Tag: quote

Posted on

How to Find Your Mentor

how to find your mentor, child

An old college friend reached out to me not too long ago and asked me if I had any tips to share on getting a mentor. And the first thing I responded with is: “Don’t ask people to be your mentor. In fact, don’t even mention the word mentorship.”

You see, mentorship is a loaded word. It comes with baggage. Centuries of it. Hell, millennia of it. And apparently, dating as far back as 3,000 years ago to Homer’s Odyssey. Mentorship comes with an expectation of commitment. While that amount of commitment differs per person, a mentorship ask from a stranger is an amorphous expectation of time and energy from a busy person who likely has a laundry list of other priorities. Without any precedence or context, it’s hard to make that decision with asymmetric information.

The best pairs of mentorship have always been a two-way street. It takes two to tango. If we were to take the equation of a line:

y = mx + b

… a mentee wants a mentor whose current b, or position and experience level in time, is greater than their own. A mentor wants a mentee whose m (rate of learning, iteration, and hustle) is as great or greater than their own. The bet is that at some point in the future, at least in my experience, mentors would like to learn from their mentees as well, and/or see it paid forward.

Yet, I see so many mentees out there who discount their own value in the relationship. One of my mentors shared with me a few years ago that the older you are, the younger your mentors should be. And I’ve carried that in my heart ever since. More recently, I found that line in the form of a tweet from Samir Kaji.

I can’t claim to have mentored tons of folks, but I also realize both from anecdotal experience and talking with my mentors that the best thing about mentorship is the feedback. That the mentors learn about the result of their advice as an opportunity to finetune their own learnings.

Take for example, my office hours. Of the hundred or so people I’ve met through open office hours, I’ve probably shared the same piece of advice at most five times. It gets even more interesting when you consider that the vast majority of people I’ve met via office hours come for fundraising advice. Somewhere in the ballpark of 80% of people. While there are similar thematic questions I ask people to consider, the best advice is tailored to every unique situation. That said, my advice, like any others’, starts as a product of my own anecdotal experience. A sample size of one. And as we learned in Stats 1 in high school or college, that’s a poor sample size. So, one of the best ways for me to refine my own learnings is either:

  1. Act on it again and again. But there are some things in life I can’t do again. For instance, high school or freshman year of college or my first job. Those are experiences entombed in amber that unless I had a time machine, they’re one and done.
  2. Learn how other people execute on that advice and what resulted of it.

One of the many joys of writing this blog is that every so often a kind reader reaches out to me and shares the results of them implementing the thoughts I’ve shared here. Then they let me know I’m either full of s**t or I drastically helped them grow. And I love both forms of feedback equally as much. After all, it’s the rate of compounded learning that helps me mature — even if it’s outside of my own anecdotal experience. Feedback and learning of others’ results gives me a sample size greater than one. The same is true for other mentors, advisors, and investors out there.

So, what does that mean tactically?

Start with the ask.

There’s a metaphorical saying in the world of venture that investors invest in lines, not dots. They want to see progression rather than stagnation. So in reaching out to anyone you’d want to learn from, don’t lead with “Can I have 30 minutes of your time?” Instead, lead with a question. Why are you reaching out? What question can only they answer?

So, that means, “should I get an MBA?” is not a good question to ask. It’s generic, doesn’t contextualize the question, and you can figure out how to do so on the internet. On the flip side, a better question would be: “I saw that you graduated from Wharton before breaking into VC. So I’m curious, did you always know you wanted to be in VC, or was that something you discovered in B-school? And what experiences did you gain in B-school that set you up for VC?”

Moreover, show you’ve spent time in the idea maze before proposing the question to the person you want to learn from. “I’ve read about X and Y, and have thought about or tried A and B already with these results. But the question still gnaws at me.”

Why does this contextualization matter? One, it gives that person context to better answer your question. Two, the last thing any person giving advice wants is for their advice to dissipate into the cosmos. For their advice to go to naught. And if you show that you’ve spend blood, sweat and tears already pondering the problem, then you’re more likely to take their advice seriously. In effect, their advice will be a lot more meaningful. And, chances are you’re going to be a lot less whimsical than the average person asking for their time. Use someone’s time in a way that won’t feel wasted.

Follow up even if they ghost you.

If they respond the first time, great. And if not, don’t give up until you’ve sent at least three emails. If they don’t respond the first time, they just might not have seen it. If they don’t respond after the ninth email, they’re just not interested.

And with each email follow up, tell them when you plan to follow up since you assume they’re busy. “If you’re too busy, I completely understand and I’ll follow up in two weeks.” On the last email if no response, thank them for their time and wish them well.

Don’t set recurring meetings (initially).

First of all, it’s a heavy ask to anyone — stranger or not. Second of all, there’s no promise that their time (and your time) won’t be wasted. Third, do you even have that much to ask about? Most of the time, you don’t. What you think you want and what you actually need are usually very different. It’s an iterative process.

Instead, start with a single question. Ask it. If they’re free for a meeting, set 20 minutes (here‘s why I like 20, instead of 30). If not, get their thoughts asynchronously. Get advice. Act on the advice (or not, but be intentional if not). The most important part is to share your results with the origin of that advice.

So, when you close out that initial meeting, ask if you can reach out to them 24 or 48 hours later after you’ve had time to mull on it or act on it. Timeframe will vary. And if you do follow up shortly after without results, limit any additional ask to 1-2 questions, max. Ideally it should take them 2-3 minutes to respond to. For any advice that takes a longer feedback loop, set a time in the future (two weeks, a month, 2 months, etc.) later to reach back out to share your learnings. And sometimes, that means you didn’t implement their advice. Why not? What did you learn from doing the counterfactual?

When you reach back out to share your learnings, see if you can jump on another 20 minute call, or shorter. And get their thoughts on the facts. Possibly get more advice. And do that again and again. Until at some point — my litmus test is usually 3-4 of these discrete exchanges, in no particular frequency —, I ask if we can get something recurring on the calendar. Nothing long. Stick to 20 minutes. And set an end date for the recurring nature. I usually do 4-5 times as the first run through.

At the end of those recurring meetings, be honest and mutually evaluate: Was it a good use of everyone’s time? If not, end it, but reach back out periodically to share your thanks, especially around the holiday season. If it does work, set another set of recurring meetings and reevaluate again in X time. And voila, you have yourself a mentor (in the traditional sense).

One more note on this… if that person is extremely busy and you know they are, sometimes a more personal touch to the email is recording a Loom and asking your question in front of a camera to that person in particular. For any Loom video, I wouldn’t go over a minute of recording time. Keep it concise, and use text to describe everything else.

Build a platform where they can share their advice with others.

Either start a podcast or a blog. Or help them find an audience that is outside of yourself —a fireside chat, a club, a non-profit, posting a Twitter thread or LinkedIn post, and so on. Their time is limited, and if they’re likely to give that same piece of advice to many others, help them find the tribe of people who are willing to listen to their advice. So instead of their advice being one-to-one, it’s one-to-many. In sum, a larger impact radius.

Of course, the caveat here is if the advice you seek is personal experience that isn’t suited for a stage, then don’t do it.

In closing

Some of the mentors I have today are folks I’ve known for years, but neither of us remember the discrete date in which it all started. Simply put, “it just happened.” There are others where we’ve never explicitly said we were mentor and mentee. Yet, I learn just as much if not more than if I had explicitly asked for mentorship. The same is true for some of the “mentees” I have.

At the same time, I wouldn’t discount the fact that you can truly find mentors everywhere in your life. Too many people focus on only finding strategic mentors, but fail to see the value in tactical and peer mentors, which I wrote more about three years back.

Photo by Ben White 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!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

Posted on

How to Hire Your First Executive

climb, hill

Last week I had the chance to sit with the one and only Steven Rosenblatt, former President at Foursquare and the one who got Apple into the advertising business, now Founding GP at Oceans. Of the many things I could have asked, I had one burning question. Something that I also knew Steven knew like the back of his hand. Hiring executives.

