The Best Ship is Ownership

We are overdue for an Arsenal related post, aren’t we? Don’t worry there will be a nugget here for you non-soccer loving people as well, I promise!

Last week, Arsenal had quite the game against our local rivals, Chelsea. We were playing away in a hostile environment and got off to a pretty miserable start. With more than 2/3 of the game left to play, we were down a man and down a goal away from home.

To say things were looking dire would’ve been quite the understatement.

Down a central defender, the vast majority of coaches would have taken off an attacking player and brought on another defender from their bench. And this is exactly what it looked like new Arsenal coach, Mikel Arteta was doing. He readied defender Rob Holding to come on, before deciding against making the switch at the last second. Instead, he asked midfielder Granit Xhaka to slot in at the unfamiliar left center-back role.

This was a strange decision but it paid dividends.

Gabriel Martinelli scored a fantastic goal to get the Gunners back in the game and Arsenal would come back once again to tie the game 2-2 through a superb finish from the captain on the night, Hector Bellerin.

Down a man away from home, a comeback draw feels a lot like a win and fans everywhere were happy with how the team responded to the adverse circumstances they faced.

Asked after the game about his curious decision not to bring on another defender, Arteta told the media that:

“I was thinking about that and said ‘I don’t want to send that message’ to the team and we decided to keep us as we were, give them a chance and I wanted to see how they could respond to that. Don’t make the response for them because I asked them to be accountable for what they do and I didn’t want to make a decision not to let them decide for themselves. It was a great response from them.”

Ever since Arteta took over the team mid-season he has preached a consistent message of accountability.

Of taking ownership of your actions and those of your teammates.

I loved what he did here. Instead of making the easy choice, he left it up to the players to step up and be accountable for their actions. I believe that if you give people an opportunity to rise to the occasion, they won’t disappoint and this Arsenal game was a perfect embodiment of that. While it is still early days, the reaction from the players to their new manager has been fantastic and I think it comes down to that same message of accountability and ownership.

I think this idea of ‘ownership’ is critically important. Ownership leads to the best decisions and the best outcomes. It is turning around Arsenal’s season and I believe it has the potential to change the course of our lives as well.

How Ownership Changes Us

Ownership changes things. Even a small amount of ownership is an extremely powerful motivator. If you own stock in a company you are more likely to buy their goods and products. Ownership gives you a stake in something’s outcome. It gives you an upside in something’s success.

It aligns incentives.

That is why companies give out equity. An actual stake in a company has a totally outsized effect on how people act. A not-so-secret-secret of the startup world is that, for everyone but the earliest employees, equity in a startup will likely not lead to life-changing amounts of money. Even with this being the case, equity still serves as a powerful motivator to do your best, because at the end of the day YOU are one of the owners. When you are an owner, even a small one, at some level you are working for yourself.

Therein lies the rub if you are early in your career.

For most junior folks at companies, they don’t have ownership. Real or imagined.

Sans ownership, the incentive structure is “work hard and you’ll get rewarded by not being fired and, depending on the company, you may have access to some sort of career progression.”

Raise your hand if incentives like that make you want to jump out of bed and run through a brick wall to do everything you can for your employer.

Didn’t think so.

So what are you to do if you don’t have ownership?

Two ideas:

Phantom Incentive Structures

If you don’t have ownership, but you want it, the best way to get ownership is to act like you already have it. A little confusing, but think about it this way:

If we accept that people who have ownership have the most incentive alignment, and therefore will generally exhibit the most desirable behavior, then the solution is to simply act AS IF you have ownership and suddenly you will have the most desirable behavior for a team, company, or project.

It doesn’t have to be actual ownership in something. Just ask Mikel Arteta.

I call this phenomenon ‘Phantom Incentive Structures’. They are incentive structures that only exist because we will them into existence. There are obviously limits with this sort of thing, but my guess is that you will find that the limit to how far you can will yourself to do something is a lot further than you’d imagine.

Build your personal brand. Build your intellectual assets. Build a flourishing network. These days those things matter a lot more than what is on your resume.

The best way to become an owner is to act is if you already are one.

Act like your incentives are properly aligned and you will stand out from the pack as the person who has the best chance of getting that actual alignment.

Taking the Jump

If all else fails, don’t be afraid to take the jump. The best way to build wealth is, and will always be, having some sort of ownership. Otherwise, you are just renting out your most precious resource, time. There is nothing wrong with doing work that you don’t have ownership in, but if your aim is wealth creation and to reach your highest potential, it is going to be a very hard and slow road without some form of ownership.

If there is no pathway to getting ownership over what you are doing why stick around? If a company doesn’t want to invest in you, why should you owe them loyalty?

I know far too many smart, hard-working, ambitious people stuck in dead-end jobs because they are simply afraid of taking that jump. They are comfortable and the idea of leaving a “just ok” job in search of a great one is scary.

Believe me I get it.

But in my experience, people far overweight career risk. Especially if you are young. We act as if every job is the end-all-be-all but the reality is that most of us will have many jobs throughout our career. I also think people don’t appreciate just how much an entrepreneurial skillset is appreciated in the corporate environment.

People think that if they leave the corporate life behind to blaze their own trail and it doesn’t work out, they will have to come slinking back to their old positions. The reality couldn’t be further from the truth. Big companies place incredible value on people who have gone out and tried to make something happen for themselves even if it doesn’t succeed. Most corporations are starved of innovative self-starters and the fact that you went out and tried something means you have this skill set that they perpetually seem unable to build in-house.

The reality is, if you take the jump and it doesn’t work out, the likelihood is that you actually would come back to at least where you would have been anyways if you had just stayed and tried to climb the latter the “old-fashioned way”.

For a young, driven, ambitious person entrepreneurial pursuits basically have zero downside. You learn more and you become a much, much more valuable asset to any other company down the road. Now all of this calculus can change based on an individual’s life circumstances, but I still think the idea that people overweight career risk is a truism no matter where you are in life.

Ownership is crucially important.

It is what achieves the best results for companies and it is what achieves the best results for individuals.

If you don’t have ownership, act like you do. That is the best way to get some skin in the game.

If that doesn’t work, start your own thing. No one can stand in the way of you getting ownership in something you start.

