Tag: questions

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! > ? > , > .

comment, bubble, feedback

Yes, that’s the title of this blogpost. And no, that’s not in Wingdings font.

And yes, that’s also an equation.

Surprises do better than suspense, which do better than pauses, which do better than full stops.

The first is indelible. The last is forgettable.

Let me elaborate.

Notation MeaningExplanation
!Surprise(For all you coders, the exclamation point does not stand for “not.”)

You’ve shared something interesting, shocking, unexpected… something non-consensus or nonobvious. This is the easiest justification for someone to take a meeting. You not only have their attention, but their curiosity.

It’s a point of contention. It allows for debate. At face glance, it may not sound right. It may outright be shocking.
?SuspenseWhy? How? You’ve posed an interesting question that begs an answer. People will follow up. They may or may not take the meeting, which is highly dependent on their bandwidth and your luck in their schedule.

Oftentimes, the follow up will seek some level of external validation. You need to appeal to a higher authority. References. Facts/data, and starting from universal truths. Or sometimes, a higher form of logic and reasoning.

In the words of Siqi Chen, questions are “tell tale signs of objections politely withheld.” For the purpose of gauging interest, quiet objections out loud may work in your favor.
,PauseYou’ve introduced a subclause before the clause. The subclause itself must be interesting enough for them to want to finish the sentence. It’s the difference between a feature and a product. If it is interesting enough, there may be a follow up, but things will usually stay asynchronous.

Oftentimes, this manifests in the form of taking a large leap of faith in logic. Either one starts a premise, but has no conclusion/solution. Or the other way around. You deliver the punchline, but has no build-up.
.StopA quick conclusion can be drawn. No further questions or curiosities. There’s nothing special. Nothing worth noting. This neither grabs attention or begs curiosity. The same as saying the sky is blue.

While that may seem obvious, the equivalent in the startup world is “We are a B2B SaaS product leveraging AI to deliver insights.” You’ve said nothing. And unfortunately, all of which is forgettable.

All that to say, if the goal is to get a conversation going, the above is a formula I often advise the founders and GPs I work with.

Then once you have the meeting, of all the meeting requests I get, the two most common reasons are:

  1. I need money
  2. I need feedback

Oftentimes, not mutually exclusive.

For the purpose of this blogpost, and as I’ve written about the former in the past, I’ll focus on the latter.

Feedback

The vast majority of people also suck at asking for feedback. Take pitch decks, for example.

Most founders and GPs ask: “Can you give me some feedback on my deck?” Unfortunately, the ask is nebulous. What kind of feedback are you looking for? How honest can I be? What are my parameters?

Should I be worried about hurting your feelings? Are you looking for validation or constructive criticism?

Am I the best person to give you feedback on this? Am I supposed to give feedback from the perspective of me as [insert your name] or a different persona?

So, unless you’re best friends with the person you want feedback from AND they are the ideal archetype you’re trying to target, you need to be more direct and focused on what you’re looking for.

Love-Hate-Forget

One of my favorite set of questions of all time happens to be something that was designed to be asked in groups of strangers. Something that came from the social experiments I hosted pre-COVID. Not original, but I forget the attribution.

  1. Who did you notice? Who, for whatever reason, rational or not, did you like?
  2. Who, for whatever reason, did you not like or feel it may be hard to be friends with them?
  3. And after all that, who did you, for whatever reason, not notice at all?

Similarly, in the case of deck feedback…

Love

  1. Could you go through the whole deck, spending an average of half a second on each slide? While you do so, could you note, which slides you spend longer than one second on, for whatever reason?
    • FYI, leave it up to them if they want to elaborate. Sometimes you don’t need to ask. Oxygen usually rises to the top.
  2. If you were to keep just one slide and throw everything else out, which slide would you keep?

Hate

  1. Could you spend up to five seconds per slide? Which slides do you dislike, for whatever reason?
  2. Why?
    • FYI, typical feedback is usually too messy, no punchline (I don’t get what you’re trying to say), or I don’t agree. The last of which is actually not always bad, depending if it’s a point of view of the world or you’re misrepresenting a fact.

Forget

These are not questions you ask the feedback giver. Rather, these are questions for introspection.

  1. Which slides did the person giving feedback totally ignore?
  2. Why might they have?

More often than not, these are table stakes slides. Delete these slides if you can.

Photo by Volodymyr Hryshchenko 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!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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#unfiltered #92 AGMs, VC Funds, and the Personality Hypothesis

event, conference, concert

In the last few months, I’ve been to a number of AGMs. For the uninitiated, annual general meetings. These annual summits VCs host once a year to their investors. Their LPs. Some of such events I go to because I’m an LP in those respective funds. The vast majority of which I am not. But I go because I’m a friend of the team, or the GPs want me to give them feedback on the event, or that I advised them on how to put together the event itself. The invite, in and of itself, especially to those I am not an LP in, is an honor and a privilege. Something I don’t take lightly.