Particularly, I’ve always been curious, since I’ve never done so myself, but have watched many friends and founders do it — successfully and well… its polar opposite, best described with this meme.

And in fourteen words, I asked Steven: For a first-time founder, how does one go about hiring their first executive?

To which, Steven generously shared: “There are three questions that founding CEOs need to ask themselves.”

  1. “What’s the most critical gap in the company that you need incredible leverage?” What are the holes you’re really failing at? That if you can hire, will dramatically increase the success of the company. If you don’t solve, you won’t have the right to raise the next round of funding. You don’t need to build a $100M company today; you need to build a $10M company today.
  2. “What are the things you hate to do or suck at?” A lot of CEOs optimize for the question: What kind of CEO do I want to be? But what’s more powerful, as Steven shared, is: What kind of CEO do I NOT want to be? Are you sure your superpower as a founder is aligned with what you want to do?
  3. “Is this person going to help me build the culture that I want at my company?” Sometimes someone is going to look great on paper, but the rest of the company and culture will outright reject them.

Culture, talent, and everything in between

As the saying goes, you look for the shimmer, but mine for the gold. (Yes, I made that up. But trust me, if I say it enough times, it’ll stick.) So, I’d be remiss to leave the jewel unexcavated. As such, in the double take, I asked: Tactically, how do you know if someone is a good culture fit?

“Write down the things that are important to you,” Steven shared, “What kind of team are you looking to build?” A results-oriented one or a process-oriented one? A culture of one-on-ones or not? Distributed or not? A family or a world-class orchestra?

“There’s no script for this,” elaborates Steven, “But think deeply about how you want to treat your employees, how you think about growth, and how you talk to investors. When I transitioned from Apple to Foursquare, on day one, while I was still only an advisor, Dennis invited me to an Exec meeting. I knew this was a culture of transparency. Additionally, at our weekly All-Hands, while Dennis led some of them, I would lead them as well as other execs. Something I found that our employees really really appreciated it. I went from a culture of secrets to one of transparency.

“So, to understand if someone is a good fit for your culture, after you write down what’s important to you, ask them:

  • What’s important to you? What haven’t you achieved that you want to achieve?
  • How do you do your best work? When do you feel the most motivated?
  • Why do you want to work here? Why are you excited to do so?

“These are multi-year relationships. And you need someone great to help you get to the next level. The truth is your first execs aren’t going to change; it’s who they are. And if they don’t live and breathe your values from the beginning, they won’t change their personality just for you.

“One thing I make sure to bring up is why they shouldn’t be here. ‘I’m not sure you really want to work here. Let me give you a bunch of examples of why you won’t want to be here. Let me tell why this is really, really hard.’ I then listen to how they react to it. In the early stages, you want someone who’s bought into the mission. After all, this is someone you’ll spend a lot of time with. Can you take this person out to brunch with your family?”

Whether it’s Steven’s brunch test or Stripe’s Sunday test or Netflix’s Keeper test, have a good heuristic for the type of person you want to hire.

The first 90 days

Now that you’ve hired a great candidate, I had to ask the man, “What does a great exec hire do in their first 90 days?”

There’s a saying that good things come in pairs. If I might add to that, it turns out great things come in triads. ‘Cause without skipping a beat, Steven said, “A great exec hire must do three things in their first 90 days: 1/ spend time with everyone; 2/ align with the founders, and 3/ build an action plan.”

1. Spend time with everyone

“Meet with everyone who’s at the company and really get to know them. Not just what they do at the company, but also why they choose to do what they do.”

Digging a level deeper, I asked: “So what questions do you ask your team members to really get to know them?” Steven, responded in kind, with his Rolodex of questions — a set I know I’m keeping in my 52-card deck:

  • What’s on your mind?
  • What does your day-to-day look like?
  • What inspires you?
  • And what’s holding you back? What’s stopping you from doing your best work?
  • If budget wasn’t an issue, what would you do? And what would you need to be able to get it done?

Of course, goalpost of everyone changes as your company scales. If someone is the first exec hire, talking to literally everyone makes sense. On the flip side, as Steven shared, “if you’re at a point, when you’re on a 100+ team — like a Series B company — you may not be able to talk to all 100 employees. In that case, 50-70 employees should suffice.”

2. Align with the founders

As important as it is to talk with the team, the conversations before and after the exec is hired are different only in the context that the latter goes much deeper. The best way for an exec to hit the ground running is to really understand the company’s past, present and future.

The past. “A great exec needs to understand what’s been built to date and why. What were some of the hard decisions we had to make? Where did we pivot? What did we stop doing? And what have we learned to date?

The present. “Who is using the product and who are our target customers? How are they using it? Gather as much product-related data as possible.”

The future. “Where do we think we want to be in the next 90 days? Six months? A year? Are there things that the exec would like to change? Where are we not aligned and why aren’t we?”

Within that three-month period, a great exec should have already figured out where they are going to prioritize their time. When putting it all together, a world-class exec is able to answer the question: Is the plan we want to execute on the same as the one our team is doing day-to-day? Is there any cognitive dissonance?

3. Build an action plan.

After they’ve talked to everyone, “the exec then comes back to management and lays it out. ‘Here’s where we need to get to to be fundable. I’ve talked to the employees, and here are the gaps we need to solve in the next few months. To help us get there, here are some of the hires I’m going to recruit.’

“In the prior conversations, you, the founder, have laid out that plan to fundability in the next 12 to 18 months. Does the exec agree with it? After all, the company’s KPIs are the exec’s KPIs.

“If so, the question becomes: How will the exec spend their time? What part are they owning? You hired this person to either take something off your plate or do something you hate doing or are not good or mediocre at. The exec’s job is to free up the founders’ time to do what they’re great at. So, you can focus on things that are higher leverage.”

So it got me thinking about the validity of my own question, is 90 days really the right benchmark for an exec to go from 0 to 100. Turns out, it may not be. “Given that this is your first exec hire and you’re still early, 60 days is more than enough, ” said Steven, “As you go further down the road, it’ll take more time to ramp up.” When you have a real business going on — something that’s default alive, as opposed to default dead — that’s when 60 days of an onboarding period turns to 90.

Letting go

I was also curious of the counterfactual. What if your hire goes wrong? How do you let someone go?

“Unless they’re a new hire, the day you let them go should not be the first time they’re hearing about this. Ideally, there should be no surprises that things aren’t going right. As the CEO, you should be having several frequent and transparent conversations to help them course-correct. If it’s clear that this person is not working out, move swiftly to let the person go. The longer you wait, the more damage it will cause long-term.

“It should also not be a surprise to the team when you do let them go. People often play to the lowest common denominator. Never the highest. ‘I just need to be better than the worst.’ If someone is really weak in their role, people see that. And if you don’t do anything about that person, they will set the culture and the standard for everyone else. So if you let someone go, and everyone else breathes a sigh of relief, that sets the record straight and your team can move on.”

Paul Graham and Suhail Doshi have a similar approach. If you ask your co-founders to separately think of someone who should be fired, and if they all thought of the same person, it’s probably time to let them go.

To take this a level deeper, I love the words Matt Mochary uses and recently shared on an episode of Lenny Rachitsky’s podcast. “The best way to lay someone off is for them to hear it from their manager in a one-on-one.” And before you give them the lay of the land, preface these hard conversations with: “This is going to be a difficult conversation. Are you ready?”

After they say “Yes”, then you share: “I’m letting you go. And this is why.”

After you share the why, you follow up with: “My guess is that you’re feeling a lot of emotion, anger, and sadness. Am I right?” Then actively listen to their fear and pain.

After you’ve had the conversation, don’t ask the canonical “How can I help?” But actively step in and help them find a better home. At the same time, it’s worth giving some people the space and time to process the multitude of emotions and stimuli. So, this doesn’t have to the first conversation, but most likely the second or third post-announcement.

