Tag: quote

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#unfiltered #50 What is Your Opening Bid?

“Is your opening bid to assume trust – to assume someone is trustworthy – and to grant them the full benefits of that? Or is your opening bid to not trust, but the trust can be earned?”

Over the past weekend, my friend shared this brilliant interview between Jim Collins and Shane Parrish at Farnam Street. The same friend who recommended this podcast that catalyzed my essay on how to think like an LP. So, needless to say, when she sent me this one, I had to tune in. I’ve been a big fan of Jim for a long time, ever since one of my favorite college professors recommended that I read Good to Great. He has an amazing talent with wordsmithing – bringing seemingly incongruous concepts together in analogous harmony. So when Jim uttered the above quote, I took my Staedtler pen and 180 g/m2 paper out.

“Have you ever considered the possibility?”

Jim also shared, “Brutal fact: Not everyone is trustworthy. And the brutal fact is that some people abuse that trust.” Some people will abuse that trust. Some people will really let you down. But that, in my opinion, as well as Bill Lazier’s – Jim Collins’ mentor, is just the cost of living. That shouldn’t change your disposition in the world, but rather illustrate how much more you should cherish the ones that are trustworthy.

Jim furthered that notion with another anecdote from his mentor, Bill. “Have you ever considered the possibility, Jim, that your opening bid affects how people behave? If you trust people, you’re more likely that they will act in a trustworthy way. So it’s a double win. It’s the best people and they’ll behave in a trustworthy way. The flip side is if you have an opening bid of mistrust, the best people will not be attracted to that. If you have an opening sense of you have to earn my trust, […] some of the best people are gonna be like ‘I don’t need to put up with that. I’ll go do something else.'”

Thinking aloud

Coincidentally, a few weekends ago, one of my good friends hosted a thought lounge. The first I’ve participated after hearing about it for a few years. The purpose of which, and I quote, “is meant to be a place where passionate people come together to practice dialogue and have meaningful conversations.” Every person brings in a topic that’s designed to spark kinetic intellectual energy that each lasts for 12 minutes. And where “creative conflict” is encouraged.

It just so happens that one of the four topics that came up that day was the law of attraction. A concept that states that similar people attract each other. And that one’s thoughts can attract similar results. The more you think you will succeed, the more likely you are to succeed. And likewise the same might be true for failing. One of my fellow participants brought up a great Henry Ford quote: “Whether you think you can, or you think you can’t – you’re right.”

And it acutely reminds me of a story I once read in Tim Ferriss’ Tribe of Mentors. Robert Rodriguez, who directed one of my childhood favorite franchises Spy Kids, shared with Tim when asked the question, “If you could have a gigantic billboard anywhere with anything on it, what would it say and why?”

“I like the idea of setting impossible challenges and, with one word, making it sound doable, because then it suddenly is. So I’d choose FรCIL! for my billboard. It’s a good reminder that anything can be done, with relative ease and less stress, if you have the right mindset. […] Attitude comes first.”

In closing

“Is your opening bid to assume trust – to assume someone is trustworthy – and to grant them the full benefits of that?”

That’s the line I need on my fortune cookie. If one day I unwittingly become a foolhardy skeptic, I want to open up a fortune cookie after a lonely meal I’ve stuffed myself to the brim on. On a quiet late night Uber ride home, thinking I’ve eaten all I can eat… I want to read that line.

My opening bid is trust. It always has been. And I hope it always will be. I know that people have taken advantage of my kindness and trust. And I know there will be more that will in the future. But I hope I never lose the optimism in my eyes.

My opening bid is still trust. What’s yours?

Photo by Marek Piwnicki on Unsplash

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

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

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Why It’s Important to Disagree with Your Co-Founders Early

While I don’t always ask this question, when I do, it provides me enormous context to how the founding team works together. What do you and your co-founders fundamentally disagree on? Over the years, I’ve heard many different answers to this question. “We disagreed on which client to bring into our alpha.” “On our last hire.” “Our pricing strategy.” And so on. As long as you contextualize the point of friction, and elaborate on how, why, and what you do to resolve it, then you’re good. There’s no right answer, but there is a wrong answer.

The answer that scares me the most is: “We agree on everything.” Or some variation of that. While people may share a lot of similarities, even potentially the same Myers Briggs personality type (although I do believe people are more nuanced than four letters), no two people are ever completely the same. Take twins, for example. Genetically, they couldn’t be any more similar. Yet, to any of us, who’ve met any pair of twins in our lifetime know they are vastly different people.

Priorities lead to disagreements

One of my favorite counterintuitive lessons from the co-founder and CEO of Twilio, Jeff Lawson, is: “If your exec team isn’t arguing, you’re not prioritizing.” He further elaborates:

“As an executive team, we never actually argued โ€” which is a strange thing to bother a CEO. But in fact, something always felt not quite right to me when we always agreed. Clearly, we must not be making good enough decisions if we all agree all the time.