Don’t be too afraid of career risk. The real risk isn’t taking a chance and better on yourself.

The real risk is waking up in 20 years with the regret of never doing so.

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The Pillars of Innovation

What is innovation?

It’s a word that gets bandied about a lot, especially in the world of venture capital, but what does it actually mean?

The dictionary defines “Innovation” as a new method, idea, product, etc. (snarky side comment: What the heck does “etc.” mean in this context. I am dying to know)

Here’s the way I see it.

There are two broad categories of innovations.

1. You can improve on something else that exists (Sustaining Innovations)

2. You can create something new (Disruptive Innovations)

That’s it.

Every new method, idea, product or etc. fits into one of those two buckets. Is one better than the other? What are the differences?

Better Mousetraps

Innovations on something that already exists are sometimes derided by tech thought leaders. They are thought of as inferior to disruptive innovations. Somehow less pure.

In the words of Peter Theil, “We wanted flying cars, instead, we got 140 characters.” (You could argue in some ways Twitter is more of a new innovation than flying cars, but the message is pretty clear here).

I definitely appreciate Theil’s perspective, but the reality is, that the vast majority of companies are building better mousetraps. There is a LOT of value to be unlocked by simply making things work better.

Less friction.

Quicker.

Slicker interface.

People pay big money for these things. And why not? At the end of the day, an increase in efficiency is really an increase in available time, the one resource we can’t get any more of.

Innovations improving on something else should not be derided. They create massive value in both venture capital and within the economy at large.

Superhuman. Zoom. Evernote. The list goes on.

There are plenty of fantastic companies that have been built by making people’s life easier. The downside is that when user experience is your selling point, you are setting the bar you need to meet extremely high.

You can’t just be a bit better than incumbents, you need to blow them out of the water.

My favorite opportunities for improvement innovations are in large, slow-moving incumbent industries that have been slow to adopt new technologies. It is absolutely unreal the amount of our economy that still runs on faxes/paper/on-site databases/etc. If you can get people to change their ways (not a trivial task), these types of markets provide the opportunity to unlock tremendous value since the status quo is so poor.

New and Shiny

Disruptive innovations are the creation of something out of nothing. These are the Zero to One type of products or services that provide you with a new experience that you have never had before. These are the products that make Mr. Theil happy as a clam (where the heck does that phrase come from? A quick Google search for those of you curious).

They are the truly great innovations that create massive step-function improvements over the ways things used to be done.

At their core, disruptive innovations provide someone with an experience they weren’t able to have before. The name of the game is access. Increasing access to a good or service that a user has never had before.

One of my favorite examples is Venmo.

Venmo isn’t a simple improvement on a cash-based society, it is an enabling force function on people’s ability to forgo cash on a daily basis. It provided access to something (P2P payments) that people hadn’t had before.

Disruptive innovations are often the platforms that sustaining innovations are built on top of.

Ok, disruptive innovations sound great right? Easier said than done, unfortunately.

Disruptive innovations by definition are harder to build. There is no frame of reference by which they can be compared. No well-worn path that they can walk. They need to be generated a priori.

And then somehow transformed from an idea into a tangible product.

This is no easy feat. Even for the biggest and most well-resourced companies in the world.

Recent innovations in the smartphone market are largely predicated on increased camera capabilities. Amazon hasn’t developed anything truly game-changing since AWS.

Disruptive innovations are, in a sense, purer. They are the creation of something from nothing. Order from chaos.

But boy, are they tough acts to follow. It is nearly impossible to successfully build and deploy one disruptive innovation, much less a string of them.

One Innovation, Two Innovation. Red Innovation, Blue Innovation.

Ok so sustaining innovations improve an existing experience and disruptive innovations provide access to something totally new.

The reason this framework is important to understand is that it defines how you look at every company or opportunity.

Sustaining innovations are, at their core, user experience plays. When evaluating a sustaining innovation business, you will want to really dig in to understand exactly how the product or service works to understand if it is a meaningful enough improvement in performance to motivate a buying decision or investment of time from a customer.

Disruptive innovations are centered around access. What access to a good or experience do they provide that people never would have been able to experience previously? I like thinking of questions of access through the Jobs to be done framework. What job does the product or service provide users? How did they achieve that job before? If the innovation isn’t an improvement on an existing good or service, what product (or products) is it replacing? Understanding the system within which the innovative product is connected will help you to determine whether it is worthwhile or not.

Ok.

I have a confession to make. This post is somewhat of a false dichotomy. I made it sound like you either had to be one innovation or the other. Sustaining or disruptive. Improving on something new or creating something from nothing.

The truth is not nearly so black or white.

The truth is that the best innovations, the most impressive, most valuable, most world-changing technologies…

They have a little bit of both pillars of innovation within them.

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So You Want to be a Venture Capitalist? Required reading for any aspiring VC

Books are one of the best ways to learn about a topic.

Art. Science. Finance. History.

A book allows you to absorb in a few hours what it may have taken an author decades to learn.

In the past, I have talked about how I always try to be reading two books at any given time, one fantasy book and one non-fiction book.

In fantasy, I exercise my imagination.

In non-fiction, I exercise just about everything else.

It will come as no surprise to most of you that a significant portion of the non-fiction part of that experience takes the form of books directly, or at least adjacently, related to the world of venture capital. I regularly get asked for resources about the industry. I thought a good place to start would be some of my favorite books on (or around) the topic. I should note that this is in no way an exhaustive list, this is simply the books that have had the biggest impact on me, my career, and the way I think about venture capital.

Without further ado, my list of must-read VC books (Amazon affiliate links included):

The Hard Thing About Hard Things by Ben Horowitz

The book that started it all. During the summer after my junior year of college, I had the opportunity to intern at a venture capital firm. I knew I wanted to be an investor, but that was about as specific as I could get. On the first day of work that summer, my boss handed me a list of books to read (many of which are included below). The first book I read was The Hard Thing About Hard Things by Ben Horowitz. The rest, as they say, was history. This was the book that first kindled my love of all things venture capital, tech, and entrepreneurship. It is a fascinating look into the ups and downs (and downs and more downs and somehow eventually even greater ups?!) of a dot-com era startup. Come for the lessons on leadership and entrepreneurship, stay for the rap lyrics and no holds barred commentary on the startup world. An amazing opportunity to learn from a successful technology entrepreneur who just happened to found one of the world’s most successful venture capital firms as his second act. Casual.