The best ones bring in quality attendees, not just speakers. And that these A-players bring their A-game. They are willing to share their insights and experience with candor, and leave little to the imagination. They are battlegrounds of ideas and creative conflict. To take a line from Matt Ridley, a line I first heard also at a an AGM last week, “Innovation is when ideas have sex.” Quality events are simply “brothels of ideas,” to borrow a line from a speaker at that AGM, leading not only to a higher quality of conversation, but also a higher quality of eavesdropping.

In the words of someone I met at one last week, “I don’t have a membership to a country club, but this is the closest thing I have to it.”

In each, the general partners for each firm would typically share the progress of the fund. The good. The bad. The numbers. The trends. As well as the future of the fund. Then after all that, they would have 2-3 of their portfolio companies present on stage, with insight as to what innovation looks like from ground zero. My personal favorites are where the founders don’t pitch that they’re fundraising. It is purely, in its truest sense, an exchange of ideas. Occasionally, there would be an additional speaker — an influential individual in the space to highlight the GP(s)’ networks. These have ranged from published authors to established GPs to celebrities to bloggers and podcasters to Nobel Prize winners.

LPs often go to so many of these. Many more than I have to date. That at some point, every annual meeting starts looking like the next. If you knew nothing else, or if you’re ever curious of my favorite rule of thumb on whether an AGM is truly different and worth one’s time is one where less than 10% of the attendees are on their devices. And even if they are, they aren’t on it for long.

That said, one thing I couldn’t help but notice was that many of the founders who spoke on stage often reflected the personality of the GPs. A mirror of sorts. Not all the time, but enough for me to consistently notice. Which makes sense since like-minded people gravitate towards each other.

People with similar energy levels. People with similar levels of charisma. Those with similar levels of curiosity. Similar sets of hobbies.

I have no thesis here. Merely a hypothesis from a very anecdotal set of observations. How crucial is a GP’s personality in selecting and attracting founders? If there was a loose personality archetype of a great founder, does that mean LPs should pick GPs with that same personality archetype since they’re more likely to attract entrepreneurs with similar personalities?

Hell, as they sit two degrees of freedom away from actual innovation, do most LPs actually know what makes a great founder?

Photo by Pablo Heimplatz 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!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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DGQ 24: Guessing a number between 1 and 100

lock, numbers

Eight years back, at least at the time of publishing this blogpost, Steve Ballmer, former CEO of Microsoft, shared one of his favorite interview questions.

“I’m thinking of a number between 1 and 100. You can guess. After each guess, I’ll tell you whether high or low. You get it the first guess, I give you five bucks. [Second guess], four bucks. Three. Two. One. Zero. You pay me a buck. You pay me two; you pay me three… And the question is, do you want to play or not? What’s your answer?”

While he didn’t go too much in depth on all the answers he’s gotten to it over the years, I imagine different people would have given different proposals on how the game might be played. Of course, the classic engineer is likely to approach it was as an expected value problem.

Most people will lose money. There are far more numbers to guess on which one loses than wins. The question really comes down to… do you know the odds of the game you play?

I find it interesting as an investor to hypothetically ask to founders and/or GPs. That said, I never did. But equally so, I usually spend the first conversation with an entrepreneur (whether the product be software or a fund model) trying to understand a person’s motivations. And, if they understand the rules of the game.

Those who don’t understand the rules will often jump head first in, and take care of the consequences later. Asking for forgiveness than for permission. An attitude that is more excusable in a startup founder than a fund manager.

Those who do understand will take a more measured approach. It’s interesting how little some people understand the game they’re playing. Be it in a two-year financial projection that encapsulates all their assumptions, or a portfolio construction model to understand the enterprise value to return the fund 3X.

For the former, it’s less so of how accurate a financial projection slide is. Hell, your guess is as good as mine. But I always ask founders to unpack it to understand how they’re thinking about the future as a function of their reality today.

For the latter, it’s to understand the true power of the power law, no pun intended. For instance, if you have a $10M fund, writing 20 checks of $500K for 5% ownership. Obviously, I’m assuming a bunch of things for the sake of keeping the math simple. No fees, no recycling, no reserves, and so on. You need to return $50M to 5X your fund. Accounting for 80% dilution, you’ll own 1% on exit. So you need $5B in enterprise value. Given the power law, one of out of the 20 companies should get to at least $3-4B in exit value.

Then again, those who understand the game too well will never take the risk necessary for serendipity to stick.