“What I came to realize was that the reason why we didn’t argue is we werenโ€™t prioritizing. One person says, โ€˜I like idea A,โ€™ and the other person says, โ€˜I like idea B,โ€™ and you say, โ€˜Great, put them both down, we’ll do it all!โ€™ And in fact, when you look back on those documents at the end of the year, we rarely got around to very much of anything in those documents.

“Be vigorous not just about what makes the list, but the specific order in which priorities fall. โ€œWe realized itโ€™s not just about all the things we could do, but the order of importance โ€” which is first, which is second. Now you get disagreements and a lot of vigorous, healthy debate.”

Starting the tough conversation

Admittedly, it’s not always easy to have these tough conversations with the people you trust most. In fact, often times, it’s even harder to have these conversations because you’re scared about what it can do to your relationship. Arguably, a fragile one at best. At the end of last year, Yin Wu, founder of Pulley, shared an incredible mindset shift when building an all-star team, which led to my conversation with her.

You’re a team driven to change the world we live in. And to do so, you need a system of priorities.

One of the best ways I’ve learned to address conflicts – explicit and implicit, the latter more detrimental than the former – is taking the most obvious, but the one that most people try to avoid. Address the elephant in the room at the beginning.

I love the way Elizabeth Gilbert approaches that elephant, “The truth has legs. Itโ€™s the only thing that will be left standing in the end. So at the end of the day, when all the drama has blown up, and all the trauma has expressed itself, and everyone has acted up and acted out, and thereโ€™s been whatever else is happening, when all of that settles, thereโ€™s only going to be one thing left standing in the room always, and thatโ€™s going to be the truth. […] Since thatโ€™s where weโ€™re going to end up, why donโ€™t we just start with it? Why donโ€™t we just start with it?”

When it hasn’t happened yet

If you haven’t disagreed with your team yet, you either haven’t established your priorities or one or the other or both has yet to bring it up. A mentor of mine once told me, “Whatever you least want to do or talk about should be your top priority.” And the goal is to sit down with your team and figure it out. To come into the conversation suspending immediate judgment and trying to see where your other team members are coming from.

As the CEO of a startup or a leader of a team, you don’t have to use every piece of feedback or input you get from your teammates. But you should make sure your teammates feel heard. That you’ve put thought and intention behind considering their ideas and opinions. Whether you choose to deviate from your teammates’ opinions or not, you should clearly convey the rubric that you used to make that decision. And why and how it aligns with the company’s mission.

In closing

And of course, the follow-up to the first question about disagreement would be: How often do these disagreements happen? And how do you move forward after the disagreement comes to light?

I go back to a line Naval Ravikant, co-founder of AngelList, once said, “If you can’t see yourself working with someone for life, don’t work with them for a day.” Indubitably, you’re going to be working with your co-founders for a long time. And if you haven’t dissented with your co-founders – or for that matter, other team members, investors, and customers – yet, you will. And knowing what, how and why you disagree with others can be invaluable for your company’s survival and growth.

This past weekend I heard a new phrasing of disagreement I really liked from a friend of mine. “Creative conflict.” I’m adding that phrase to my dictionary from now on. And well, this is my preface to you all before I do.

Prioritize. Communicate. And embrace creative conflict.

Photo by Ming Jun Tan on Unsplash

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

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Losing is Winning w/ Jeep Kline, General Partner at Translational Partners and Venture Partner at MrPink VC

“I was a swimmer since I was very young and, you know, I never won. I never won.”

You’re probably assuming this is how the opening scene of a movie about a future world-champion swimmer begins. The beginning of the world’s most amazing underdog story. And you’re wrong. Well, not completely wrong. This isn’t a story about the world’s next biggest Olympic swimmer. Although it might be well-timed with the Tokyo Olympics around the corner. This… is a story, in my humble opinion, of one of the world’s next biggest venture capitalists. A story of a young Bangkok girl who became a VC from learning how to lose.

I’ve never been the smartest kid on the block. At least in the IQ department. So I make it my mission to hang out with folks who are smarter and more driven than I am. Jeep is no exception. I met her last month. And as if going from a World Bank economist to Intel leadership to startup advisor and investor to lecturing at UC Berkeleyโ€™s Haas School of Business was not enough, in our first conversation, she shared an incredible set of contrarian insights. So earlier this month, I had to jump into another conversation with her.

Something about going long

If you’re a long-time fan of this blog, you know one of my favorite Bezos-isms is, “If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that.”

Jeep is that same kind of superhuman.

“I started as a competitive swimmer since I was seven, and I swam so much and so hard, like three kilometers a day. It’s just a lot of practicing. I never even won a medal. And I kept doing it. And that was hard.

“Because other kids they got medals in different styles. So I learned early on in life what losing actually meant. And I think that’s very important because a lot of smart kids, they never learn how to fail early on in their life. And it’s kind of like a winner’s curse because you know, when they’re the best at everything, since they were young, throughout college , once they come out, and they realize that the world is hard, they are doing things or want to pursue a career that their parents cannot help them, they become risk averse. Meaning they don’t want to try new things.