Creative Capital by Spencer E. Ante

If you want to learn about something, what better place to start than its beginnings? Creative capital is the story of one man, Gorges Doriot, and the monumental impact he had on the world by founding what we know of today as the venture capital industry. Doriot was an unassuming Frenchman academic who answered his adopted country’s call-to-arms by serving in World War II. After the war, he went on to found the first venture capital firm. An enjoyable and enlightening book that takes you back to the metaphorical primordial ooze of what turned into the modern venture capital industry.

Venture Deals by Brad Feld and Jason Mendelson

The definitive must-read for anyone interested in learning about the nuts and bolts of how venture capital deals are structured. Brad Feld and Jason Mendelson are legendary venture capitalists in their own right, but their contribution to the industry in the form of Venture Deals is pretty tough to beat. If you are a VC, read it. If you want to be a VC, read it. If you are an entrepreneur trying to raise venture capital, read it twice. Venture Deals walks you through the ins and outs of deal terms and gives you a baseline understanding of what you can expect when hand shakes have been made and the lawyers start putting pen to paper. If you are going to be spending any time in or around this industry, you will be a step behind if you haven’t read Venture Deals.

Zero to One by Peter Thiel and Blake Masters

Zero to One is the ultimate place to start understanding the world view of one of the most successful technologists and investors in history. The book is about how to think differently and build truly innovative products the world needs, instead of simply inventing better and better mousetraps. In some circles, Peter Thiel may be derided at worst and thought cliche at best, but I for one couldn’t have a higher opinion of his technological and ideological contributions. Zero to One is one of those books you are either going to love or you are going to hate. You will either be inspired by Thiel’s unique perspective or you will find yourself diametrically opposed to it. And in some ways, that is precisely the point.

The Lean Startup by Eric Ries

Another seminal book in the world of technology and venture capital. If you have had any exposure to modern technology development or startup building, chances are that you have come across at least some of the ideas contained in this book. Reis’ ideas have become so pervasive in the world of startups that they have become completely core to how companies are built. There are no such things as “lean startups” simply because nearly all high growth technology companies are built using the lean methodology today. The book is not without its share of critics COUGHkeith raboisCOUGH, but it is a pillar of the modern technology ecosystem. At the end of the day, The Lean Startup is about tightening feedback loops, pushing decisions as close to problems as possible, and getting customer input before you start building something they don’t want. Which business couldn’t use some of those strategies?

Powerful by Patty McCord

You want to learn how to build a world-class organization? You start by reading this book. Patty McCord was the architect behind the culture of one of the world’s most effective and impactful modern companies. Patty joined Netflix during its early days after previously working at Reed Hastings's prior startup. She was instrumental in creating a culture that favored candor, transparency, and trust over the normal HR jibber-jabber of engagement, hierarchy, and performance plans. Her key insight: People want to work on something important while being surrounded by really smart people and they want to be treated like adults. Get that wrong and all the hand-holding, all-staff retreats, and ping pong tables in the world won’t save you. An incredible book that guides you through thinking about building a company culture that is fit to excel in the dynamism of the modern world. Be warned though, if you are reading this while finding yourself stuck at a company with its head in the sand, you will find yourself in for a world of frustration.

Creativity, Inc. by Ed Catmull and Amy Wallace

The story of Pixar. Does anything else need to be said? Creativity, Inc. takes you behind the curtain of one of the most exciting and fascinating companies ever. It gives you an inside look at the trials (so. many. trials.) and tribulations of one of the most beloved companies in the world. If you read it for the heartwarming stories about how to capture the imagination, you won’t be disappointed, but this book is so, so much more. Creativity, Inc. isn’t just the history of Pixar, it is a guidebook on how to create a company where innovation always comes first. Where envelopes are pushed and conflict is handled directly out in the open instead of through anonymous feedback inboxes. The placement of Creativity, Inc. next to Powerful is no coincidence. You will see many of the same themes about transparency, treating people like adults, and holding employees to the highest possible standard echoed across both books. It’s almost like they might be on to something…

Elon Musk by Ashlee Vance

Hero or villain. Sympathetic or despicable. Genius or idiot. The modern titan that is Elon Musk refuses to be defined by easily traced lines. You really have a chance to know the man you need to be one of the few he lets into his inner circle. For the rest of us, we read this fantastic biography by Ashlee Vance. Halfway through the book, I wanted nothing more than to be Elon. By the end of the book, I wanted nothing less. Elon Musk’s life is one that defies all attempts at shallow categorization and in some ways this book reads more like an action novel than a biography. If you want to become an expert at building innovative companies, you absolutely must take the time to read about the life of the world’s most innovative company builder.

Loonshots by Safi Bahcall

One of my favorite books that I have read in recent years and one that, if you know me, I have probably recommended to you multiple times. Safi Bahcall excellently examines why it is that some companies are able to innovate and others aren’t. Why some are able to nurture the crazy ideas that change the world and others bury their most promising talent under paperwork and bureaucracy. So many non-fiction books follow the trope of “Here is my idea and here are 27 chapters that include slightly differing examples.” Loonshots is among the minority that truly break the mold and I found myself on the edge of my seat throughout. Throughout the book, Bahcall examines some of the very companies and people discussed on this very list and why their companies were able to succeed where competitors didn’t. I’ll give you a hint: It’s all structure.

Have you read any of these books? Are there any other must-reads for the next generation of venture capitalist? Let me know in the comments or on Twitter.

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Gaming will Eat the World

In 2011, Marc Andreessen wrote one of the seminal thought pieces in the history of Venture Capital. Why Software is Eating the World basically was the rubberstamp that the age of the internet had truly arrived. Going back and reading it today, it almost reads as quaint. The idea that every company is a tech company is so widely accepted today, that it is hard to believe that under a decade ago this was a novel insight.

I am not Marc Andreessen. And I never will be.

He is one of the forefathers of the internet in addition to being the founder of one of the world’s top venture capital firms. So far, the only things I ever founded are this blog and the school of fashion consisting entirely of Polos + Gym Shorts.