There’s an interesting blogpost an LP shared with me for my blogpost on evergreen content that VCs and LPs consume. A piece written by the legendary Graham Duncan. “The Playing Field.” A piece I highly recommend reading, even if to shape your own thinking about how the game you play evolves over time. In it, a line worth underscoring.

“[I]t’s the way you learn to play the cards you’ve been dealt, rather than the hand itself, that determines the worth of your participation in the game.”

Photo by Towfiqu barbhuiya on Unsplash

The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.

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!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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DGQ 23: What’s the most interesting question you’ve been asked so far?

cactus, different, unique

I use this question quite often as a discovery tool. My job as an early-stage investor is to find crazy, interesting people building interesting things. By the time things look less crazy (at least at face value, without digging), I’m likely too late.

To founders who are fundraising, I often ask this question with respect to VCs. Most VCs default to the usual.

Tell me about your company.

How much revenue do you have? Growth rate?

Tell me about your 2-year plan. Your financial projections.

Tell me about your competitors.

How much are you raising?

Who else is investing?

And I’ve probably missed a plethora of usual suspects when it comes to questions VCs ask founders. But I love people who ask different sets of questions. People who think different, see different, and as such ask different. How are they slicing the cake differently? What might these people be seeing that most others are not? And then, I go back and reflect… is there alpha in that way of thinking.

But first, it’s about the questions. Some examples of such… here, here, here, and here, and also here and here.

So when I ask, “What’s the most interesting question you’ve been asked so far?” to founders, they can help me uncover new VCs I may not have noticed before. Probably investing in ways the industry has not seen before. And probably also investing in companies uncorrelated with most others. At least in the early stages. When I ask it to GPs, I can find LPs whose portfolios may look different from others. Or at the very least, will have arrived at their conclusion differently than their peers.

Photo by Nick Karvounis on Unsplash

The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.

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!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Starting from Yes versus No

stoplight, green, red, yes, no

Last week, I was chatting with an LP about decision-making processes at institutional LPs, whether a large family office or a pension or an endowment. And I asked her:

“When you come across a new investment opportunity, do you often find yourself starting from a yes and working to find ways to disprove yourself to get to a no? Or do you start from a no, then spend the next few years working your way to get to a yes?”

(To be honest, I could have phrased the question. But alas, you get the gist.)

She gave a light chuckle. Thought for a moment. And said, “In the first conversation I have with a GP, I either get to a quick no or a tentative yes. And in the next few months, I try to find signs of why this investment could be a no. But if I don’t find any strong disproving evidence in that exploration, that’s when we choose to invest.”

Of course, she’s not alone. I haven’t actively gone out to measure the distribution. But out of 20 or so LPs I’ve asked, I’d say anecdotally, it’s about half who start from a yes, and half who start from a no.

There’s no hard and fast rule here. But what I seemed to notice is that it depends heavily on how easily people get to conviction.

Some people are more prone to saying yes. They get easily excited about new opportunities. The feeling of love at first sight. As such, their investment process accounts for that by delaying gratification and impulse purchases. The discipline of their investment process allows to take time to find clues that may either prove or disprove their intuition.

Among thousands, if not tens of thousands of opportunities, for others, it’s easier to say no. Most LPs don’t have a time horizon they have to commit capital before, barring fund of funds, and potentially some large institutions who act as fiduciaries for others’ capital. Unlike a GP whose mandate is potentially stage-specific, to most LPs, a Fund I commitment versus a Fund II or a Fund III is virtually the same to them. If a pre-see-only fund says no at the pre-seed, they lose that window of opportunity because they’re not allowed to invest net new checks at seed or Series A.

For LPs, this takes the possibility of a near-term transactional relationship out. Then as the relationship matures over time, one might stumble across something about a GP that gets them over the activation energy to dig deeper. And eventually, when enough evidence is collected, they’ll pull the trigger. More often than not, it’s not “enough evidence,” but rather enough time to realize the one or two brilliant things about a GP.

Photo by Diane Picchiottino 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!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Interviewers I Really Respect and Why

podcast

I’ve always been fascinated by how to get to the bottom of things. Yes, you can do your homework into the data, but at the end of the day, you have to go back to people and their experience.

Jeff Bezos has this line: “The thing I have noticed is that when the anecdotes and the data disagree, the anecdotes are usually right. There is something wrong with the way that you are measuring it.”

So, when it comes down to finding the right anecdotes, I’m a big believer that asking the right questions gets you most of the way there. It’s why I started the DGQ series on this blog. Naturally, I spend a lot of time studying others who are better at the craft than I am. After all, I have a long road ahead of me. While this is obviously useful in the context of my podcast, studying the best interviewers has also helped me when:

  • Listening to founder and GP pitches
  • Doing diligence
  • Interviewing potential candidates for a role
  • Making friends
  • Small talk
  • Coffee chats / when asking for advice
  • And of course, when doing research.