“So I never won in [any] swimming competitions. Until I got into college. When I got into college, at the time I already quit swimming. I quit in high school. So, I didn’t swim competitively anymore since I didn’t have time to practice. I picked up other activities like piano, which I came to love. In college, one of my friends asked me, ‘Hey Jeep, why don’t you come back to the competition?’ And she knew I never won. We were in the same race at so many events. And I said, ‘I don’t know. Let me try.’ So I tried again.

“So I got back to the practice routine. Adjust my strokes a little bit. And then I won. I got gold and silver medals for a college swimming competition. And I was like, ‘This is a joke. How could I win?’

I never won ever, like for ten some years. And I joke with my friend, ‘You know why, because everybody else quit!’ They quit about the same age in high school.

I just went for it. And that was one of the moments in life that I realized that it’s all about grit. You do what you love and you don’t quit. There will be a moment that you win.”

The analogy extends further

“Failure is the mother of success.” It’s an ancient Chinese proverb that my mom used to tell me again and again growing up. Every time I “failed.” Scored low on a test. Embarrassed myself on stage for a school musical. Placed fourth, right off the podium for multiple competitions. It’s funny thinking about it in retrospect since she turned out to be the exact antithesis of a stereotypical Asian parent. And I love it!

Take tbh, an app where you send your friends anonymous compliments, as an example. It launched back in late 2017. 73 days after its launch, it went from zero to 2.5 million daily active users, which subsequently led to a $100M acquisition by Facebook. To many, tbh looked like an overnight success. But it wasn’t. Nikita Bier, co-founder of tbh, and his team spent seven years with 15 failed products before they arrived at tbh. And with each iteration, they learned and compounded their lessons from their previous failure.

Clubhouse’s Paul Davison and Rohan Seth is another example of a seemingly overnight success. From Talkshow to Highlight (acq. Pinterest), the pair went through at least nine failed apps before they arrive at Clubhouse – last reported to have passed 10 million users. And valued at $4 billion. Their lead investor, Andrew Chen at a16z, spent eight years getting to know Paul.

One of my junior swim teammates told me years ago when I was at my prime, “David, I don’t think I can beat you as you are now. But I promise you I will beat you one day, even if that means after you retire.” At the time, I dismissed it as just another snarky comment, which athletes are prone to make from time to time. But now that I’m a bit wiser than I was in high school, I find that same comment incredibly prescient. It just so happened that a few years ago, we raced each other again. Both of us had long exited the competitive arena, and he won.

In closing

Near the end of our conversation, Jeep cited something Soichiro Honda, the namesake for the Honda Motor Company, once said. “Success can be achieved only through repeated failure and introspection. In fact, success represents 1% of your work which results only from the 99% that is called failure. Many people dream of success. To me success can be achieved only through repeated failure and introspection. In fact, success represents 1% of your work which results only from the 99% that is called failure.”

She further elaborated, “For people who grew up in a society, in a culture that does not easily accept failure, I want them to know that it’s actually not a bad thing to try and hear rejection. But along the way, they have to make sure that they learn.

“It’s the same thing when I teach UC-Berkeley students. I told my brilliant graduate MBA students that there is, for me – and it’s true – there is no stupid question. If other people think your question is stupid, but at least you learn. If you learn, there’s no stupid question. Do not ask good questions, if it means you don’t learn anything.”

In a way, I’m reminded of a peculiar quote by Karl Popper, “Good tests kill flawed theories; we remain alive to guess again.” While Popper was known to be quite the contrarian thinker of his day, the same seems to hold for questions. Good questions kill flawed theories. We remain alive to learn again. After all, speaking from personal experience, I often find myself burning the midnight oil to ask the perfect question. But in the pursuit of asking the “perfect question”, I’ve forgone the adventures I would have had to arrive at the answer I thought I sought.

We learn when we fail. We learn, to one day succeed. The greatest are the greatest because they have a higher propensity to fail than the average person. As the great Winston Churchill said, “Success consists of going from failure to failure without loss of enthusiasm.”

And as Jeep said, “Winning is actually losing, but learning along the way.”

Thanks Jeep for helping with earlier draft edits!

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

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#unfiltered #49 Doing Boring Things

I recently tuned back into Elizabeth Gilbert‘s, author of Eat Pray Love, 2016 interview with On Being. It also happens to be one of my favorite interviews about creativity and curiosity. I found myself pausing, rewinding, playing, pausing, rewinding, then playing again one line again and again.

“Everything that is interesting is 90 percent boring.”