I don’t expect this post to ever reach the same rarified air that his did. But I do believe one day a post on the same topic might.

And that is because, though gaming isn’t eating the world today,

I believe that it one day will.

eHype

Getting excited about gaming and esports (not eSports, I have gotten flammed for that before so watch out) is not exactly a revelation these days. Every investor and their great grandmother’s aunt Judithe is paying attention to the space. The larger gaming market is going to do about $152B in revenue this year and that figure is expected to grow to $180B by 2021. Compare that to the traditional sports market which is worth in the neighborhood of $500B (but has about a 4,000-year head start) and you can start to see why people like Judithe are putting her retirement money into a Croatian GS: GO team. More people watch videogame streams any given day than tune in to the NFL. It is a massive and quickly growing industry.

All that is great, but I’m not telling you anything new.

I don’t want to talk about how gaming is the future of entertainment.

I want to talk about how gaming is the future of EVERYTHING.

I believe that gaming and esports will become so much more than simply entertainment. As I pointed out above,it is an interesting opportunity worth investing in, in and of itself, but honestly, I think people are sleeping on just how big gaming really will be.

You had one Job

You know me. Big Future of Work guy. Gaming is a big reason for that. Gaming is going to create countless jobs in the years to come.

There will be the obvious jobs that have been part of the industry for some time now. Game development/marketing/ etc.

Then there will be the modern gaming jobs.

Esports athletes. Tournament casters. Esport reporters and news personalities. Video game streamers. These are already here and not only can you make a pretty penny from them, but they are the new aspirational careers for Gen Z.

What I am really intrigued by is the next wave of jobs. New technologies like Tokenization create the potential for creatives to buy and sell their digital wares within the economies of games themselves. Selling skins for characters and items is nothing new, that’s how many game companies make the bulk of their revenue off of free-to-play games (the most expensive CS:GO skin was sold for over $60K). A16Z had a really interesting podcast recently on the future of gaming monetization. New strategies to incent early adopters, creatives, and entrepreneurs could allow people to support themselves off of creating and selling digital goods. Imagine Etsy but for digital goods to be displayed on digital avatars. This is the way the world is going and it will be a massive opportunity for gamers and creatives alike to build income through jobs that have never existed before. And the best part is that they could do it from anywhere on earth.

Gamify me, Captain

Not only will gaming grow in new and unexpected ways, but I predict that it will start to permeate other aspects of our world. Many of the cutting edge technologies of our day like AI and high-end processors started off in the gaming world, it is not a stretch to believe that other aspects of gaming will make the jump into other industry verticals.

Today we are currently experiencing the consumerization of the enterprise stack with technologies like Slack and Zoom. Tomorrow we will see the gamification of the enterprise stack.

Generally, when people hear the term ‘gamification’ they think of stickers or leader boards. Really what gamification is is the creation of compelling incentive structures that re-frame something mundane in a compelling way. This could mean taking advantage of people’s competitive nature to try to perform better against their coworkers. Or adding a layer of abstraction to create user enjoyment where there wasn’t one before. There are already examples of teams being effectively trained through gamified modules instead of the traditional boring training seminars. I expect that this will only continue to grow and touch more aspects of people’s jobs. It is much less expensive to keep a current employee than to try to get a new one. Gamification can be powerful tools borrowed from the world of gaming to drive increased retention and employee engagement.

Of course, work is just one of many aspects where we will see a growing influence of gamification. Relationships, education, and healthcare are just a few of the aspects of our life that would stand to benefit from utilizing some of the tools and strategies developed by the world of gaming. One of the trends that I am most excited to watch is the improving UX of work. The adage that “work is supposed to feel like work” is quickly growing extinct. Today billion-dollar companies are being built by removing friction from work and simply making things like collaboration and communication not suck. I believe that tomorrow we will see billion dollar companies built to make work actually fun.

Here Today, Game Tomorrow

If you aren’t paying attention to the world of gaming and esports, you are sleeping at the wheel. Gaming is no longer for kids or the counter culture. It is a multi-billion dollar industry that is not only here to stay, but one that will continue to seep into more and more aspects of our everyday life.

My focus is not on the business as it is today, but on all that it could become in the future.

See you at the Auction House.

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Things are Looping Up

Life is about loops.

Sometimes it is easy to make the assumption that life is a series of discrete events and choices. We believe that life is like a stone skipping crisply across the surface of a lake. There is a singular point of contact and then we are just along for the ride until the next point of contact.

This assumption is incorrect.

Life is about loops. The iterative processes and actions that define our life, behavior, and businesses.

Things are rarely as simple as action and reaction. This may occur in science experiments that take place in a closed system. Life is more often a series of interconnected systems where the outcomes have some level of impact upon the next impact.

Think about driving. An action that seems like second nature to most of us is actually a complex loop involving multiple neural and physical systems. You are only able to drive because of the short feedback loops between these systems. Moving the steering wheel causes the car to change direction. This feedback is relatively quick and direct which allows your brain to either A) keep turning or B) stop turning.

A key lesson to be learned from driving and applied widely across our personal and professional lives is that a key to operating a system successfully is to keep feedback loops short and direct.

Shoulda, woulda, OODA

A lot of the modern thinking around loops and systems started by Air Force Colonel John Boyd. Boyd developed a concept called the OODA loop that is still widely utilized in military and business strategy today. It is a decision-making framework whereby decisions are made by constantly cycling through the loop of Observe Orient Decide Act. In aerial dogfighting between fighter jets, the fastest or most heavily armored plane is not who wins, it is the pilot who can react most quickly to changes in circumstances. Utilizing the OODA loop methodology, pilots can cycle through decision trees extremely quickly. Less focus is placed on making the correct decision as is focused on making decisions quickly, examining the results, re-orientating accordingly, and then taking action again.

Sound familiar?

OODA loops and the underlying theory that agility overcomes superior resources serve as the bedrock for modern business strategy and technological development. (For a great podcast and loops about in business, check out this episode of Invest Like The Best)

Why startups win

Agile software development and the lean startup movement are two examples of this kind of thinking. In both cases, the lengths of feedback loops are minimized and decision making is pushed as close to the customer as possible. Resources are front-loaded and experiments are run and re-run so that teams can get feedback quickly and make adjustments as necessary.