In closing

As we wrapped up our conversation, Steven left me with these closing words. “Don’t be scared to make that first executive hire. But also, don’t rush into it. Take the time to get it right.”

He’s right. As with all great things, take the time to get it right.

Cover photo by Tobias Mrzyk 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!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

Posted on

How to Take Control of your Fundraising Process

It’s not often I get to work with someone I deeply respect on the content front. In fact, in the history of this blog, I’ve never done so before. But there are a rarified few in the world that if I was ever given the chance to work with them, I’d do so in a heartbeat. Tom White is one of them. As someone who I had the chance to work briefly with when our time at On Deck overlapped, he is someone I’ve been continually enamored with — both in how he commands the English language and in how intentional and thoughtful he is as an investor.

So when Tom reached out to collaborate on a blogpost for the Stonks blog, it was a no-brainer. And, the below is that product on how founders can own their fundraising process.

David’s note: Tom never ceases to amaze me on his ability to meme anything.

It’s a tale as old as time.

After a good meeting and a great pitch, the VC across the table (or on your screen in this day and age) offers a forced smile and utters: “Thanks again for making the time. Let me circle back internally and we’ll get back to you if we’re interested.”

If you have ever fundraised as a founder — hell, if you’ve ever fundraised, period — you have heard those fatal few words many more times than you care to remember. Though frequently said, the pangs of disappointment and frustration that they impart seldom fade away.

Fear not fellow founders!

To ensure you never hear those dreaded words again, we turned to the one and only David Zhou. A “tenaciously and idiosyncratically curious” writer and investor per LinkedIn, David pens the inimitable, brilliantly-named Cup of Zhou, scouts for a number of VCs, and helps run the On Deck Angel Fellowship.

Over to David!

Your ability to raise capital is directly proportional to your ability to inspire confidence in potential investors.

I’ll get into that, however, first a brief aside.

One of my favorite lines in literature comes from the seventh book of the Harry Potter franchise: Harry Potter and the Deathly Hallows. Inscribed on the golden snitch is a simple, but profound phrase: “I open at the close.”

In many ways, that line alone echoes much of the world of entrepreneurship. Whether backcasting from the future as Mike Maples Jr. puts it (i.e. great founders are simply visitors from the future) or breaking down your TAM to your SAM then SOM, the greatest founders — no, storytellers — start from the end. They share the future that they wish to see and distort today’s reality to fit into that predestined mold. Without further ado, my five tips on willing the future you want to see via successful fundraising.

1. Measure Founder-Investor Fit

Before you dive into talking with every investor under the sun, you must first understand there are more investors out there than you possibly have time for. You will never pitch every single one, nor should you. You need to be judicious with your time.

As you raise your first institutional round, you’re seeking out early believers. Julian Weisser — an investor with whom I’m lucky enough to work — calls this belief capital. You’re selling a promise, a vision.

And let’s be honest, at pre-seed there is no amount of traction that will convince any investor with numbers alone.

You see, it’s all about narrative building.

More on that below, but for early investors, it’s about whether they not only believe, but are also willing to fight for the future you collectively desire.

2. Close the First Meeting

I recommend that many founders with whom I work ask a two-part question heavily inspired by my conversation with Hustle Fund’s Eric Bahn for my emerging LP playbook: “Critical feedback is important to me in my journey to grow as a founder and a leader. So I hope you don’t mind if I ask, given what you know about my startup and myself: On a scale of one to ten, how fundable am I?”

To be honest, the number they give is inconsequential. That said, if they give you a ten, get a term sheet on the spot.

The more important question is the following one: “Whether I didn’t share it yet or don’t have it, what would get me to a ten? What would make this startup a no-brainer investment?”

Collect that feedback.

Put it in your FAQs.

Incorporate it into your next pitch.

Test and iterate.

I was listening to Felicis Ventures’ Aydin Senkut on Venture Unlocked recently and he mentioned that he iterated on his fund pitch deck every single time he got a no. And by the time he received his first yes from an investor, he was on the 107th version of the pitch deck.

As such, the answer to the second question should help you preempt and address concerns—explicit or implicit—in future pitches.

I discovered the below courtesy of the amazing Siqi Chen. Per a 2015 Harvard study, most people believe that people make decisions by:

  1. Observing reality
  2. Collecting facts
  3. Forming opinions based on the facts collected
  4. Then, making a rational decision.

But the reality is, people do not. People aren’t rational and investors are no exception.

Like everyone else, investors:

  1. Are presented with facts.
  2. Fit facts into existing opinions.
  3. Make a decision that feels good.

Most of these opinions are not explicit. It’s neither on the website nor laid out in the firm’s thesis.

The good news is that most investors will share the same reservations. If one investor hesitates about something, another will likely do so. The best thing a founder can do is to address it before it comes up.

For example, if an investor tells you that if you have a better pulse on the competitive landscape, you would then be a ten. In the next version of the pitch, you might say “You might be thinking that this space is highly competitive, and you’re right. At a cursory glance, we all look like we tackle the same problem and fight over the same users. But that’s when this space deserves a double take. Company A is best in class for X. Company B is second to none in Y. But we are world-class in Z. And no one is offering a better solution for Z. Not only that, customers are begging for solutions for Z. One in every five posts on Z’s subreddit asks for a solution like ours. But if you look at the responses, no one has a perfect solution for it. In fact, people are duct taping their way across this problem. Not only that, in the past three months, since we shared our product on the subreddit, we’ve had 10k signups to the waitlist with 500 of them paying a deposit to get early access to our product.”

On that note, I don’t think it’s worth trying to change the original investor’s opinion after they share such feedback. Most of the time, you’ve unfortunately lost your window of opportunity. If it takes X amount of information for an investor to form an opinion about you, it takes 2-3X the amount of effort and time — if not more — for him/her to change said opinion and form a new one.

Lastly, per Homebrew’s Hunter Walk: “Never follow your investor’s advice and you might fail. Always follow your investor’s advice and you’ll definitely fail.”

3. Schedule the Second Meeting during the First

Say the vibes are right and you get the impression that the investor really loves your product and/or your problem space and/or you as a person. When you’re raising your first institutional round, it’s either a “Hell yes” or a “No.”

Open up your calendar at the end of the first meeting and schedule your next meeting there and then, but be sure to give the VC enough time to talk with his/her team and also suggest where their firm might want to dive deeper. Give three options for topics to dive into the next meeting. For instance:

  1. The team and future hiring plans
  2. The vision and financial projections
  3. The product, demo, and team’s current focus

From there, have the investor pick one of the above before your next meeting. If they don’t, say something along the lines of: “During this conversation, you seemed to love to hear about the product, so we’d love to dive deeper into the product the next time around unless you prefer one of the other two options.”

Also, start tracking which paths seem to convert investors faster. For example, if 30% of the investors you talk to jump into diligence after hearing the vision, but only 15% convert after the product path, lead with the vision one first next time. “Most of our investors fall in love with us after hearing about the vision, and would love to share more on that at the next meeting.”

The moral of the story is simple: make it easy for your investor to say yes to the next meeting.

4. Realize that ‘No’ is merely a ‘Yes’ in Disguise

If you get the feeling that it may be a no, ask the investor, “What firm/investor do you think I should talk to who might be a better fit for what I’m working on?”

Do not ask for introductions. An introduction will come naturally if an investor is really excited about you. Additionally, even if the investor who passed does introduce you, a natural question will be: “Why didn’t you invest?”

This sets you up for failure because the other investor’s first impression of you will be negative. The only exceptions are if the reason is outside of your control. For instance, they’re raising their next fund since they don’t have any more to deploy out of the current fund, or they’ve recently changed their investment thesis away from what you’re building.

But I digress. What you should do instead is collect a Rolodex of names.

Never ever run out of leads. You never want to be in the position to beg someone who turned you down for money.

When a certain investor gets mentioned more than once — ideally at least three to four times — that’s your cue to reach out to them. “Hey Tom, we haven’t met before, but I’m currently fundraising for David’s Lemonade Stand. And four investors highly recommended I chat with you on the product, given your experience in food-tech and how you helped Sally’s Lemonade Bar grow from 10 to 500 customers.”