She further elaborates, “And I think one of the reasons that both my sister and I ended up being authors is because we were taught how to do boring things for a long time. And I think thatโ€™s really important, because here is one of the grand misconceptions about creativity, and when people dream of quitting their boring job so that they can have a creative life, one of the risks of great disappointment is the realization that, ‘Oh, this is also a boring job a lot of the time.’ Itโ€™s certainly tedious. Itโ€™s a boring job I would rather do than any other boring job. Itโ€™s the most interesting boring job Iโ€™ve ever had. […]

“And we are in a culture thatโ€™s addicted to the good part, the exciting part, the fun part, the reward. But every single thing that I think is fascinating is mostly boring.”

She takes it from a perspective that everything has its boring parts. So you have to learn to accept what’s boring along with what’s interesting. I think she’s absolutely right. But while I was tuning in again to that same interview – those exact same lines – for who knows, the 20th time, I thought… maybe there’s something more. Forgive my brain for having the tendency to jump into numbers and equations. That for some reason, one of the primary ways I understand life has to be through some quantitative lens. I thought, what if we take it from an expected value perspective.

Expected value = 10% * (Utility of interesting) + 90% * (Utility of boring)

The utility we gain from boring, often times, is of course, well… boring. Some utility value less than zero. Or in other words, more often than not, we lose utility. On the other hand, the utility we gain from interesting is positive. So, then it becomes a balancing act between what’s interesting and what’s boring. That in the decision to pursue something interesting, there might be the below subconscious calculus:

10% * (Utility of interesting) > 90% * (Utility of boring)

To shine a different light, is the interesting part interesting enough that it outweighs all of the boring parts combined, and ideally, more?

Take, for instance, writing for me. I love writing. It’s meditative. Thought-provoking. And it’s challenging. But at the same time, editing, filling in the keywords for SEO, finding a cover image, all the way to writing when I don’t feel inspired, but I do so to commit to a weekly routine is tedious.

Similarly, Gilbert uses the example of raising children. “Raising children โ€” Iโ€™m not a mother, but Iโ€™m a stepmother, Iโ€™m a grandmother, Iโ€™m a godmother, Iโ€™m an aunt, and I know that 90 percent of โ€” especially, being with very small children…

“Incredibly โ€” itโ€™s hard. And then thereโ€™s the moment where you realize, ‘Oh, my God, this is a spark of creation that Iโ€™m working with, and this is magic, and this is life seen through new eyes.’ And creativity is the same, where 90 percent of the work is quite tedious. And if you can stick through those parts โ€” not rush through the experiences of life that have the most possibility of transforming you, but to stay with it until the moment of transformation comes and then through that, to the other side โ€” then, very interesting things will start to happen within very boring frameworks.”

For many of this blog’s readers, it’s starting a business. Whether you’re changing the world or the people you care the most about, that mission is what drives you. That’s what makes it interesting. And every time you hit a milestone –

  • Your first user outside of your friends and family,
  • Rated #1 on Product Hunt,
  • One of your customers writes a handwritten love letter to you and your team about how you saved her family,
  • You finally have enough revenue to pay your team members who’ve been working with you for free for two years,
  • $1M in ARR,
  • 50,000 users,
  • You reach profitability,
  • Your dream investor says yes,
  • A Fortune 500 business offers you 9 figures for your business,
  • And the list goes on and on.

… it’s exciting! But let’s be honest, not every day will be sunshine and rainbows. 90% of your days will be tedious. Some percent of those days or weeks might even suck! 90% of your days will be you working to find and reach that 10%. And if that 10% is just that amazing, it’ll make that 90% worth it.

In a sense, it’s like the Pareto Principle. 80% of your utility will come from 20% of your achievements. That star 20% – your customer love letters, providing employment for all your team members during the tough days of COVID.

In an analogous mental model, in everything that is boring, there might be a small percentage that makes it interesting. Now I’m really curious as to what I might discover here.

Photo by Sophie Dale on Unsplash

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

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

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#unfiltered #47 Two Ears, One Mouth

I’ve been this self-proclaimed “few screws loose” for a while. Rationally, what I do, it doesn’t always make sense. But in their post-mortems, my adventures often turn out to be invaluable lessons of growth. The month of March was no exception.

It all started with someone who reached out to tell me I didn’t know what I was talking about. And subsequently, that I should stop writing. It certainly wasn’t the first, but definitely the most direct one to date. I saw where he was coming from. I’d never personally taken an idea from inception to scale, much less exit. On the venture side, I’m a scout, and well that means, I don’t personally invest in many deals, if at all.

At the same time, it’s not like I didn’t expect such a comment. As a content creator, even an amateur one, I’m putting myself out there. And in doing so, I’m opening myself up to criticism. This, well, just the first of many more to come. In fact, I’ve alluded to it before. As Jeff Bezos once said, “If you can’t tolerate critics, don’t do anything new or interesting.” Now before I make myself seem smarter than I actually am by appealing to authority, I’m not. Simply, I believe their few words profoundly summarize what might take me an essay to convey.