This is why startups can go toe to toe against massive incumbents and win. Usually, success isn't a case of simply throwing resources at a problem. Startups beat incumbents because they can act and react so much quicker. By the time that a large incumbent has gotten the ship turned in the right direction, the startup already has such a large headstart that it has captured the hearts and minds of the consumer.

Issues occur when feedback loops are too long. A prime example of this is diet and exercise. We all know eating healthy and exercising is good for us. So why don’t more of us do it? The answer is that the feedback loops are long with these activities. You may not see results from your effort for weeks or months. It is easy to get discouraged while the immediate gratification of Grandma’s chocolate cake is immediately available.

Now, this is a massive issue for my industry.

Why the long pace?

Venture Capital is notorious for having extremely long feedback loops. Those startups that are successful enough to have a positive outcome will often spend 5 to 10 years getting there. And this trend is only elongating as companies are staying private for longer. As such, it will take an EXTREMELY long time to figure out whether your decision to invest in one company or another was the right one. Because the feedback loops are so long, it makes it almost impossible to alter your strategy and adjust.

So how do you deal with these long feedback loops? That is the challenge. Here are some ideas I have come up with.

1) Focus on building a repeatable process

Ahh the classic Erik Berg Process suggestion. You knew it was coming. I’m a big process guy. What can I say? When feedback loops are long, the importance of having a good, repeatable process is magnified. Notice what I said. Simply having a process isn’t enough. First, it has to be a good process. Having a bad process is worse than having no process at all because it will likely either reinforce poor decisions or give you false-confidence about your decisions. Second, it has to be a repeatable process. Your perfect process will do you no good unless it is flexible enough to be applied across different opportunities. It also will do you no good if the process is so cumbersome and painful that you struggle to get other stakeholders, entrepreneurs in my case, to get through it. Having a bad process in venture opens you up for MASSIVE issues. You may find yourself with a due diligence process that is so painfully slow and cumbersome, you aren’t flexible enough to be opportunistic on good deals and, even worse, you may experience adverse selection bias as the best entrepreneurs are unwilling to put up with jumping through your hoops.

What does that good process look like in Venture? Unfortunately, there isn’t a one-size-fits-all solution. What works with one segment or geography may not work for another. But it is something that you should spend significant time and energy being thoughtful about. Don’t do things just to tick a box on your checklist, be purposeful and make sure every step in your process drives tangible value for either you or the entrepreneur (ideally both).

2) Document your decisions

With long feedback loops, it is almost impossible to remember the set of facts or thoughts around a decision months or years later. This makes documentation of the utmost importance. If you won’t know whether a decision was successful or not until years later, you need to have enough documentation to be able to come back to it and review what was going through your mind at the time and how that mapped against how things eventually would play out. Were your assumptions correct? Did you anticipate all the exogenous threats? Was your understanding of internal dynamics accurate in hindsight?

You won’t be able to ask yourself the right questions, much less answer them, unless you are documenting decisions effectively. Note that this does NOT mean that you need to write a novel recounting the most minute aspects of every decision. Remember what I said about having an efficient process? This is definitely a case where more does not equal better. How does the saying go? “It was too hard to write you a letter on one page so I wrote it on four.” As in all other aspects of communication, decision documentation should strive for clarity and conciseness. It is better to write one accurate and poignant page than it is to write twelve that are not. (This is also true in blogging and something that I am desperately trying to get better at.)

3) Audit yourself

Hey, remember when I said that it was important to document your decisions? Believe it or not, that is very much predicated on your willingness to go back and actually look back at your decisions. It is amazing how few people and firms do this. More often the self-analysis only goes as far as: “Decision right = skill. Decision wrong = bad luck”.

Have the courage to look in the mirror at all your mistakes. Go back and try to understand where your head was at the time. Use your clear and concise documentation to figure out where you went wrong and how you can react better in the future. The reasons people don’t do this are two-fold. One, people are lazy and this takes time. Sorry, you are just going to have to suck this one up if you ever want to improve. Two, people don’t like admitting they were at fault for their errors. This intellectual humility is what sets the best from the rest.

4) Measure using an intermittent proxy

If you won’t know if something is successful for a long time, try to find indicators with which to orientate yourself even before something is fully baked. Look at the exercise example I used previously. If you focus on how you look in the mirror, it will be extremely hard to stay motivated. If you instead focus on the energy you feel after a workout or the weights/reps you were able to lift, you will have a much easier time staying motivated. You will see progress all along the way instead of only once you reach your destination.

William at Frontline Ventures has an excellent article detailing how he and the Frontline team utilized the intermittent proxy measure of future financings to measure a company’s success. It isn’t a perfect measure (just ask WeWork), but it was good enough to give a directional indication of whether they were on the same track or not. Based on the data they gathered, they realized that they were missing out on deals because their process was too slow. Accordingly, they adjusted their process to be more nimble so they wouldn’t continue to fall into this pitfall.

Staying in the Loop

Life is about loops.

Observe.

Orientate.

Decide.

Act.

Move nimbly and purposefully. Make sure to pick your head up often enough to adjust your direction as necessary. Design good processes that you can repeat scalably and effectively.

Remember: David beat Goliath.

Speed wins and to be fast you need to be able to design tight feedback loops.

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Entrepreneur's Table

For something that captures so many headlines and national attention, there sure isn’t a ton of entertainment revolving around startups or entrepreneurship. For someone as obsessed with the topic as I am, you have to get a bit creative.

I’ve found my favorite content about entrepreneurship in an unexpected place.

Cooking.

Specifically shows like Chef’s Table that do a deep dive into a chef’s history and the journey that brought them to build the world-class restaurants they preside over today. I believe there is a lot that we can learn about entrepreneurship from cooking and from chefs that are at the top of their own game of creating something new.

Entrepreneur de Cuisine

I love the model for entrepreneurship that a kitchen provides.

In the kitchen, the head chef is the chief facilitator. He sets the tone. He designs the menu. He may even put the finishing touches on certain dishes, but if you peek into the top kitchens in the world, you will find that the chef spends little time doing much of the actual cooking itself. It simply isn’t possible in any restaurant with more than a few tables. Instead, there is a horde of more junior chefs and assistants that take care of all necessary aspects of creating a great dish.