5. Use Investor Updates

Send interested investors weekly investor updates during your fundraise and monthly ones after its conclusion. Share important learnings, key metrics, and your fundraise’s progress.

Be sure to induce FOMO in your updates. Not in the sense that your round is closing soon, rather, that you’re at an inflection point right now in both your product and the market. Two example prompts:

  • Why are you within the next 12-18 months “guaranteed” (I also use this word hesitantly) to 10x against your KPIs?
  • Is the blocker right now a market risk (which leaves a lot for debate, and most investors will choose to wait for a future round) or an execution risk?
  • How have you de-risked your biggest risks?

Taking this a step further, you need the courage to “fire” an investor. If an investor doesn’t get back to you after two emails, it could just be that they’re busy. If they don’t get back to you after eight or nine emails, they’re just not interested. My rule of thumb is always three emails each a week apart for each investor. I have seen founders who have done more, but I would not recommend any fewer.

Regardless, whatever number you decide on, the last email ought to try to convert them. For examples:

“Since you haven’t gotten back to me yet about your interest, I assume you’re not interested in investing. As such, this will be our last investor update to you. If we are wrong, please do let us know.”

Interestingly enough I’ve seen more investors start conversations by this last email than by the very first. Remember to treat your fundraise like a sales pipeline; A/B test different copy and see which lands the best.

Concluding Thoughts


Remember, fundraising is a lot like life: it’s simple, but far from easy. It requires grit, determination, and a healthy dose of elbow grease. Despite current market conditions, forge ahead! Follow Jim Valvano’s lead and “Don’t give up. Don’t ever give up!”

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!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

Posted on

#unfiltered #72 The Purpose of My Writing

hug, console

“Art is to console those who are broken by life.” — Van Gogh

An investor I deeply respect recently told me, I am “really good” at long-form writing. Admittedly, even writing the sentence just before leaves me just as squirmy as when he first said it. I am of course genuinely grateful for the compliment. But my childhood prevents from fully appreciating and accepting a kind compliment.

Rather than having a practiced eye for structure and prose — which I’m sure the real linguists and writers will have much to critique on my lack thereof… for me, I can’t imagine a world where I can boil down distinct and nuanced thoughts from multiple sources in one tweet. Which could mean three things:

  1. I was never great at writing college apps.
  2. I am terrible at Twitter.
  3. I have trouble saying No to people and options.

Don’t get me wrong. There are many things out there are best expressed simply — that need no further elaboration. My blogposts on 99 pieces of unsolicited advice are examples of such. One for investors. One for founders.

Nevertheless, longer form writing helps me think. My mind is often a mess, and sometimes I wonder how I make it by with a mind that looks like the inside of an average college boy’s dorm room. It is most evidenced when I speak, but least explicit when I write. I have time to mull over thoughts. I have time to realize that not every thought, idea, Eureka! moment is a productive one.

I apologize if I seem smarter than I am. I’m not. I’m just another person looking to learn my way through life. Curious enough to know I am lacking, but confident enough knowing I can get there. When confidence in my self-worth wanes, I find solace and therapy in the letters that I ink on a page.

I’ve shared this analogy a few times with friends. That there are artists. And there are designers. The latter fulfills a need their audience has. The latter creates where the audience is someone other than themselves (while that doesn’t have to be mutually exclusive to building for oneself). For the former, the audience is themselves. It is a form of expression unforgiving to the remarks and views of others. While others may appreciate it, you create for yourself. In a way, the best entrepreneurs start as an artist but end up as a designer. For me, this humble piece of virtual real estate is my art gallery. And a small part of me fears becoming a designer through this blog. I save the design work for other parts of my life.

I’ve been fortunate to have sponsors reach out to support this virtual acreage in the wider, increasingly saturated market of content. As you might have noticed, I’ve turned down everyone so far. Partly because of alignment, but mostly, I’m not yet sure if I want to turn writing into a job. To me, writing is comforting. It’s a sanctuary where I can isolate, even briefly, from the equivalent of noisy San Franciscan streets filled with sirens and honks every minute. And upon receiving payment, I would find myself in debt to someone or some entity. That’s fine if it was an essay or a piece of content I wanted to write anyway. But so far, it hasn’t been. And if it’s not, I find myself enjoying this therapeutic process just a little less.

I’m reminded by something Gurwinder wrote a few months ago about the perils of audience capture. In it, he shares the story of Nikocado Avocado, who lost himself to his audience, in a section of that essay he calls: The Man Who Ate Himself. He also shares one line that I find quite profound:

“We often talk of ‘captive audiences,’ regarding the performer as hypnotizing their viewers. But just as often, it’s the viewers hypnotizing the performer. This disease, of which Perry is but one victim of many, is known as audience capture, and it’s essential to understanding influencers in particular and the online ecosystem in general.”

I know many of you came to this blog via the content I write about startups and venture. At least that’s what WordPress tells me. If you came here expecting only that kind of content, I will have to disappoint. And I’m happy to send you recommendations of what I read in that arena. If you came here for that and a little more, I’m excited to share more of my takeaways as I traverse this blue planet. Who knows? Maybe one day beyond.

Nevertheless, I appreciate every one of you for giving me time in your day. Stay tuned!

Photo by Cathy Mü 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!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

Posted on

Five Tactical Lessons After Hosting 100+ Fireside Chats

microphone, podcast, fireside chat

Over the past 12 months, I’ve done over 100 interviews and fireside chats. While there are the more popular lessons out there, like asking follow-up questions and breaking the ice with your guest with a pre-interview chat or having rapid-fire questions at the end, for the purpose of this blogpost, I’ll be sharing some non-obvious lessons I picked up in the past year.

  1. Never start with a question on career.
  2. Ask your guest three questions before the interview.
  3. Do enough research to be literate in the subject you’re interviewing for.
  4. Prep the audience for questions.
  5. Ask Yes / No questions.

Never start with a question on career.

The first question always sets the stage for the rest of the conversation, especially how vulnerable and candid the guest would be.

The best question in my experience to start with is always a surprise to the guest, as my goal for every interview is to get to know the guest better than they know themselves at that moment in time.

For how you measure success… if that respond with, “How did you know that?”

In practice, it looks a little something like… “I want to start this chat a little off-center. In the process of doing homework for this conversation, I came across the name: Bootstrapping Bill*. Could you share what that name means to you?”

*Footnote: This can be a high school or college nickname or an activity that they were heavily involved in that’s not related to their current career. Or a role model they had when they were younger. Other starter questions can be about quirks they used to have or still have that are:

  1. Not embarrassing
  2. Something that only they have.

For example, for some of my interviewees, I found out:

  • That someone used to write code on a notepad
  • A longtime fandom around Gary Keller
  • A nickname the guest used back in his street dancing days
  • A class they really enjoyed taking in college and an art professor who inspired her to pursue entrepreneurship
  • Someone who used to walk by foot 15 hours one-way just to go to a library in Cairo to download PDFs of Stanford research papers to take home and study

Of course eventually it all has to tie back to the topic at hand, which is usually through a trait they developed early on that created the person they are today. Grit. Creativity. Rebelliousness. Kindness. And so on.

Ask your guest three questions before the interview

To piggyback on the above lesson, don’t touch things that are highly personal and risqué, like their social security number or their divorce. The latter without their explicit permission. You never want to be in the situation where you make the guest feel bad. As such, in my email to them a week in advance with the questions I plan to ask, I ask an additional three questions to help give me parameters for the conversation:

  1. What would make this interview the most memorable one you’ve been a guest for even two years from now?
  2. Are there any topics you don’t want to talk about? Or are sick of talking about?
  3. Are there any questions you have yet to be asked, but wish someone were to ask you?

Of course, also share the questions that you plan to ask before the interview. Leave it up to them whether they want to prepare for them or not. And if you do so, they’re likely to bring more robust and less generic answers for your audience. Unfortunately, not always true depending on the individual you invite and how busy they are.