So while you may not have a podcast — or maybe you do — I hope you find the below useful in regards to other aspects of your life.

The callback

What is the callback? A callback — a term quite often used in the comedy circuit — is an allusion to something previously brought up in conversation. It’s not only a sign that you’re actively listening, but that you’re actively engaging in the flow of the conversation. For instance, say you hear someone bring up a quote they liked recently. For the purpose of this example, it’s Amos Tversky‘s line. “You waste years by not being able to waste hours.” Then later in the conversation, they say the last hour flew by so quickly. Then a callback could come in the form of, “Better than wasting a year with me.”

Conan O’Brien is world-class at this, if not best-in-class. If you watch his show or his podcast, you’ll see multiple examples. But probably best illustrated in just the number of times he did it in one episode, I’d recommend his episode with Larry David.

Surprise and delight

The first question in a conversation is often the hardest, but also has the greatest impact towards the rest of the conversation. Getting someone to put down their guardrails without pre-established rapport is really, really hard. It’s why podcasters and TV show hosts alike have pre-chats, where they spend time with each guest to warm them up.

It’s for that reason I have a lot of respect for Sean Evans who hosts Hot Ones. The number of times his guests have responded to his questions with “How did you know that?” and “You really did your research” or “I’ve never been asked that before” is a refreshing take in a world where talk show interviews are just a formality for a celebrity’s road show. And not only does the style and how Sean ask questions set the show apart from literally every other interview that celebrities go on, you can see how his first few questions help him build instant rapport with a guest whether or not they knew each other well before.

That said, I’d be hard-pressed to find just one as he’s able to execute well for most episodes of Hot Ones already. If you’re short on time, the only ones I find to be little less helpful, at least to see the mutual banter, are probably the ones where he’s interviewing himself, or a fictional character (i.e. Donald Duck or himself), or the guest and him go through less than 10 chicken wings (aka the full gauntlet).

Underneath the surface

Despite having hosted a number of fireside chats, when I first started Superclusters, I was obsessed with hitting every question I had prepared. An internal expectation that because the podcast is a public asset and is likely to be online till the end of time made me feel I had to cram as much information into each interview as possible. The funny thing is I still didn’t end up covering the lion share of questions.

For each episode, I end up preparing anywhere between 10 and 30 questions. Yes, you read that latter number right. And yes, for a roughly hour-long podcast. Naturally, there’s no way in hell I’d get to the vast majority of questions, but in mind, I had an internal drumbeat that I felt compelled to keep on pace with.

The more I talked with other seasoned podcasters, the more I realize that while others may not prepare as much research as I do before each interview, the best ones let the conversation flow. They ask great follow-up questions. They spend time on the nuance of words, phrases, even micro-reactions and flinches when guests speak or hear something. One of the most useful pieces of advice I got from a friend, Erica Wenger, was to do all the research you humanly can before each recording. Then, ask the first question, and throw the rest out the door. Which I’ve since internalized.

Tim Ferriss is my favorite on this front. And he does this for almost every single one of his episodes. That said, if you’re looking for a starting point, his episode with Eric Ripert was the first one I actually sat down with pen and paper purely to take notes on how Tim follows up with each of Eric’s comments.

By a friend’s recent recommendation, I also stumbled across The Diary of a CEO podcast. I will admit that the first few episodes I came across I found less interesting from a content perspective. But when three episodes later, I tuned into his episode with Marc Randolph, and holy cow, the depth of questions was clearly a cut above the rest, specifically around when Marc had to step down as CEO of Netflix. And you can just see Steven Bartlett asking one great question after the next.

Avoiding the yes

The fallacy with many rookie podcasters, admittedly my own rookie mistake as well, is that the host doesn’t push back on the guest’s answers enough. When an answer just isn’t good enough. Either the one answering dodges the question or kept their answer too broad.

Hasan Minhaj is my go-to person on this front as he’s incredible at pushing back thoughtfully, which is a really hard thing to do. One of my favorite interviews he did by far was the one he did with Kevin O’Leary on FTX, which Kevin personally invested in.

Drills, drills, drills

I can’t say I got this from any one podcaster, but actually something I learned from my time as a competitive swimmer. For every race we competed, we had to practice sets of twice the distance regularly. Even more so, we had to practice with a handicap, focusing on refining the technique for only part of our body. Be it legs only, or arms only, hell we even swam with our goggles black-sharpied out before. To us, these were drills that would help prepare us for the real thing.

As a podcaster, in case you couldn’t tell, I’m still a work-in-progress. Likely will always be. That said, one of the most helpful ways I’ve found to practice the art of asking questions (since I’m not in race mode every day) is I often listen to the above shows, hear the host ask the question. Then wait for the guest to respond. Then right before the host asks another question, I practice what I would say and where I’d interrupt. And only after I’ve said my response aloud, do I press play again and see what the host would say.