The chef will orchestrate the incredibly complex process of coordinating multiple dishes so that everything comes out at exactly the same time. His role is vital, but it is not sufficient for success. Even the best chef in the world will fail if he doesn’t have a team that can execute and works well together.

A founder is not so different. Even with all the talent in the world and an amazing idea, entrepreneurship at any sort of meaningful scale is a team sport. If a leader doesn’t create an environment where their team can be successful, their venture will be as doomed as the most dysfunctional kitchen. My wife and I recently watched the movie Burnt, starring Bradley Cooper as a troubled chef working his way towards the redemption of his third Michelin star. Without spoiling too much, the main character only begins to attain success when he learns to trust the other chefs on his team and stops trying to do everything himself.

Founders take note. Your success will depend every bit as much on your ability to manage, lead, and create an environment where the best and brightest can flourish as it will on your talent, grit, or world-changing ideas.

If changing the world was easy, everyone would do it

Something that becomes abundantly clear for anyone who spends much time learning about the culinary arts is just how brutally difficult it is to build a restaurant that truly makes a significant impact. Chefs train their entire lives for a shot and every single successful chef will have their fair share of scars and near-death experiences.

The path to success is just so brutally difficult.

The hardest part of all?

You can never rest on your laurels. The second that you stop innovating, creating, and moving your craft forward, the world will pass you by. The thing I am most consistently amazed by while learning about the world’s greatest chefs is just how relentless their drive and passion is. They never give up and they never stop pushing the envelope forward. If they did, they would no longer be great. They are only able to do this by creating from a place of genuine Instinctual Originality.

These observations ring every bit as true in kitchens as they do in the hip co-working spaces or innovation centers that startups call home. Entrepreneurship isn’t easy. If it was, everyone would do it. It is a daily knife fight where if you let your guard down for one second, someone younger, faster, and hungrier will come along to replace you.

Companies need to constantly reinvent the wheel to stay relevant. It takes all the running you can do, just to keep in the same place.

Sears. Polaroid. Xerox. Blackberry. Nokia.

Each at some point was absolutely on top of the world.

And then they stopped moving their craft forward.

And the world passed them by.

Entrepreneurship for all

The last thing I love about examining entrepreneurship through the lens of cooking is that it expands the definition of what entrepreneurship could look like. In the startup tech world, I believe we too often paint entrepreneurship into this little box that we like to call “Venture Fundable”. Look, I will be the first to tell you that venture capital is not for everyone. To conflate a company’s funding mechanism with its identity is dangerous at worst and short-sighted at best. Just because the venture model is not right for someone or their business does not make them any less of an entrepreneur!

In a recent post, I called startups Churches of Entrepreneurship and claimed that the only real requirement for a company to be a startup is that the Spirit of Entrepreneurship resides within it.

Restaurants are a great example of the truth in that. At the highest level, a chef uses their restaurant to create things the world has never seen before. They utilize familiar ingredients and techniques bring something into being that is completely new.

If that isn’t entrepreneurship, I don’t know what is.

Acknowledging the entrepreneurship inherent in world-class cooking opens your eyes to see the myriad of other businesses and entrepreneurs that capture this same spirit. Just because a company doesn’t look like a startup doesn’t mean that it is any less entrepreneurial. Viewed through this lens I believe that the question must be asked of whether we are doing enough as investors. Is our current conception about how to build businesses broad enough? Maybe there are gaps out there? I have found myself increasingly fascinated by the accelerating trend of permanent capital and how it might be applied to the world of tech startups. If fund structures are a prime source for incentive misalignment, what happens when you get rid of them?

Anyways, these are questions for another day.

Founders, learn the lessons that chefs can teach.

Build a team that you can trust to get the job done.

Innovate by creating from a place of Instinctual Originality.

Acknowledge that there is more to entrepreneurship than twenty-somethings in thick-rimmed glasses and hoodies drinking nitro cold brew and discussing the finer points of C++.

And most of all…

Keep on cooking.

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Why Brushing your Teeth is the Secret to Success in Life and Startups

Brushing your teeth is the secret to being successful in life and entrepreneurship. In this post, I am going to tell you why.

Brushing your teeth is not difficult. It is something we all do. But how many people do it the right way? It’s recommended that you brush your teeth twice a day, every day. There is proper form and improper form. I am sure some kinds of toothpaste are better than others, but admittedly, it can be difficult distinguishing which toothpastes are the best given that each and every one is recommended by 9 out of 10 dentists (I hope I never come across the 10th dentist. Must be a terribly negative person).

The key to dental health is consistency. You need to put in consistent effort day in and day out. Brushing your teeth for an hour at a time will not allow you to skip brushing your teeth for the next month.

Now, as much as I appreciate the importance of dental hygiene, this isn’t really a post about brushing your teeth. This is a post about life and business, two areas where we all too often brush for an hour once a month.

The key to success in life is consistent application of effort. This is true for everything from relationships and startups, to exercise and reading. Very rarely will you find yourself in situations where a single herculean effort is all that stands between success and failure. Much more often, slow and steady really does win the race.

When I was working at Carlyle the head of my team had a favorite phrase, “Do your day job.” It means taking care of the fundamentals of your role and making sure that you excel on the little things. Because if you don’t, it tends to be a slippery slope.

I am a big Broncos fan and our newest coach, Vic Fangio, put it well in his introductory press conference. When asked to explain his famous “death by inches” mantra he said:

“If you're running a meeting, whether it be a team meeting, offense or defense meeting, a position coach meeting and a player walks in, say 30 seconds late, 45 seconds late -- that act in it of itself really has no impact on whether you're going to win or lose that week.

"But if you let it slide, the next day there's two or three guys late or it went from 30 seconds to two minutes. It causes an avalanche of problems. That's 'death by inches.'”

The little things matter. Showing up consistently and putting in the effort is what makes the difference between success and failure.

No place is this truer than with startups.