In writing weekly content, and subsequently, doing my homework to write the best I can on any given topic, I give off the illusion that I’m smarter than I actually am. And every once in a while, I fall victim to using esoteric phrases. Like I could say the same statement above as: I give off the illusion that I have a larger repository of information than I have. But I do so because sometimes I really, really like the phrasing I come up with or come across. It’s more of a personal fulfillment than a misleading faรงade.

Like I’ve mentioned before… I write to think. An unrefined concept that through the process of writing, I come to a more robust understanding. But let’s be honest, it’s not all up and to the right. It’s a rollercoaster. I love how Packy McCormick, who authors Not Boring, described his own writing process.

After all, mine doesn’t fall too far from the apple tree. But I digress. That one message led me down a path to jump on phone calls with other folks who found my content or myself to be disagreeable. Some more perverse and antagonistic than others. Five people total. Four who had just fallen on a series of unfortunate events. Two of which just wanted to be heard. The other two seeking advice and feedback. And last who seemed to find power through berating me for 20 straight minutes. One other who has yet to respond.

Why? I’ve known for a while that I’m terrible at having tough conversations. Some of my friends might know from personal experience. A number of other founders who’ve been on the receiving end of my inability to say “No”. Especially when I first began in venture.

I thought that maybe – just maybe – if I go to the more extreme end of the spectrum, I might get better at giving others the respect and time they deserve. While I’m not sure if the five conversations have helped me mature, they made me a better listener.

When two broke down during our short call, what they needed wasn’t advice or feedback or someone to tell them everything was going to be alright. They just wanted someone to listen. Just listen. Given my personality, I was constantly tempted to respond. To give advice. And to ease the “awkward silence.” But it wasn’t awkward at all. My inability to recognize the sanctity of silence made it awkward.

For the two other founders, they sought feedback since no investor they chatted with so far gave them any constructive ones. I couldn’t promise connections nor capital. All I could promise was my own radical candor. And they were free to do with it as they saw fit. So I spent 10-15 minutes with each, listening to their pitch. No questions in between. My thoughts only chronicled on a 5×8 notepad in front of me. And only after they’d concluded, I would share my thoughts.

The last one, frankly, there was nothing I could do or say that would have changed his mind. And rather than trying to, which would only reinforce his belief, the best I could do was stay silent and occasionally smile.

I’m reminded once again of a line someone I deeply respect once told me, “The quality of communication is measured by not how much comes out of your mouth, but by how much reaches the other person’s ear.” And another, “We have two ears and one mouth; we should use them in that proportion.”

And I am still working on it. I have a long road ahead, but I’m positive if I keep the above lessons in mind, I’ll go further faster.

Photo by Jonathan Sanchez on Unsplash

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

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

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The Fastest Way to Test a Startup Idea

Last week, I reconnected with Shuo, founding partner of IOVC, and one of the first people I reached out to when I began my career in venture. That day, I asked her a pretty stupid question, “Given the rise of solo capitalists, rolling funds, equity crowdfunding, and the democratization of capital, do you think now’s a good time to raise a fund?“

She replied, “I don’t know. It could be a good time now. It could be a good time five years from now. If you’re set on sticking around for the long term, it really doesn’t matter. ‘Cause whether it’s a good time or not, you’re going to be raising a fund regardless. So just do it.”

Not gonna lie, it was serious wake-up call. While I was initially looking for her perspective on the changing venture market, what she said was right. If you’re set on doing something, say starting a fund or a business, the “right time” to start is irrelevant. The world around us changes so much so frequently. We only know when’s the right time in hindsight. So focus on what we can control. Which is starting and doing.

So as an aspiring founder, which idea do you start with? And how do you test it?

Starting a business is scary

Starting a business is scary for most people. And well, the government doesn’t always make it easy to do so. Just like what WordPress and Squarespace did for websites, you have companies, like Stripe (and their Stripe Atlas), Square, Shopify, Kickstarter, just to name a few, streamlining the whole process for entrepreneurship. For an aspiring entrepreneur, not only is it taking that leap of faith, before you begin, there’s a slew of things you have to worry about:

  • Figure out how to incorporate your business (C-corp, LLC, or S-corp),
  • Assign directors and officers to your business,
  • Buy the stock, so you actually own your stock,
  • Learn to file your taxes (multiple forms, including your 83(b) election),
  • When you raise funding, get a 409A valuation,
  • And that’s just the beginning.

Of course for the above, do consult with your professional lawyer and accountant. It’s two of the few startup expenses I really recommend not skimping on. While the purpose of this post isn’t designed to solve all the documents you’ll have to go through in starting a business, hopefully, this will help with one front – taking that leap of faith. Specifically finding early validation for your idea.

The superpower of writing

I stumbled on Max Nussenbaum‘s, who’s leading On Deck‘s Writing Fellowship, provocative tweetstorm:

He boils it down to, effectively, four reasons:

  1. You can test the validity of an idea faster by writing than with code.
  2. Writing well trains your ability to sell.
  3. Publishing regularly gets you comfortable with shipping early and often.
    • To which he cited one of my favorite Reid-isms: “If you’re not embarrassed by the first version of your product, you’ve launched too late.” – Reid Hoffman
  4. Writing is easier for most people to pick up than coding.

