed by a recognizable brand, especially the folks on the other side of the chasm on the adoption curve.
    • It’ll be easier to hire world-class talent. Your business, in their mind, is less likely to go out of business tomorrow. And while you’re not looking for candidates who seek stability, it does give the candidates you do want to hire a peace of mind and confidence that you have external validation.

There’s a saying that the difference between a hallucination and a vision is that other people can see the latter. It’s really a chicken and egg problem. I’m not saying a VC’s brand will guarantee the success of your startup, but I do believe it will help, with the underlying assumption that you pick the right VC. Whereas it used to be a differentiator a decade ago, all VCs these days say they’re founder-first or founder-friendly. But unfortunately not all are. They might be if things are going well. But the true tells are what happens when things don’t go well. Here are some of my favorite questions to ask portfolio founders before you work with a VC. And how to find founder-investor fit.

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#unfiltered #41 Pondering Purpose and Passion – Notes from Naval Ravikant on Clubhouse

fire, passion, purpose

I’ve been a long time fan of Naval Ravikant, so when he went on Clubhouse recently to share his thoughts, despite not having an iPhone (I know ?), I had to find a way to tune in. While Clubhouse is designed to be the ephemeral demystification of the broader world, there are a rarified few conversations I believe are and should be evergreen. Naval’s happens to be one of them. Whether Clubhouse itself compiles these knowledge banks or through some third-party service, we already have listeners and Clubhouse users recording these conversations. A temporary hack that paves the way for a broader solution.

Over the weekend, I found Naval’s definition of purpose to be one of the best I’ve heard to date:

“You have to live up to your own moral code. Your life is an eternal single-player game. You’re not competing against anybody else; you’re competing against yourself. You set your own desires and your goals. You have your own perspective. You have your own morality. And you have to live up to it.

“There is no standard meaning or purpose. If there was a single purpose or meaning for all of us, then we’d all be slaves to that single purpose. We’d all be robots – every one of us fighting each other in conflict to get to that one purpose. And there’s not even a single purpose for you necessarily, other than the one that you create. So, you get to create your meaning and purpose. You get to craft your own story here. […]

“It is a race, but you’re just running against yourself. You pick the finish line; you pick the goal line; you pick the meaning; you pick the purpose. So you can pick a meaning or purpose that is antithetical to happiness, or one that aligns with it.”

A month ago, my friend and I watched Pixar’s Soul. In it, the writers illustrated a powerful lesson on life’s inspiration. As Jerry enlightens Joe, that distilling your whole life into a singular purpose is “so basic”, Joe enlightens Soul 22, “your spark isn’t your purpose. The last box fills in when you’re ready to come live.” To live means to enjoy and savor every minute, every second, the entire 24-hour day, all 365 days of the year, and every year we are alive and breathing. Not just, and I’m generalizing here, the 40-100-hour workweeks. Joy and purpose, after all, was never meant to measured as a unit of time alone.

Many of us live life looking for our purpose in life – a singular destination. A singular raison d’être. We compartmentalize our entire lives into self-prescribed labels. In high school, it was either by our grades or our extracurriculars. In college, by our majors. In our adult life, by our job title. I can’t speak for everyone, but I’m willing to bet that most, if not all people, are more robust than just their full-time roles make them out to be. Just like I’m more than a VC Scout. That’s why I’m so fascinated by polymaths in our society.

In opening our minds to a world beyond a single degree of freedom, we give ourselves more surface area to find inspiration and happiness. As Tim Ferriss once said, “It is not that beauty is hard to find; it’s that it is easy to overlook.”