On the startup battlefield, wars are not won in a decisive moment. Startup successes are a culmination of years of executing on the little things and consistently making progress. In tech, that steady progress tends to grow exponentially. This fact is sometimes hard to see among twitter hype threads and Techcrunch headlines, but the saying “an overnight success, 10 years in the making” really does ring true.

Execution is so, so key. A VC I really respect once told me that he would take a team that can execute in a small market over a team that can’t in a big market every single day of the week. Execution really is what sets apart A+ teams from the rest, and in venture you need those A+ teams to get the outcomes that justify the whole model.

You can bet that this hyper-focus on execution is something that VCs pay attention to.

A great example of this is due diligence. Due diligence is a necessary, but slow, and sometimes painful, process for everyone involved. A secret of venture capital that not many may know is that how an entrepreneur conducts themselves during due diligence, is just as big of a signal about whether the startup will be successful as anything else. An entrepreneur that is organized, prompt, respectful, and who has a masterful understanding of the ins and outs of their business during due diligence will likely exhibit that same attention-to-detail and execution mastery when it comes to running their business. Entrepreneurs who are difficult to deal with and get easily frustrated or are dodgy about direct questions about the business are unknowingly flying a pretty big red flag for all investors involved.

So now that we have agreed that consistent effort is the key to success, what is the best way to go about applying that effort?

In the immortal words of Joel Embidd:

“Trust the process”

The best way that you can ensure that you are properly applying just the right amount of force and using the proper technique when brushing your way through life is to build a process and stick to it. Our culture is far too outcome oriented. We operate on a last-in-first-out basis and optimize based on the outcomes we see, even when those outcomes are often nothing more than luck. If you flip a coin 4 times and get tails every time, you would not conclude that a coin will always land on tails. And yet, far too often our personal and professional actions are the equivalent of flipping a coin once, and assuming that every other time we ever flip a coin we will get the same result.

I have had a big focus on process ever since reading the book Chop Wood, Carry Water by Joshua Medcalf. I can honestly say this book has had a bigger impact on my life than any other. The subtitle says it all, “How to fall in love with the process of becoming great.” I highly recommend this book to any looking to lead a more process-oriented life.

My advice for you:

Focus on doing the little things right.

Fall in love with the process of becoming great. If you are able to truly do this, the outcomes will take care of themselves.

Maintain consistent effort instead of bursts of hyperactivity.

Take care of things like your health, your body, your relationships, your spirituality, and your mindset that only need a little bit of time each day to maintain and yet, are all too often neglected. These are things that are vitally important to your success in life, and yet not one of these things can be maintained by brushing for an hour once a month.

And speaking of.

Brush daily with consistent application of effort.

You’ll be surprised where you end up.

A Slice of Humble Pie

Photo by Irina on Unsplash

This may come as a shock to you, but I sometimes have a bit of an ego problem. Yes, yes, I know. Hard to believe the guy who likes to hear himself talk so much he puts it into written word and blasts it off to the interwebs on a weekly basis has an ego problem.

Point is, I think I am awesome.

And I think that this is generally a good thing. But sometimes it is a bad thing.

Following?

I have a lot of self-confidence. I truly believe that I can achieve anything I set my mind to. I am someone that likes to throw himself head first into whatever roadblocks or hurdles life puts in my way. I am a big believer in the idea that if you don’t like something that is going on in your life, stop making excuses for it and take the necessary steps to change it.

I think this confidence is good. But sometimes it’s bad.

Sometimes I can get a little bit ahead of my skiis and fall down too much on the side of “better to ask for forgiveness than permission.” This approach works well in some settings, and significantly less so in others. One of my biggest weaknesses, my tendency to de-value the accomplishments of others, stems directly from this overconfidence and the related insecurities it can cause.

Another way that this confidence can sometimes manifest itself is through eagerness to take on more. I am supremely confident in my ability to upskill and do what I need to take on more and more, but sometimes this can be at odds with my choice of career.

Venture capital is not a fire-from-the-hip industry. Or at least, I believe that it is not when done well.

VC is an apprenticeship industry. It takes time to learn the craft. Sometimes that is hard for me to remember. I want to do more and take on more responsibility and have opinions on every company and every sector. But I have been doing this for less than a year. And I have a lot still to learn.

This week I got a reminder of that after hearing more experienced investors than myself talk about board governance. What a huge responsibility it is and all the perils that responsibility entails if its gravity is not appreciated.

After hearing about their trials and tribulations on various boards throughout their career, it really struck me how much more I have to learn.

I am so excited to be in this industry.

I love working with entrepreneurs and helping them build great companies.

But it is important to keep in mind that I don’t know everything. That this industry is a craft and like all crafts it requires reps and experience before you can become a master. Rome was not built with enthusiasm alone.

I write this post not because I am discouraged. Quite the opposite actually.

When I think about how relatively inexperienced I am and how much I still have to learn, I am not demoralized.

I am not daunted.

I am not intimidated or frustrated.

Instead, I am excited to get back to work and keep learning. To keep beating on my craft.

I think that is a pretty good sign.

Why?

In our day and age there is a lot of airtime and energy spent on the “What”. What people are doing in their career. What is going on with the weather (hint: if its early March in Columbus it probably sucks). What movie won the Oscar. What outrageous remarks politicians made yesterday. What is important. What has its place, but I want to use this post to talk about the “Why”.

Because I think Why is very important.

Why is what gets you through the cold nights when your back is up against the wall. Why sets successful people apart from unsuccessful people. And Why sets world-changing people apart from successful people.

Why is important, but it is often overlooked.

Your Why is what motivates you. It’s the reason you are doing or acting the way you are. Too often we stop at the What and never ask about the Why.

There are two instances I see regularly where I think that people need to take some time to figure out their Why.

The first is people trying to break into venture capital. Believe my, I get it. It is a cool job. You don’t have to tell me twice. But there are a lot of cool jobs out there. I think people too often get sucked in by the glitz and glam of working with big name brands in cutting edge industries. As awesome as working in venture is, I can assure you that it is not as glamorous as it appears from the outside looking in (most things aren’t). Behind the scenes, things are complicated, messy, and every deal is closed with blood, sweat, and LOTS AND LOTS of paperwork. There are also better (and easier) ways to make money (especially in finance) if that is what motivates you.