There’s a “5th reason” as well, but I’ll let you uncover that yourself. Talk about creativity. Side note. Max created one of my favorite personal websites to date.

Much like Max, I write to think. And in sharing my raw thoughts outside of the world of startups via the #unfiltered series, often far from perfect, as well as my take in this fast-changing universe, my cadence of writing twice a week has forced my brain to be accustomed to the velocity of growth. In the sense, I better be learning and fact-checking my growth week over week. Over time, I’ve developed my own mental model of finding idea and content catalysts.

Of course, if you know me, I just had to reach out. Particularly around the third point in his tweetstorm.

What mental models or practices did he use to help him wrestle with his embarrassment from his own writing? And he replied with two loci that provided so much more context:

  1. “Reading other writers who open up way more than I do, which makes what I’m doing feel easy by comparison. Two favorites I’d recommend are Haley Nahman and Ava from Bookbear Express.”
    • And another I binged for an hour last night. Talk about counterintuitive lessons. My favorites so far are Stephen’s 12th and 16th issue. You might not agree with everything, but he really does challenge your thinking. Thank you Max for the rec.
  2. “Publicly committing to writing weekly and finding that the embarrassment of publishing was outweighed by the embarrassment I’d feel if I missed a week. Also, like all things, I’ve found it very much gets easier with practice.”

Why not both?

Then again, why not both? I go back to Guillaume‘s, founder of lemlist, recent LinkedIn post. He says:

And he’s completely right. If I were to analogize…

Writer = common
Writer + coder = uncommon
And… writer + coder + X = holy grail

You don’t have to own one unique skill. And in this day in age, there aren’t that many individually unique skills out there that haven’t been ‘discovered’ yet. Rather than search for the singularly unique skill that you can acquire, I’d place a larger bet on a combination of skill sets that can make you unique. As a founder, test your ideas early with writing. If there’s evidence of it sticking, build it with code. And it doesn’t just to be just writing and code, whatever set of skills you can acquire more quickly and deeper with the circumstances and experiences you have. Even better if there’s a positive flywheel effect between your skills.

In closing

There’s a Chinese proverb that goes something along the lines of, “The best time to plant a tree was 20 years ago. The second best time is now.” And it circles back to Reid’s quote that Max cited, “If you’re not embarrassed by the first version of your product, you’ve launched too late.” As an entrepreneur, or as an emerging fund manager, it’s a given you’re going to mess things up. But all the time fretting around at the starting line is time better spent stumbling and standing back up.

I followed up with Shuo after our call, and she elaborated a bit more, “In all honesty, you can argue now is a good time (a lot of capital available for good managers) or a bad time (valuations are frothy), but in the long-term, these variables even out and it’s how you add value as an investor that’s most important.”

If I were to liken that same insight to aspiring entrepreneurs… Yes, investors look for timing. And yes, understanding the timing of the market is important, when you’re launching a product that will revolutionize the way we live in a fundamental way. But that boils down to which idea you plan to pursue. But if you’re looking to be a founder, it’s finding that overlap in the 3-way Venn diagram between (1) what the market needs and (2) where you, as the founder, can provide the most value. And (3) where your competitors are not maximizing their potential in.

For many aspiring founders, that first step can be practicing the art of writing. Writing for clarity. Writing to practice selling. Learning to ship early and embracing imperfection. Frankly, it’s also something I need to get better at myself.

Though I’m not a religious fellow, I’m reminded of a quote from Jesus’ teaching, which I first found in Jerry Colonna’s book, Reboot. “If you bring forth what is in you, what is in you will save you. If you do not bring forth what is in you, what is in you will destroy you.” Writing is that act of bringing forth what is in you. And well, if you’re like me, I often find my greatest regrets come from a lack of action rather than in taking action.

If you’re looking for a place to start…

Top photo by Cathryn Lavery on Unsplash

Thank you Shuo and Max for reviewing early drafts of this essay.

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The Goosebump Test

Ever since I started my career in VC, I’ve been trying to understand the concept of “intuition”. Yet, it wasn’t after I’d seen over 500 pitch decks and met over 100 founders before I began to have an inkling of what intuition meant. In fact, embarrassingly so, when I first started at SkyDeck, Berkeley’s startup accelerator, I thought every other startup I met was gonna be a winner. After all, it was rather rare that a founder wouldn’t be excited about their idea at the first meeting. I was told again and again by investors, one of the key drivers for a startup is the founder’s passion. I thought, well, the numbers might not be there yet. But with this founder’s excitement, they’ll get there eventually. And quickly, I mistook “hopefully” as “eventually”. Two words with very different meanings.