Do enough research to be literate in the subject you’re interviewing for.

Unfortunately, not every A-lister will bring their A-game. Some have been busy. Others are distracted. And a handful of others frankly just don’t care. For them, this is just another talk they’ve done a million times. Not THE talk of the year. Even if it might be for you.

Luckily, it doesn’t happen too often. But it does happen. And as such, you can’t just ask a question. Instead, I like to give the speaker enough time to think of an answer. I call it the QCQ sandwich.

  1. Start with a QUESTION.
  2. Follow up with CONTEXT.
  3. And close with the initial QUESTION.

I’ll give an example.

“Since you just mentioned LP-manager fit / I want to switch gears for a second… I’d be remiss not to ask you about how you think about it. In your experience, how have you seen the best fund managers think about LP construction when they begin fundraising versus when they’re about to close the fund? To shed some extra color, I’ve recently chatted with a number of emerging GPs. And there seems to be a concentration of thought leadership around… [additional context] So, I’m curious, are you seeing the same? Or have my observations departed from the median?”

Most people either only ask the question or lead with context before asking the question (I’m guilty of the latter myself from time to time).

To be fair, you may not need to use this structure all the time. But for people whose answers are typically less structured and may need some time to formulate a robust answer, this is the play. A proxy for this is if their answers only get better the more they talk or if they haven’t had a chance to look through the questions you sent them beforehand, but they typically like to.

Then there’s the exact opposite. Even if the guest speaker is well-intentioned, in efforts to cram as much info into an answer as possible, their talk becomes overly informational. I forget which world-class podcast host once told me this, but he said that that every episode he does is 20% informational and 80% entertainment. The footnote is that the 20% has to be so insightful that it can carry the episode just by itself. The sign of a good episode is if the listener walks away with at least one thing they didn’t know before.

I go back to Kurt Vonnegut‘s #1 rule on writing. Use the time of a total stranger in such a way that he or she will not feel the time was wasted.

As the MC, your goal is to be the steward for insights. The spotlight is never on you, but the question is how do you support your guest in a way that they’re able to put the best foot forward.

Prep the audience for questions

There are two angles I usually tackle from when prepping the audience for questions.

  1. I tell them exactly what they can ask at the beginning and stay away from those topics so that the audience can ask during Q&A if they have no other questions in mind.
  2. Give the audience time to ramp up questions by alternating between live questions and my prepared questions even in open Q&A.

“We’re going to cover a lot of ground today from [topic 1] to [topic 2] to [topic 3]. But if I don’t get to all of them, and you’re still curious about them, please keep us accountable during the open Q&A after.”

And I usually don’t get to all of the above topics, which leaves room for the audience to ask them. Before I ask my “last” question for the interview, I also tell the audience to the effect of: “This is going to be my last question, before I turn it over to everyone present today. So for anyone who would like to ask X something, in about 3 minutes, it’ll be your time to shine.”

The big takeaway is that it always takes a bit of time for the audience to ramp up to ask their questions. And this helps seed some possible topics not covered in the interview so far, so the guest also feels like they’re not repeating themselves.

Since almost every interview and fireside chat I’ve done has been virtual in the past year, this second tactic is designed when you a Zoom chat but I find is still useful when you have a shy live in-person audience. I always tell the audience to leave questions in the Zoom chat at the beginning of the interview. That I’ll call on them when we get to open Q&A. More often than not, the Zoom chat is less alive than I would like. And when it is (and I admit this has only been a more recent discovery of mine), I say:

“We’re going to try something new. During the open Q&A, I’m going to alternate between questions I’ve gotten before this chat to live questions from the audience. So feel free to pop your questions into chat, as I start with the first pre-submitted question.”

I know some MCs seed audience members to ask questions at the beginning of live Q&A for it to not seem awkward. I’ve seen it work, but sometimes I’ve also seen those 1-2 people take control of the Q&A, where the rest of the audience doesn’t feel like they have the opportunity to ask their own question, so they turn passive. With open Q&A, I try to give my audience agency to determine the flow of conversation. Sometimes, they just need an inspirational nudge.

Ask Yes / No questions

For a long time, I had this fear of asking yes/no questions during fireside chats. The main reason was that I believed it would lead to a lackluster interview. The guest would give a one-word response and that we would have radio silence after.

But, contrary to my initial belief, I realized over the past year that yes/no questions are insanely powerful, specifically in the context of public interviews and fireside chats. I do want to note that they don’t hold the same weight in mediums that are known or sought for their brevity. For instance, emails and instant messaging. Where speed is the name of the game.

It’s specifically under the circumstance where there’s an allotted time and an expectation to fill the void with content that this tactic shines. The guest would more often than not feel an urge to fill the empty void with additional thoughts and context. In that moment, sometimes they share something that is more off-the-record than they initially planned. Of course, in realizing that it is, and since most of my fireside chats are recorded, I follow up with the guest after to make sure they’re okay with the recording.

As an interviewer, at the same time, I’ve learned to hold myself back. There’s an equal if not more powerful urge in me to fill the void with questions. After all, oftentimes, this is the audience in which I had invited, and feel my reputation is on the line. If you could see below the camera, I have a sheet of paper in front of me where I write “Shut up” to myself at least twice before I jump in.

In closing

While I share all the above, just like being a founder, you could do everything right and the interview may still fall short of being ideal. And when some interviews do fall on either deaf ears or I feel I was just unable to bring out the best in people, like many others, I wonder… do I just suck at being at asking questions? Or being an MC?

It’s an iterative process. And the fun part of it all is that it makes me a better investor. I ask founders better questions. The answers I get when diligencing are more valuable.

The above isn’t the end-all-be-all. I’ve written on this topic before, and I will continue to work to be a better interviewer. But hopefully the above serves to bolster your arsenal of tactics.

Photo by Keagan Henman on Unsplash

Edit: Added in a fifth lesson that’s too short for a full blogpost, but longer than a tweet.

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!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

Posted on

The Two-Part Question That Differentiates Just Another GP From THE GP

singer, signal above the noise

The past 2 weeks brought me a whirlwind of conversations with emerging managers and LPs, catalyzed by the emerging LP playbook. And of the former, I’ve come across two main themes:

  1. Everyone — I kid you not… everyone — has top-tier VCs as their follow-on and/or their co-investors. What was once upon unique is no longer so.
  2. Eric was right. There’s an overabundance of the word “signal” in venture wonderland these days — to the point the word itself has lost its meaning. By definition, it should mean that is unique and stands above a sea of noise. For many investors, that means either investing in brand-name startups (i.e. SpaceX, Figma, etc.) or investing alongside brand-name investors. The latter, unfortunately, is also a product of the ecosystem as many LPs seek social proof about your investment thesis from others’ who have a proven track record. The former gets a bit sticky. A lot of these logos are either off-fund-thesis or came as a Series B syndicate investment (but the fund itself is investing in pre-seed or seed).

To piggyback on the above, the notion of signal is worth elaborating on, likely a vestigial appendage of the past two years.

Let me preface by saying that it takes a lot to get to conviction.

In 2020 and 2021, many investors’ calculus of startup signal boiled down to three things: great investors, great traction, and great team. And in that order. That is first and foremost what I see a lot of professionalizing investors do. I can’t entirely blame them since the ecosystem itself propagates the belief that if a Tier 1 VC jumps in, you’re more likely to get to a great exit. Or at the minimum, get a great mark-up to make your IRRs and TVPIs look better. On paper, of course.

But what I believe a lot of investors are missing is that… venture is a game that’s not about your batting average, but about the magnitude of the home runs you hit. You’ve heard it before, and you’ll continue to hear more of it. Unlike other financial services, VC is driven by the power law. 80% of your returns will be driven by 20% of your bets. That’s the 10,000 foot view. Let’s be honest. Most of us, myself included, don’t take that panoramic view every day or even every week. In fact, I see many emerging managers only take that view when they’re forced to. In other words, when they’re in fundraising mode.