To me, those are the drills I run through when I can to prepare myself when I am eventually on camera. Other times, it’s just fun to see how my response or line of questions would differ from some of these other hosts.

In closing

I’ve often given the excuse that I’m a better writer than I’m a speaker. Which may be true. I often sit with myself during the editing process and wince at words I’ve used or using some complex language to explain what could have been a 140-character question. And the truth is, I’ve held myself back. By giving that very excuse. So now I am earnestly trying to improve. To close that gap, that delta between the way I write and the way I talk. At least from a proficiency standpoint. It may take me a while. But I appreciate every one of you being on this journey with me. And if there’s any advice you can share along this path, as some of you are further along, I’m all ears.

I hope the next time I write something like this, I’ll be further along. And maybe… just maybe, find myself circa today to be embarrassing to watch and listen to.

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!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Timeless Content for the Weary Investor

city, ads, information

“If you don’t read the newspaper, you’re uninformed. If you do read it, you’re misinformed. […] What is the long term effect of too much information? One of the effects is the need to be first, not even to be true anymore. So whatever responsibility you all have… to tell the truth, not just to be first.” — Denzel Washington

Since I’ve first started this blog, I’ve always had a bias towards sharing evergreen content. Lessons that can be applied to any era. Of course, not all my thoughts withstood, nor will withstand the test of time, but the goal was to be intentional with what I was putting out there. The bias was also due to the fact that I didn’t think I was best in class in being first to news updates (although opportunistically I could be).

And while not SEO-optimized, I find peace in delivering content that is hopefully as useful today as it will be tomorrow. In that regard, this blog will forever stay a blog, as opposed to any semblance of the traditional definition of media, which at the end of the day is the acquisition and monetization of attention. The latter of which I don’t plan to do for this blog, ever.

That said, the consumption of information is often just as if not more important than the production of information. In the words of my friend, one’s information diet. And if you’ve been around this blog long enough, you’ll be no stranger to that term. Of which about 50% of my information intake is ephemeral and 50% evergreen. But for the purpose of this blogpost, this one is less about me, but about the information diet of friends and colleagues. Where do many of the VCs and LPs I respect consume their evergreen content?

So I went around and asked the simple question:

Do you have 1-2 examples of evergreen content you love revisiting or stays in your mind rent-free?

In other words, what do you read when you need to get to the bottom of things, not just to stay on top of things?

By nature of being friends with everyone I asked, and to reduce the noise in the below list, I’ve excluded every mention of a specific blog whose first word is a synonym to ‘mug’ and a specific podcast whose name is inspired by astrophysical concepts. I asked about 20 VCs and LPs each. Whose fund sizes ranged from 7-figures to 10-figures. Whose tenures in investing ranged from five years to thirty years. Geographically, all except two I asked reside in North America, but many also invest into geographies external to the star-spangled banner and the home of the maple leaf.

There was no particular reason as to why I sampled as such, other than an availability bias. All of whom I could text or ping pretty quickly and get a response. After all, I incubated the idea for this post earlier this week. Also, by default, all recommendations were kept anonymous.

But without further ado, I’ve compartmentalized the below content into:

  1. What VCs consume
  2. And, what LPs consume

You’ll notice some do overlap, which goes to show how timeless some things are.

What VCs consume

Blogs:

Books:

Papers:

increasing conviction while saving timeDownload

Podcasts:

People to follow:

Manifestos:

Source: Holstee Manifesto

What LPs consume

Blogs:

Books:

  • The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel
  • The Power Law: Venture Capital and the Making of the New Future by Sebastian Mallaby
  • The Big Picture: On the Origins of Life, Meaning, and the Universe Itself by Sean Carroll
  • Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts by Annie Duke
    • The amazing Jamie shared the below bullets as to why Annie Duke’s book is just that good, and Jamie’s words were too good not to include:
      • Embrace Uncertainty: I can make more rational and less emotionally driven decisions
      • Resulting: People judge the quality of a decision based on its outcome rather than on the decision-making process. THIS HAPPENS ALL THE TIME IN VC!!!! Annie argues that a good decision can lead to a bad outcome and vice versa, so it’s crucial to focus on the process rather than just the results.
      • Probabilistic Thinking: Think in probabilities rather than absolutes. By estimating the likelihood of different outcomes, individuals can make more informed decisions. This approach helps in managing risks and setting realistic expectations.
      • Learning from Feedback: Learning from both wins and losses is crucial, instead of attributing success solely to skill or failure to bad luck, understand what contributed to the outcome
      • Decision Groups: Forming decision groups where members can share insights and challenge each other’s thinking- this can help identify biases and improve the quality of decisions, I would say a key part of what happens at Screendoor 
      • Importance of process: Developing and following a structured approach, individuals can make better decisions even in the face of uncertainty.