You don’t have to be a full-time investor to know that I was quite off the mark. I soon and quickly learned that passion can be faked, especially in the first meeting. And on that journey, I realized how important having a large and deep sample size was. Large, in the sense of number of founding teams I was meeting. Deep, in the sense of spending longer hours with these teams. Of course, realistically, I couldn’t spend more time with everyone I met, but that also meant I shouldn’t just spend half an hour with them and call it a day. My general rule of thumb became I was going to meet every founder at least twice, and at least a week apart. This gave me:

  1. Time to cool my head from the excitement of the meeting
    • Am I more, less, or just as excited to meet them in meeting two as I was in meeting one?
    • If I were [insert my mentor’s name], would I do the deal? Why or why not?
      • Sometimes, it was really helpful to put myself in the shoes of someone’s who’s way more experienced than I am.
  2. Time to approach the opportunity more analytically
    • Does it align with the macro trends I’ve seen?
    • Do they have some early semblance of product-market fit? Why can that be an early proxy for it?
    • Would I be a power user?
    • Is their origin story enough to compel them towards this idea for the next 7-10 years? Are they meant/”destined” to do this?
    • Would they be able to succeed without me? Without funding?
    • Is venture funding a path they need to take towards growth? What about equity crowdfunding? Bootstrapping? Reaching profitability via a tweak in their business model?

Of course, there were, are, and will be exceptions.

Alfred Chuang of Race Capital recently shared his “co-founder test”: “People asked me so well, how do you determine this is a company you want to invest in. In early stage, I say if this company I want to co-founded with, that I will, in any moment jump on my own two feet in the building, the company would have found this, I donโ€™t do it. Wow. Right. Thatโ€™s where the conviction come from. Right? This is the ultimate gut test, you donโ€™t pass that gut test, you donโ€™t do it. So I urge the founders on either side to say, Well, think of me as your co-founder. If you donโ€™t think of me as a co-founder, donโ€™t do the deal with me.”

I recently tuned into one of Basecamp‘s Jason Fried‘s latest interviews, in which he describes how he chooses to pursue projects based on feel. Particularly when he gets the goosebumps. Similar to him, and I’m sure many others, I regret far more of what I say yes to than what I say no to. It’s not that I jump in knowing I will regret my decision. In fact, I’m usually pretty sure I won’t. Nevertheless, in only a rare few circumstances, is it a full-body yes, as Tim Ferriss would call it. VCs, as with any investor or buyer, aren’t immune to buyer’s remorse.

When imagining what could go right – the greatest, most impactful possible upside, does it send happy chills down my spine? Am I riffing off their energy and actively throwing ideas out? Am I unconsciously trying to hit my limit on words per minute? If so…

Some investors call it intuition. Others call it conviction. I’m gonna need my own pretentious phrase. Let’s call it the goosebump test.

My goosebumps will undoubtedly evolve over time. It will react to new stimuli, based on my accumulated knowledge and experience. It will also learn from the scar tissue that will form in the future. While I will try to follow my goosebumps as much as I can, they will undoubtedly also fail me at times. Just like how I wouldn’t be as excited now by some of the startups that got me excited back at SkyDeck, I imagine there will be a healthy handful that I do now that my body will learn from in the future. And I will continue to do my best to codify my learnings and share my scar tissue for myself and on this blog over time.

Photo by Stephen Leonardi on Unsplash

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#unfiltered #45 Two Questions that Force Me to Face My Own Ego

“Ego is about who is right. Truth is about what is right.” – Mike Maples Jr.

I distinctly remember reading this soundbite on page 64 years ago in Tim Ferriss‘ then-new book, Tribe of Mentors. With the recent string of world events over the past few months, I’m reminded once again of this line. It’s strange to think that our most available mentors come in the form of books. Yet, every time I realize this fact, I seem to stumble upon another Eureka moment.

I was a passively-rebellious kid growing up. Though not often, there were times I would swing left when my parents said right. High school, on the other hand, did not make it any easier for my parents. As if puberty was not enough, in high school speech and debate, I learned to play the devil’s advocate on nearly everything. Frankly, it didn’t matter if they were right or not. And in more times than I am willing to admit, I found myself in trouble for not heeding my parents’ advice. Physically. But more often, emotionally. I was just emotionally antagonistic to my own wellbeing. Something I was unwilling to admit for quite a while.

We live in an era where many debates have spiraled down the path of: “If I’m right, you’re wrong” or “If I’m wrong, you’re right.” But most issues – and I might even be as bold as to say, all issues – are not nearly as binary. Debates have become arguments rather than conversations. We fail to realize great constructive conversations are never zero sum. Socratic discussions lead to nuance and a spectrum of colors that are dimensionally vast. Many of us have chosen what is the easiest for us to swallow in that moment. That soundbites resonate more than 3-hour debate. We’ve turned our attention towards ephemeral efficiency rather than robust literacy. At the same time, we need to balance complexity with simplicity. Sometimes, matters aren’t as complicated as we make them out to be. Other times, they are and possibly more so.