For many professionalizing angels and syndicate leads, that becomes trying to string a narrative from seemingly disparate data points. Or at least, it seems that way.

As Asher Siddiqui told me, “[after] you look at their whole life and career history, and look at their thesis, if the thesis doesn’t make complete and perfect sense, then I don’t think this is a ‘great‘ fund manager. If it fits like a glove, then yes, they could be.”

The best GPs are disciplined even before they start fundraising. They focus on the thesis they want to raise on when they do. That’s not to say they don’t invest off-thesis every so often. But they don’t pitch their off-thesis angel or syndicate investments as part of their thesis-driven track record. But I digress.

In chasing signal for the sake of signal, when you hear of a hot deal every other day, many investors forget to be that belief capital for founders. I’m not saying that an investor should do so for every founder out there. But to pick a few, or even just one. One that they’re willing to take the swing before others do.

The signal is their own conviction in the founder.

The first half

Because of this progression, there’s been a new two-part question I really enjoy asking emerging GPs. The first half:

Which company in your portfolio you think is still underestimated?

Which company in your portfolio didn’t get the investor attention you expected but are still extremely bullish on their growth? And why do you still believe in them? What are other investors missing out on?

It’s not about track record or social proof here. It’s about the ability to recognize exceptional talent and articulate it clearly. Hopefully, a rose growing in concrete.

Well, in terms of the odds, you’re likely to be wrong. But that’s okay. You need to be willing to be wrong to achieve outlier success.

Fund I is often the proof-of-concept fund for the emerging managers I’ve talked to. They start by writing small checks, don’t lead rounds, and don’t fight for ownership targets. They claim to be extremely helpful and hands on. Then again, expectation often differs from reality, especially if they’ve never been so before (where LPs discover through reference checks). And because they’re writing smaller checks now, I’ve seen many implicitly hold off on developing a framework to get to conviction until Fund III. Whereas the best GPs start thinking about it early on.

You can think about it this way. As long as you’re benchmarking on signal via other investors, why should an LP back your thesis when they can back your “signal”?

For individuals and smaller family offices, they’ll still back you. What they’re buying is access, since they can’t afford nor have the relationship to be an LP in the “signals.” Larger LPs have the optionality to do so. And if you’re an emerging GP hoping to grow as a professional manager by having larger and larger funds, you eventually need to raise from large LPs. At least, until the SEC changes their 99 limit. And to do so, from larger LPs, means you need to bet where their existing portfolio has not bet before. Plus do it well.

The second half

If you haven’t already, a great way to build a referenceable track record is to sweat the details. Yes. The details matter. Nate Silver, one of the best poker players of our generation, said earlier this year, “you can’t just get the big things right in poker. You have to get the small things right too. It’s too competitive of a field right now.”

Though he said venture is different, I believe he’s half right. Most investors don’t sweat the small things. But investors should. Today, that’s how you stand out.

It might not have been true a decade ago, but now it is. Just last year, in 2021, there were 730 funds created. To put that number into perspective, on average, that literally means two firms closed every single day last year, including the holidays and weekends!

Capital has become a commodity. In 2021, speed was a differentiator. Clearly, in 2022, it is not. Today, it’s tough being a founder. If you’ve raised in the last two years, you’re considering extending your runway. That means having tough conversations to reduce your workforce, your benefits, or your salaries. If you haven’t raised, it’s a hard market to be raising in now. And so the differentiator today, is in two parts:

  1. Helping founders navigate these tough situations. In other words, being (proactively) helpful.
  2. And helping founders raise their next round. Mac Conwell recently shared a great thread on how powerful a founders’ network is to get funding. The same applies to an investors’ ability to help their portfolio raise capital. How liquid is your network? It’s not about who you know, but how well you know your friends downstream, and how can you get them over the activation energy to invest. Don’t get me wrong. There still needs to be a certain level of hustle from the founders themselves. But a great investor often steps in to reduce as much friction as we can in that process.

Both of which have long been the job description of being a VC. It’s in the small things. Jump on a 2AM call. Help your founders figure out the wording for a reduction-in-force. Fix the sales copy to better close leads.

There are 10-15 character-building moments in a founder’s journey where the moat they build around the business (as opposed to just the product) is not IP or early product traction, but rather from the lessons obtained from scar tissue.

It’s hard to predict looking through the windshield when these moments are, but quite obvious via the rearview mirror. And the best an investor can do is be there as much as he/she can. Albeit hard to do for every company in your portfolio, and that’s the truth. The wealth of information creates a poverty of attention. The larger your portfolio, the harder it is to be truly helpful to every single one. So focus on founders who need you, rather than those who will do great without you. Reputation is built in wartime and realized in peacetime.

So, the second part to the above question is:

What did you do for this company that no other investor or advisor did?

… where I’m looking for answers on how this investor went above the call of duty to help a company they believed in grow.

In closing

In summary,

  1. Which company in your portfolio you think is still underestimated?
  2. What did you do for this company that no other investor or advisor did?

This is by no means original, but heavily inspired by the recent conversations I’ve had, as well as helps me build my own framework for analysis. In parts, this question is a derivation to the check size to helpfulness ratio (CS:H). How helpful are you as an investor? When you say you’re founder-friendly, do you mean it?

Photo by Austin Neill 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!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

Posted on

It’s a Numbers Game

numbers

When I first jumped into venture, there was a wave of founders who believed that a great product will sell itself. But in the past few years, under the proliferation of startup content, discourse and amazing Twitter threads, while anecdotal, I’m happy to have seen far fewer founders who believe in that extreme.

Nevertheless, that dogma hasn’t completely disappeared. Rather than sales and marketing, I’ve realized this to be more the case on the fundraising front.

How often are you in the batter’s box?

This past week, a handful of pre-seed founders asked me for fundraising advice. On Monday, a founder I had chatted with at the beginning of the pandemic reached back out to let me know he was now starting to fundraise for a new idea. Naturally I asked him what he learned from the last idea.

To which he responded, “There weren’t enough investors interested in my last idea.”

I followed up, “How many did you talk to?”

“Twenty.”

That’s not nearly enough. Especially for what was his first institutional round. Moreover, like most other founders, he wasn’t an insider. As such, I believe he should have pitched to more. A lot more.

He’s not alone. Two other founders I chatted with felt they had already tried everything after getting rejected by 30 and 40 investors, respectively.

I mentioned in a blogpost back in April that if you’re an emerging fund manager raising a Fund I, think of it like raising 10 Series A rounds. For most Series A rounds, a founder talks to about 50 investors. So for a Fund I, you’re likely to talk to 500 LPs to close one. An LP I talked to for a blogpost that will soon come out chatted with a GP who pitched 625 investors to raise her first $18 million fund.

Why do I mention this? While this is equally true for emerging fund managers raising a Fund I — a fund that’s pre-product market fit, if the average Series A founder needs to pitch 50 investors, as a pre-seed founder, you need to talk to double that number. If you’re lucky, you can stop pitching sooner. But at the very minimum, you should expect that ballpark number. And that’s also why fundraising is a full-time job.

The more realistic your expectations, the more efficiently you can set up your pipeline, the faster you can get back to building your world-changing idea.

The takeaway

Never run out of leads. You never want to be in the position where you have to go back to someone who passed on you. Keep your funnel open. Every time you pitch a VC or an angel, especially those that say “No,” ask them: Which investor would you recommend who might be interested in what I’m building?

A lot of founders try to optimize for warm intros. But most people who say No to you won’t go out of their way to help you, especially asynchronously. They’d much rather spend time on their own portfolio companies. So, don’t add in asynchronous steps that would increase friction. You don’t need warm intros. You just need names. And if any investor gets recommended more than three times, it’s worth just cold messaging that person sharing that they came highly recommended from the investors you’ve chatted with so far.