Equally so, his rhetoric on passion is equally as provocative. Or specifically, the relationship between your passion/obsession (more on obsession here and here) and domain expertise. The latter, as Naval calls it, “specific knowledge”:

“How do you gain specific knowledge? It’s almost a catch 22. Specific knowledge is built up by you through your passions. So, when they say follow your passion, it’s kind of what they mean. It doesn’t always lead to money, but it can. Because if you’re obsessive about something and learning it for your own genuine intellectual curiosity – not to get a degree, not to make money, not to impress your friends – you’re going to end being better at it than anybody else. So, I really believe that you should only read and engage in activities that you genuinely enjoy. And you should cultivate your intellectual obsessions without any goal that you may be surprised when you look back and connect the dots later that one of them developed into a goal. One of the hallmarks of specific knowledge is that it will feel like play to you, but it will look like work to others. So, anything that fits that model, you should develop. […]

“You get what you want out of life. You just have to want it badly enough. If it’s your all-consuming desire, you will get it. You will create the path to the destination no matter what it takes.”

Naval’s encyclopedic answers asked underscored once again a question I ask myself when I am the most lost:

What would I do if, at the end of the day, I would be only one applauding myself?

Photo by Almos Bechtold on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

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#unfiltered #40 Questions That Hone Your Emotional Fitness

As I’m gearing up for a few projects, I spent the last few weeks pondering on a number of questions. And to stress test those questions, I spent the greater half of that time asking the people around me. But in the process of doing so, I found 10 of the above questions sponsored the most self-inquiry within myself and others.

The Questions

Elad Gil, legendary angel investor, said in an interview late last year that “every startup needs to have a single miracle… If your startup needs zero miracles to work, it probably isn’t a defensible startup. If your startup needs multiple miracles, it probably isn’t going to work.” Was there a defining miracle, when preparation met opportunity, that got you to where you are today?

Similarly: Life is some percent skill and effort and some percent of luck. How much has luck contributed to get you to where you are today?

In 2005, a Yahoo! Exec once told the Alexis Ohanian, founder of Reddit, that they were a “rounding error” which Alexis then framed on the company wall as motivation. Have there been chapters of your life that were defined by strong opposition – externally or internally – and your ambition to prove them wrong?

Pat Riley, Hall of Famer basketball coach, wrote in his book, The Winner Within, “You don’t wanna be the best at what you do; you wanna be the only one who does what you do.” What skills, experience, or mental models do you have where you are the only person – or in extremely rarified air – who can do what you do?

Quoting Jerry Colonna in his book Reboot, how are you complicit in creating the conditions you say you don’t want?

Norman Vincent Peale, author of the bestseller, The Power of Positive Thinking, once said, “Shoot for the moon. Even if you miss, you’ll land among the stars.” Entrepreneurs are people who pursue impossible odds and enjoy the journey of shooting for the moon to become world-class athletes. Telling them no is like telling a 7-year old they can’t become an NBA All-Star. Odds are they’re not going to succeed, but the process of pursuing that goal makes it worthwhile. And in doing so, they become a stronger, more resilient individual than never trying to pursue it in the first place. In your life, what have you done or would you do regardless of the outcome of the pursuit?

Andy Rachleff, founder of Wealthfront and Benchmark, once said in an interview: “If we’re batting a thousand or close to a thousand, we’ve done a really poor job.” If your probability of success is really high, the likelihood of a big win is extremely low. To win and not just focus on not losing, you have to take big risks. And as per the definition of risk, you’re more likely to fail. Have you had a failure in your life that contributed the most to where you are today?

On the same token, have there been alleged setbacks turned out to be a blessings in disguise? Or, were there “misfortunes” that turned out to be fortunes?

Let’s say life is a game blackjack. If the first card you drew represents your journey prior to 2020 – face up – and the second card exemplifies your life from 2020 till now – face down, which two cards did you draw? And would you continue “hitting” knowing the hand you’re dealt?

I saw in a Quora thread once, “When you are happy you enjoy the music, but when you are sad you understand the lyrics.” When you were in your lowest of lows, were there words, phrases, or lessons that had profoundly new meaning to them?

Desmond Tutu, who won the Nobel Peace Prize in 1984, once said, “My humanity is bound up in yours, for we can only be human together.” So, to borrow his words, what are the common themes between moments you’ve given up your humanity, either individually or collectively?

What is the narrative that you find most compelling when your inner weather is the most turbulent?

Photo by Johannes Plenio on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

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