Someone I deeply respect once told me. “The quality of your words are determined not by what comes out of your mouth, but by how much reaches another person’s ears.” Oddly enough, we fail to use our senses in the proportions nature gave to us. Two ears. One mouth. Yet, we often act as if we have two mouths and one ear. And I am not immune to that fact.

Over the years, due to the accumulation of scar tissue, I’ve learned to abstract who from what they are saying. When I hear advice, opinions or even facts from someone I am emotionally aloof or antagonistic with, I ask myself, if someone I deeply respect said the exact same thing, would I still be as averse as I am now?

If still so, why? What are my underlying assumptions to oppose such a claim?

Similarly, if someone I deeply respect (even blindly so) says something I agree with too quickly, would this piece of advice hold the same gravitas if it came from someone with little social capital?

Of course, the above is much easier when my inner weather isn’t hormonally turbulent. But when it is, I breathe deeply thrice. And ask myself the question again. And if still turbulent, then I repeat until I’m ready to face my own ego.

Photo by Krissana Porto on Unsplash

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

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Think like an LP to Get a Job in VC

I want to preface this piece by first saying, though I have LP (limited partner) friends, I’ve never been an LP. So take everything with a grain of salt. For that matter, even I have been an LP, still take this with a grain of salt. After all it’s just my one perspective on the world. Nevertheless, I hope this perspective helps to provide some context around the venture space. As it did for me.

For years, I’ve recommended my friends who were looking at startup job opportunities to think like a VC. And having chatted a number of firms over the years about scout, associate/analyst, venture partner roles, I’ve come to a new revelation. Or rather one that I’ve practiced for a while, but haven’t connected the dots until recently.

When you’re looking for VC job opportunities, think like an LP. I’ve written about the LP calculus a few times before, like:

Here are some questions I usually consider:

  • How have you thought about your own differentiation that gets you access to some of the uniquely fund-defining opportunities you have?
  • What are the startups in your anti-portfolio? And what have you learned since from them?
  • [if their funds are wildly different in fund size (i.e. Fund I – $20M, Fund II – $100M)] How do you think about fund strategy now versus Fund [t_now-1]?
    • For context, usually each subsequent fund doubles in size. i.e. Fund I $20M, Fund II $40-50M, Fund III $80-100M
  • [If they have fund advisors, EIRs, and/or scouts] How do you pick advisors? What is your mental model for picking scouts?
    • Or one of my favorite phrasings: How do you differentiate the good from the great [advisors/scouts]?

Over the weekend, my friend sent me a great podcast for me to unwind. In it, I found an unlikely hero soundbite. “Your library holds a lot of value that you may not know until the story arrives. […] No one’s selling characters ’cause they’re one story away from this character becoming a hit.” While its context is related to why Marvel won’t sell any of its superheroes, Alex Segura‘s, co-president of Archie Comic Publications, anecdote proves just as insightful to the world of venture.

Discovering first-time early-stage founders is hard. The same is true for finding the next killer GP or venture firm. AngelList’s Rolling Funds are democratizing access to capital, lowering the barrier to entry for emerging fund managers. And really the success of a fund is determined by its MOIC – multiple on invested capital. 5x and up would be ideal. And that, like I mentioned in my last blogpost, boils down to the fund’s top one or two winners. Loosely analogized to a fund’s unicorn rate (percent of portfolio that are unicorns). In other words, the “one [investment] away from this [fund] becoming a hit.”

To see if a fund can consistently find those stories boils down to its systems. Often times, you’re joining a fund that has yet to have a runaway success. Or a fund that has a fund returner. So, instead, you’re looking at their thesis and if their thesis allows them to be:

  1. The best dollar on the cap table of a startup in their scope
  2. Forward-thinking enough to see where the market is heading, rather than where it’s been
    • And by definition of being forward-thinking, taking bets/risks that few other VCs would, yet calculated enough to make logical sense given the trajectory of the market. In other words, is the thesis grounded on first principles, yet able to capture their second-order effects?
    • That, in turn, requires you as a VC applicant to have decent literacy in the market the firm is betting in.

As James Clear, author of Atomic Habits, wrote, “You do not riseย to theย levelย ofย your goals.ย Youย fall to theย levelย ofย yourย systems.” What are their mental models? Fund strategy? How do they think about portfolio construction? About capital allocation? And more importantly, time allocation?

If you’re looking to learn more about GP-LP dynamics, I highly recommend Samir Kaji’s Venture Unlocked podcast and Notation Capital’s Origins podcast.

Photo by Micheile Henderson on Unsplash

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Why Should the Investor NPS Score Exist?

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

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

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

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

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

Erik Torenberg of Village Global further elaborated in a tweet:

And, Jason M. Lemkin of SaaStr tweeted:

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

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

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

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

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

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

The uncommon

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

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

The common

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

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

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

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

Finding investor NPS

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

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

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

In closing

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

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

With three options:

  • No
  • Yes
  • It’s a no-brainer.

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

Photo by Laurice Manaligod on Unsplash

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