For those who say “Yes” to you, it is likely you won’t ever reach profitability with the capital they gave. Early-stage investing, for instance, the pre-seed, luckily, is very collaborative. If you’re raising a $1M pre-seed round, that leaves room for a lead investor of $500K, $3-4 $100K checkwriters (emerging fund managers, syndicate leads, or active angel investors), and a bunch of smaller, but extremely valuable investors. Ask each for who they’d like their co-investors to be. Even if those recommendations don’t commit this round, collect the names for your next round.

During your first institutional raise — hell, even prior to that — you’re an outsider. No one’s heard of you. But there are still people out there who believe in the world that you want to create. You just have to find those early believers. Believers in you. Believers in the future you see.

Justin Kan once shared this great line:

Focus on distribution.

Photo by Nick Hillier 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!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

Posted on

#unfiltered #71 In Search For Work-Work Balance

balance

My friends who know me well know I have this concept I call work-work balance. And in sharing it with someone new, it’s usually met with a light chuckle. I never mean it as a joke. But nevertheless, people take it as my attempt to be snarky and witty.

I believe most of you, my readers, are familiar with work-life balance. A lifestyle that balances work and your life outside of work, often one that spends the capital earned though work. When I hear most people say it aloud, its most frequent use case is in avoidance of doing more work. But the underlying principle is that most people don’t enjoy the work they do. Rather, they find their joy and fulfillment in pursuing hobbies and passions outside of the confines of a 9-to-5.

Just like having a work-life balance is a privilege, having a work-work balance is, in my humble opinion, even more so one. Speaking of privilege, earlier this week, I had the fortune of hearing a rather profound line:

“If you do one thing in life that fuels and motivates you, then you should yourself lucky.”

So, in even talking about work-work balance, I admit I came from a position of privilege, but one I do not think is unattainable for those who also have the privilege of debating the technicalities of work-life balance.

Work-work balance is the balance of doing what you love doing with work that you need to do to continue doing what you love doing. To me, work that I enjoy doing — interesting projects — fulfills me. It gives me meaning and purpose in life. To best illustrate this concept, I’m going to have to steal Elizabeth Gilbert‘s line in a 2016 interview with On Being. It’s not the first, and it won’t be the last time I quote her here:

“Everything that is interesting is 90 percent boring.”

When you’re proud to have work be your identity

Starting something — anything that is going to be core to your identity, even if it is only briefly — is going to be unhealthy.

Being a great venture-backed founder is unhealthy. Starting a venture fund from scratch is unhealthy. Being a world-class content creator is unhealthy. Being a diligent and serial author is… well, you get it. Hell, even binge-watching the latest and greatest Netflix show is unhealthy.

It is also the difference between passion and obsession. One keeps you daydreaming; the other keeps you from sleeping.

I’m not advocating that everyone live an unhealthy lifestyle, but that the concept of work-life balance is a lifestyle that doesn’t fit everyone, but those who have not or have yet to find deep fulfillment in the professional aspect of their life. For those who have found their life’s work, work-work balance may be a more sought-after lifestyle. In working mainly with founders and emerging fund managers, their life stories seem to corroborate the previous sentence.

In the world of startups, I often tell founders, and have many a time, advised founders not to take venture capital. There is no shame in creating an great and fulfilling lifestyle business. But as soon as you take venture, that’s a different story. After all, another name for venture capital is impatient capital. It is the perfect permutation of not just ambition, but also of expectation. The greater you raise in venture, the greater the expectation.

A $10 million valuation is not a number indicative of your company value. In fact, I think the 409a valuation does a better job of that than what VCs price your company at. Rather, a $10 million valuation on a social media company is a bet that you have a 0.0025% chance — a 1 in 40,000 chance — that you’ll be as big as Meta. At least at the time of writing this blogpost. Equally so, a $1 billion valuation is a bet on the odds that you have a 1 in 400 chance to grow as big as Meta. As Uncle Ben said, “with great power comes great responsibility.”

And as such, the expectation and the will of your new bosses — your investors — is that you can scale a team that can help you capture that opportunity. And for VCs, or die trying. Many, if not most, great VCs would much rather you bat for the home run than walk a base. After all, the success of an investor is not defined by their batting average but the magnitude of home runs she or he hits. But I digress.

As a founder, you must love your work so much that it’s contagious. That it affects your investors, your team, and your customers. Why? Because in the course of building a rocket ship, there are a million and one things that can go wrong, and a million and two things that feel tedious, repetitive, and slow. And the work you enjoy doing must be so powerful that just the thought of being able to do more of it invigorates you through the long troughs between wins.

I say all this to every founder I’ve met who didn’t fall madly in love with their problem space and who expect venture funding. The going will get tough, and I, like many other investors, want to know that you have the grit to make it through this long, windy journey. Having a good pulse on work-work balance is one of a few proxies for that grit.

Of course, I do want to posit that a work-work balance doesn’t mean you should make prolonged sacrifices to your mental health, your sleep schedule, or your time with friends and family.

Photo by Piret Ilver 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!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

Posted on

Three Mindsets To Being A Great Venture Investor

compass, path, direction, future

“Readily available quantitative information about the present is not gonna give you they key to the castle. […] If everyone has all the company data today and the means to massage it, how do you get a knowledge advantage?

“The answer is you have to either:

  1. Somehow do a better job of massaging the current data, which is challenging; or you have to
  2. Be better at making qualitative judgments; or you have to
  3. Be better at figuring out what the future holds.”

Those are the words of the great Howard Marks on a recent Acquired episode.

When most of us first learned economics — be it in high school or college, we learned of the Efficient Market Hypothesis. In short, if you had access to both public and private information, you would be capable of generating outsized returns that outperformed the market.

The truth is that reality differs quite a bit. And that’s especially in early-stage investing. Investors often make investment decisions with both public and private information at their disposal. There is admittedly still some level of asymmetric information, but that depends on deep of a diligence the investors do. Yet despite the closest thing to a strong efficiency, there’s still a large delta between the top half and bottom half of investors. The gap widens further when you compare with the top quartile. And the top decile. And the top percentile. Truly a power law distribution.

Massaging the data

I’m no data scientist, although I am obsessed with data. But there are people who are, and among them, people I deeply respect for their opinion.

There’s been this relentless, possibly ill-placed focus on growth (at all costs) over the last two years. Oftentimes, not even revenue growth, but for consumer startups, user growth.

I want to say I first heard of this from a Garry Tan video. The job of a founder pre-product-market fit (pre-PMF) is to catch lightning in a bottle. The job post-PMF is to keep lightning in that bottle. Two different problems. Many founders ended up focusing on or were forced to focus on (as a function of taking venture money) scale before they caught lightning in that bottle. They spent less time on A/B testing to find a global maximum, and ended up optimizing for a local maximum.

Today, or at least as of September 2022, there’s this ‘new’ focus on retention and profitability (at all costs). But there’s no one-size-fit-all for startups. As a founder, you need to find the metric that you should be optimizing for — a sign that your customers love your product. Whether it’s the percent of your customers that submit bug reports and still use your product or if you’re a marketplace, the percent of demand that converts to supply. Feel free to be creative. Massage your data, but it still has to make sense.

From a fund perspective, equally so, it’s not always about TVPI, IRR, and DPI, especially if you’re an emerging fund manager. Or in other words, a fund manager who has yet to hit product-market fit. You probably have an inflated total-value-to-paid-in capital (TVPI) — largely, if not completely dominated by unrealized return. The same is true for your IRR as well. In the past two years, with inflated rounds and fast deployment schedules, everyone seems like a genius. So many investors — angels, syndicate leads, and fund managers — found themselves with IRRs north of 70% for any vintage of investments 2019 and after. Although an institutional LP that I was chatting with recently discounts any vintage of startups 2017 and after.

So the North Star metrics here, for fund managers, isn’t IRR or TVPI. It’s other sets of data. I’ll give two examples. For a fund manager I chatted with a few weeks ago, it was the percent of his portfolio that raised follow-on capital within 24 months of his investment because it was more than twice as great as the some of the best venture firms out there. Another fund manager cited the number of his LPs who invested in his fund’s pro rata rights through SPVs.