Lectures:

Podcasts:

People to follow:

Additionally, one LP shared their more comprehensive list of content they revisit often. One that’s well-worth bookmarking.

I don’t know about you, but I know what I’m doing this weekend.

Big thanks to all the LPs and VCs I reached out to for recommendations, including Jamie Rhode, Eric Bahn, John Rikhtegar, and everyone else who shared their thoughts on short notice before we had a chance to get the compliance’s blessing.

P.S. John had probably the most unique pieces of evergreen content he regularly revisited. While I won’t spoil which, you can probably guess based on which of the above seem like recommendations off the beaten path.

Photo by Anthony Rosset 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!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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The Strength of Battle-Tested Friendships

These days I’ve been spending a lot of time thinking about succession and key person risks. Definitely influenced by a number of conversations I’ve had with a partnership I invested in who broke up and LPs who take the long-term perspective on investing in funds.

When I say long-term, I mean when those LPs invest in a firm, it’s not just a single check into one fund. They plan to budget out $XX million dollars over the next three funds or so. Or across 9-10 years primarily to invest in this fund manager. We’ve talked about how underwriting a solo GP is actually much easier than underwriting a partnership, at least on the key person risk side of things.

If a solo GP dies, they die, and the firm naturally cannot go on. And any capital reserved for them automatically goes towards net new investments. If a partnership loses a key partner, then it’s this awkward dance to figure out if the remaining partners are worth re-upping on. And a re-underwriting needs to occur.

Before I go any further, let me first define key person risk for the uninitiated. Key person risk is the risk created when a single person leaves or dies that creates meaningful knowledge, brand, or performance loss at the institution. Simply put, when shit hits the fan in a partnership, how volatile will the transition be?

As such, my recent conversations informs much of what I write below. For the purpose of this blogpost, I’ll focus on partnerships as opposed to solo GPs and founders.

All great relationships are battle tested. Battle-hardened. In fact, when I ask a set of co-founders how they resolve disagreements, and they say, they never disagree, I run in the opposite direction fast. So fast that I could be cast as Barry Allen. Maybe. If my acting were better. If two people never disagree, they’re either the same person (which is hard, ’cause even biological twins disagree) or they’ve never truly worked on something together that they would call their life’s purpose.

To me, the formula for battle-hardened relationships has two key variables.

  1. Depth – High stakes
  2. Breadth – Time for the stakes to manifest

High stakes

Even if artificially high stakes. Even if in the moment, all parties involved must truly believe that this is the be all, end all. That there is no Plan B. There’s no going back. That everyone has to see it through. In Hollywood, I believe it’s called the inciting incident. A clear market in time that after a set of events that there is no way one can go back to their old life. Whether it’s the state championships for a sport among high school students, or fighting for survival in the middle of nowhere. For artificially high stakes, one must distort the reality, so that at the minimum they must convince themselves of the gravity of the situation.

Why do high stakes matter? Because only then does one put their all into something. And when you truly care, you hold nothing back. High stakes reveals the character you are. If people can accept and embrace you at your worst, everything else is a cherry on top.

Time for the stakes to manifest

This varies for different people. Sometimes it takes time to care. Other times, it takes time to fully realize what’s at stake. And others still, may never get to that point of realization. For example, in a ball game with four quarters, sometimes it isn’t until the score is neck and neck in the fourth quarter do you give it your all.

In practice

So in practice, I love spending time with folks to talk about their past. Their origin story. And get into the weeds on key inflection points not only in their own lives, but also in the time they’ve gotten to know each other. When did they first work together? When did they realize they were more than just colleagues? At what point did they introduce their families to each other? What was the point of realization?

Most investors focus primarily on length of a relationship, which is definitely valuable information, but without depth, it’s easy to know someone for decades and care very little for their growth and success.

Photo by Kimson Doan 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!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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DGQ 22: If you were hiring someone underneath this person, what skills would they have?

hire

I’ve had Harry’s episode with Peter Lacaillade under my saved episode list on Spotify for a long minute. And Benedikt Langer‘s semi-recent piece on Embracing Emergence finally got me over the activation energy to listen to it. (Sorry, Harry)

But I’m so glad I did. In it, Harry shared a question he likes asking “If we were hiring someone underneath me to support him, what skills would they have?” In many ways, it’s the same as another question Doug Leone shared on his podcast as well. What three adjectives would you use to describe your sibling?

It comes down to simple purpose of trying to ask about someone’s weakness without asking them “what’s your weakness?” Why does it matter? When you’re too forward with your question, say the weakness one, recipients always end up finding ways to explain their “weakness” as a byproduct of their strength, or not really sharing a true weakness. “I’m too honest.” “I work too hard.” And so on.