Making qualitative judgments

In this camp, these are folks who have an extremely strong sense of logic and reasoning. When a founder has yet the data to back it up, these investors go back to first principles.

In my experience, these investors are incredible at asking questions, like how Doug Leone asks a founder for their strengths and weaknesses. But more than just asking questions, it’s also about building frameworks and knowing what to look for when you ask said questions.

For instance, every investor knows grit is an important trait in a founder. More than knowing at a high level that grit is important, what can you do to find it out? For me, it boils down to two things.

  1. Past performance. In other words, prior examples of excellence that they worked hard to get.
  2. Future predictors. I ask: Why does this problem keep you up at night? Or some variation. Why does this problem mean so much to you? Why are you obsessed? Are you obsessed? Why is this your life’s calling? And I’m not looking for a market-sizing exercise here.

While I don’t claim to hold all the truths in this world, nor can I yet count myself in the highest echelons of startup investing, the most I can do here is share my own qualitative frameworks for thinking:

Futurists

One of my favorite thought pieces on the internet is written by a legendary investor, Mike Maples Jr. of Floodgate fame. In it, he illuminates a concept he calls “backcasting.” To quote him:

“Legendary builders, therefore, must stand in the future and pull the present from the current reality to the future of their design. People living in the present usually dislike breakthrough ideas when they first hear about them. They have no context for what will be radically different in the future. So an important additional job of the builder is to persuade early like-minded people to join a new movement.”

Early-stage investors must have the same genetics: the ability to see the future for what it is before the rest of humanity can. And they back founders who are capable of willing the future into existence and create reality distortion fields, a term popularized by Bud Tribble when describing Steve Jobs.

When I first jumped into venture, one of the first VCs I met — in hindsight, a futurist — told me, “Some of the best ideas seem crazy at first.” A visionary investor is willing to take the time to detect brilliance in craziness. Paul Graham, in a piece titled Crazy New Ideas, proposed that it’s worth taking time to listen to someone who sounds crazy, but known to be otherwise, reasonable because more than anyone else, they know they sound crazy and are willing to risk their carefully-built reputation to do so.

For 10x founders and investors alike, the more you hear them out, the more they make sense. That said, if they start making less and less sense the more you listen, then your time is most likely better spent elsewhere.

In closing

As you may already know, a great early-stage investor requires a different skillset than a great public equities trader or a hedge fund investor. You’re more likely to work with qualitative data than quantitative data. Regardless of what archetype of a venture investor you are, you have to believe that we are capable of reaching a better future than the one we live in today. It is then a question of when and how, not if.

Of course, I don’t believe that these three archetypes are mutually exclusive. They are more representative of spectrums rather than definitive traits. Think of it more like an OCEAN personality test than a Myers-Briggs 16 personalities.

To sum it all, I like the way my friend describes venture investors: pragmatic optimists. Balance the realities of today with how great the future can be.

Photo by Jordan Madrid 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!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

Posted on

#unfiltered #70 Conviction Comes From The Stories We Tell Ourselves

focus, conviction, motivation

On the second half of a late summer Friday, as I was overlooking the singed blades of the parched grass in our front yard, I found my good friend, Andrew, in my inbox. An inbox that was about to be empty from filing an eclectic collection of investor updates, food science analyses, tech articles, and my weekly subscription of Substack extraordinaires into my Read Later folder.

An email headline in boldface. All it would take would be two clicks. Two clicks to add to my party of internet writers I would be conversing with over a Saturday morning of roasted hojicha tea. Instead, I clicked once. Just once. And I’m glad I did.

Andrew started writing again. Pen to paper. Or rather, finger to keyboard. And that, that was worth celebrating. I, like many of his other friends, had been starved, deprived, relieved of his prose given his busy schedule. In it, he postulated the relationship between commitment and conviction.

“Commitment helps you stay on the path. Conviction is what calls you to the path in the first place.”

In sum, the pre-requisite for commitment is conviction. And so, it got me thinking about the source of conviction…

From inspiration

For decades, athletes have tried to break the 4-minute mile. According to British author John Bryant, since 1886. “It had become as much a psychological barrier as a physical one. And like an unconquerable mountain, the closer it was approached, the more daunting it seemed.”

But it wasn’t till May 6, 1954, did Roger Bannister break it with a time six-tenths under the mark. As soon as Bannister did it, 46 days later, another did. One year later, three runners broke the once elusive 4-minute barrier in one race.

The thing is, nothing technological had changed in the world when all these runners post-Bannister broke the four minutes. Nutrition hadn’t drastically improved. Neither was there drastic evolution in the technology of shoes. Yoram Wind and Colin Crook argues it was a mindset shift. The impossible was possible.

We see the same notion today in the world of emerging markets. In these markets, the first wave of unicorn founders is usually spearheaded by Harvard and Stanford grads building X for Latam or Y for Africa. For instance, both of Grab’s founders are HBS graduates. Gojek’s Nadiem is no exception. Nubank’s David Velez holds a similar Stanford GSB degree. So does Cabify’s Juan de Antonio. Rappi’s founders are also Stanford alumni. And the list goes on. They come with the Silicon Valley mindset in a market underestimated by not only the broader world but by the homegrown talent themselves. I like the way a Midwest founder-turned-investor once put it, “My mind is in Silicon Valley, but my feet are in the Midwest.” The same is true for this first wave.

And once they’ve proven it’s possible to reach unicorn status, the second wave follows quickly after.

Most people follow in the footsteps of our predecessors. Older siblings are the same for their younger siblings. Parents are that for their children. While I’m not a parent yet myself, I do aspire to be that for my children. Equally so, that’s why we need diverse representation in media, in positions of power, and in stories.

For many, conviction comes from examples to disprove the limitations of our own imagination.

From emotion

For a handful of others, conviction comes from a deep desire to prove or disprove.

There’s a superpower that comes with being underestimated. Reddit’s founders famously hung on the office walls the words of a Yahoo! exec who told them,  they were nothing but a “rounding error.”

When Michael Phelps’ eight gold medals in Beijing were on the line, their coach Bob used what the French team was boasting on the papers as motivation in the locker rooms. “The Americans? We’re going to smash them. That’s what we came here for.” And soon after, the world was blessed with one of the greatest races to date. A race of which the Americans — the underdogs — pulled a miraculous spectacle of conviction and resolve.

For founders, you need obsession, not just passion. Many of the best ones have a personal vendetta — a deep, unquenchable desire borne out of time spent in the idea maze. Every successful founder needs to perform 10-15 miracles in the startup to household name journey. Trials by fire that are meant to deter the fainthearted.

After chatting with a number of limited partners (LPs, folks who invest in venture funds) over the past two months, I’ve realized the thread of founder obsession continues here. That investor-market fit is not just a function of professional experience but also of life experience. Once again, a deep desire to change the world from personal frustrations and the hope that no one will ever have to go through what they went through.

In closing

Earlier this year, Reed Hastings shared a profound line with the graduating class, “[stories are] about harnessing the human spirit.” Conviction starts from the story we tell ourselves. The story itself is bound by the limitations of our own imagination. And conviction happens to be the belief that we can will our imagination into existence.

Michelangelo once said, “The sculpture is already complete within the marble block, before I start my work. It is already there, I just have to chisel away the superfluous material.” Commitment is the dedication to your conviction. A devotion to say no to distractions and yes to the person you want to be.

We live in a world filled with shiny objects. So, ask yourself, do you want what others want? Or what you truly want? Is your conviction inherited or innate?

I was listening to the latest episode of the All-In podcast, and David Friedberg echoed a similar notion for the greater human race, “What differentiates humans from all other species on Earth is our ability to tell stories. A story is a narrative about something that doesn’t exist. And by telling that narrative, you can create collective belief in something. And then that collective belief drives behavioral change and action in the world.”

Photo by Devin Avery 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!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

Proudly powered by WordPress