While the above set of questions may not work for everyone, and probably even less so now that Harry and Doug shared it in a public arena, I can’t help but appreciate the linguistic gymnastics to find the right combination of words that gets one the answer they want. Nevertheless, I’m sure there are many more on this planet who still have yet to be exposed to those questions.

Similarly, I find it to be a damn good question to ask when doing references on potential investments. The truth is every founder or GP one invests in will have weaknesses. And that’s okay. Everyone’s a human. But in reference calls, there are two hurdles that one most overcome in their diligence:

  1. Getting the reference to share an honest assessment of the person they know. This is especially hard when these are on-list references. In other words, references that the person being diligenced is providing themselves. Naturally, this list is full of people who are almost guaranteed to say positive things about said individual. Besides, there is absolutely no incentive to badmouth another person. Neither do most people aim to do so.
  2. How high on the priority list is this person’s weakness? Can I get conviction on this deal even if I were to accept this weakness? Does it matter as much in a Fund I? Fund II? Fund III? If they need to hire someone to fundraise for them, is that a question of ability or network? And how crucial is it not only to the firm’s survival, but also their outperformance? If they need to hire someone to manage their calendar, that may be lower on the priority list of risks for most LPs.

Nevertheless, I find Harry’s question a great one to ask former colleagues, occasionally portfolio or anti-portfolio founders.

Photo by Clem Onojeghuo on Unsplash

The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.

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!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Emerging Manager Products versus Features

mug, comparison

Inspired by John Felix in our recent episode together, as LPs, we often get pitches where GPs claim they’re an N of 1. That they’re the only team in the venture world who has something. Usually it’s the fact that they have brand-name co-investors. Or they run a community. Or they have an operating background, like John says below. And it isn’t that unlike the world of founders pitching VCs.

The truth is most “unfair advantages” are more commonplace than one might think. Even after one hears 50 GP pitches, one can get a pretty good grasp of the overlap.

For the purpose of this blogpost, the goal is to help the emerging LP who has yet to get to 50-100 pitches. And for the GP who hasn’t seen that many other pitches to know what the rest of the market is like. Obviously, the world of venture shifts all the time. What’s unique today is commonplace tomorrow.

For the sake of this post, and to make sure I’m not using some words too liberally, let’s define a few terms I will use quite often in this blogpost:

  • Product: A fully differentiated edge that an emerging manager/firm has. In other words, a must-have, if the firm is to succeed.
  • Feature: A partially differentiated edge, if at all, an edge. In many cases, this may just be table stakes to be an emerging manager today. In other words, a nice-to-have or expected-to-have.

Networks

ProductFeature
Differentiated community
(high/consistent frequency of engagement)		Alumni network (school or company)
Downstream investors that prioritize your signalsIn-person events
Keeper testVirtual events
Co-investors

Networks, in many ways, are synonymous with your ability to source. It’s the difference in a lot of ways from co-investing versus investing before anyone else (versus investing after everyone else). The latter of which is least desirable for an LP looking for pure-play venture and risk capital.

The quickest check is simply an examination of numbers. LinkedIn or Twitter followers. Newsletter subscribers. Podcast subscribers. Community members. While it’s helpful context, it’s also simply not enough.

Here’s a simple case study. Someone who has 5,000 followers on LinkedIn with hundreds of people engaging with their content in a meaningful way is usually more interesting than beat someone who has 20,000 followers on LinkedIn, who only has 10s of engagements. Even better if one generates a substantial amount of deal flow with their content alone.

One thing that is hard to evaluate without doing an incredible amount of diligence is your founder network referring other founders to you. From one angle, it’s table stakes. From another, true referral flywheels are powerful. In the former, purely having it on your pitch deck without additional depth makes that section of the deck easily skippable.

One of my favorite culture tests is Netflix’s Keeper test. That if a team member were to get laid off or fired, would you fight to keep them or be relieved? The best folks, you would fight to keep. And as such, one of my favorite questions during diligence to ask the breakout / top founders in each GPs’ portfolios is: If, gun to head, you had to fire all your investors from your cap table and only keep three, which three would you keep and why?

Do note I differentiate breakout and top founders. They’re not mutually exclusive, but sometimes you can be brilliant and do everything right and things still might not work out. But smart people will keep at it and start a new company. And maybe it was a smaller exit the first time, but the second or third time, their business may really take off. Of course, sometimes I don’t have the same amount of time to diligence each GP as an LP with a team, so I generally ask the question: If all of your portfolio founders were to drop what they’re currently doing regardless of outcome, and start a new business, who are the top 2-3 people you would back again without hesitation?

At the end of the day, for networks, it’s all about attention. It’s not about who you know, but about how well you know them AND who you know that TRUSTS what you know. In an era, where there is more and more noise and information everywhere, a wealth of information leads to a poverty of attention. But if you have a strong foothold on founders’ and/or investors’ attention in one way or another, you have something special.

Experience/expertise

ProductFeature
Early hire at a unicorn company
+
Grew a key metric by many multiples		Operating background
(marketing, sales, operations, talent, community, etc.)
Hired top operators who’ve gone on to change the worldExperience at a larger firm where you didn’t lead rounds / fight for deals
Independent board member

Experience only matters here where there are clear differentiations that you’ve seen and can recognize excellence. In a broader sense, having an operating background is unfortunately table stakes. As John mentioned, any generalities are.

While strong experiences help you source, its main draw is that it impacts the way you pick and win deals. Only those who have experience recognizing excellence (working with or hiring) know the quality in which A-players operate. Others can only imagine what that may look like. That’s why if you’re going to brag that you’re a Xoogler (or insert any other alumni), LPs are going to care which vintage you were at Google. A 2003 Xoogler is more likely to have that discerning eye than a 2023 Xoogler. The same is true for schools. Being a college dropout from a Harvard and Stanford is different from dropping out of college at a two-year program. Not that there’s anything wrong with the latter, but you must find other ways to stand out if so.

Given a large pool of noise when it comes to titles, it’s for that reason I love questions like: “What did you do in your last role that no one else with that title has done?”

Additionally, when it comes to references, positive AND negative references are always better than neutral references. Even better is that you stay top of mind for your founders regularly. A loose proxy, while not perfect, is roughly 2-3 shoutouts per year in your founders’ monthly updates. It takes a willingness to be helpful and for the founders to recognize that you’ve been helpful.

Process

ProductFeature
Response time/speedSome generic outline of an investment process
Evidence of a prepared mindDoing diligence
Asking questions during diligence most others don’t know how to

Yes, response time (or speed in getting back to a founder, or anyone for that matter) is a superpower. It’s remarkably simple, but incredibly hard to execute at scale. By the time, you get to hundreds of emails per week, near impossible, without a robust process. One of my favs to this day happens to be Blake Robbins’ email workflow who’s now at Benchmark.

Now I’m not saying one should rush into a deal, or skip diligence, but making sure people aren’t ghosted in the process matter immensely. As my buddy Ian Park puts it, it’s better for a founder or an LP to know that a GP is working on it than to not feel heard.

You’ve probably heard of the “prepared mind.” The idea that one proactively looks for solutions for a given problem as a function of their lived experiences, research, and analyses over the years.

Its origin probably goes as far back as Louis Pasteur, but I first heard it popularized in venture by the folks at Accel. Anyone can say they have a prepared mind. From an LP’s perspective, we can’t prove that you do or don’t have it outside of you just saying it in a pitch meeting. That’s why a trail of breadcrumbs matter so much. Most people describe it as a function of their track record or past operating experiences. Unfortunately, there may be a large attribution to hindsight bias or revisionist’s history. Being brutally honest with yourself of what was intentional and what was lucky or accidental is a level of intellectual honesty I’ve seen many LPs really appreciate. As an example, I’d really recommend you hearing what Martin Tobias has to say on that topic.

But the best way to illustrate a prepared mind is easier than one thinks. But it also requires starting today. Content. Yes, you can tweet and post on social media or podcast. But I’d probably rank long-form content at the top.

Public long-form writing (or production in general) is arduous. The first draft is rarely perfect. Usually far from it. With the attentive eye and the cautious mind, you go back to the draft again and again until it makes sense. Sometimes, you may even get third parties to comment and revise. Long-form is like beating and refining iron until it’s ready to be made into a blade. And once it’s out, it is encased in amber. A clear record of preparation.

In closing

Pat Grady had a great line on the Invest Like the Best podcast recently. “If your value prop is unique, you should be a price setter not a price taker, meaning your gross margins should be really good. A compelling value prop is a comment on high operating margins. You shouldn’t need to spend a lot on sales and marketing. So the metrics to highlight would be good new ARR/S&M, LTV:CAC ratios, payback periods, or percent of organic to paid growth.”

In a similar way, as a venture firm, if your value prop is truly unique, you’re a price setter. You can win greater ownership and set valuation/cap prices. If your value prop is compelling, the quality of your sourcing engine should be second to none, not just from being present online, but from the super-connectors in the industry, be it other investors, top-tier founders, or subject-matter experts.

Of course, all of the above examples are only ones that recently came to mind. The purpose of this blog is for creative construction and destruction. So if you have any other examples yourself, do let me know, and I can retroactively add to this post.

Photo by Mel Poole 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!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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