The one thing I can tell you about getting in to venture is that it is hard. Trust me. Firms are often top-heavy and rarely hire outside of fund cycles. And there is always an abundance of people looking to get in to the industry. It can be done, but it isn’t easy to get a job, and once you do, it isn’t as glamorous as it looks on tv. Who is a good fit for VC?

If your Why is that you obsess over being a part of building things that will change the world, venture might be a fit for you.

If your Why is a deep desire to learn by constantly diving headlong into industries you didn’t even know existed the day before, venture might be a fit for you.

If your Why is building relationships with people doing exciting things and providing them with value without any strings attached or expectation of return, venture might be a fit for you.

If you want to work in a sexy industry and become rich, I’d look elsewhere.

The second area where I think the importance of Why is severely understated is when evaluating founders. I have talked about founder motivation before, but I really believe its importance cannot be overstated. If you thought venture capital was hard, wait until you see entrepreneurship. I like Brent Beshore’s description of entrepreneurship as a “daily knife fight”.

I, like many others, watched movies like The Social Network and read books about the great tech titans and thought to myself “hey I could do that.”

After almost a year working as a venture capital investor, my tune has changed to “hey with a great idea and a lot of super smart people around me, I could do that. But would I ever want to?”

I have seen first hand how hard company building is. And I sit in the privileged seats. I get to grab my 6-1/4” 7.5oz heavy duty utility knife (I spent a summer as a knife salesmen before college and still geek out about kitchen cutlery) and hop into the trenches every day. But when my day is done, I climb back out and get to set my knife in a regulation bamboo knife block (a well sheathed knife is a safe knife).

Entrepreneurs are not so lucky.

Their whole life is the trenches. If their company is successful, they could spend more than 10 years down there before they get a real breather. If they aren’t so lucky, their stay will likely be much shorter.

Kitchen cutlery brawl metaphors aside, building something out of nothing is never easy. It requires 100% commitment. There are going to be times where nothing is working. There are going to be times where things are working but a seemingly “better” opportunity comes along.

A lot of entrepreneurs like being entrepreneurs more than they like being founders.

They like the accolades and admiration more than the accountability and the brutal decisions.

They like the business cards more than the business.

Rare is the entrepreneur that is able to see it through to the finish line.

And every single one of them has a Why that gives them a fire to preserver. Whenever I meet an entrepreneur, I am looking for that Why. I want to see a founder starting a business because they think that if they don’t build this company, no one else will.

And the world needs this company too much to risk that happening.

The Globalization of Venture Capital: Is United States Innovation Falling Behind?

Photo by NASA on Unsplash

There was a story doing the rounds this week about a new Center for American Entrepreneurship study about the globalization of Venture Capital. CAE’s study showed that the United States’ share of global venture capital investment had fallen 20% in the last five years and 50% in the last 25 years. These statistics were framed with alarming rhetoric from both the tech media and the Center for American Entrepreneurship.

VentureBeat stated that this report should give Americans “cause for concern.”

Richard Florida, one of the leaders of the study, stated that “[he] thinks for the first time, the U.S. is truly in trouble.”

Much of the discussion around this report has represented similarly disheartening views of the outlook for innovation in the United States. Media sites and commentators have worried over America’s loss of “edge,” and forewarned of dark days ahead.

My response:

Are we really so insecure that our place in the global order is threatened by the United States only receiving HALF of the globe’s capital invested into innovation?

The United States represents approximately 4% of the world’s population. By any objective viewpoint we are significantly punching above our weight to receive over 12x our share of the world’s risk capital.

But Erik, what about the relative decrease in our portion of venture capital investments? Shouldn’t we be worried about investment into our country decreasing by 20% in 5 years?

Short answer: No.

Long Answer: This is why Intro to Statistics is required coursework. Venture capital investing into the United States has not decreased by 20%, the share of global venture capital received by US-based companies has decreased by 20%. The difference is incredibly important.

Via NVCA. As of June 30, 2018.

2018 is, in fact, poised to be the largest year for venture capital investment into US startups since the Dotcom crash. At the halfway point of 2018, about 3/4 of 2017’s total investment value has been deployed. This means that we are on pace for a potentially record breaking year (for discussion of whether this should even be something to be celebrated or not, check out last week’s post.) Yes, our piece of the overall venture capital pie is shrinking, but the overall size of the pie is magnitudes greater than it used to be. That is what matters most. Innovation is not a zero sum game, our ability to innovate is not hampered by China’s or India’s. In fact, it is the reverse. Increasing levels of global innovation create network effects which the United States can take advantage of to propel us even further.

It is short sighted and, frankly, close-minded to believe that the United States has some sort of divine right to be the innovation capital of the world. Innovation, by its very nature, is meritocratic. The United States’ shrinking share of venture capital dollars should be met with fanfare, not rumors of our impending demise. The rest of the world is catching up, and that can only be a good thing. More innovation means more impactful technologies that can improve people’s lives for the better. Where that innovation occurs is far less important than the fact that it is occurring, and if we are being honest with ourselves, there are many parts of the world that need ground-breaking innovation a lot more than the United States needs a new social media app.

We are not facing an innovation crisis in the United States. We are the pioneer of modern technological innovation and the rest of the world is starting to build up their own capabilities on the back of 80 years of the United States writing the playbook.

This is a good thing.

For everyone.

To suggest otherwise is both alarmist and misguided.

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How I got a job in Venture Capital

Photo by Nick Jio on Unsplash

Ever since I started in my new role as an Analyst at Rev1 Ventures, I have been intending to write a post detailing my experience trying to break into the world of venture capital. VC is a notoriously difficult sector to make your way in to, especially junior roles for someone only a couple years out of college. A common refrain that you will hear during informational interviews is that there are more professional baseball players than there are venture capitalists. This fact may be overblown (and certainly compares apples to oranges), but it does demonstrate just how difficult it can be to get into the field. Many arguments can be made as to exactly why this is, but at the end of the day, it boils down to a lot of people vying for relatively few open positions. 

I was able to make the transition because I made a plan and executed on that plan. There are things I would've done differently, but I think the fact that I was able to make it to final round interviews at 4 different firms demonstrates that my planning was effective.

One of the first things you learn as you start exploring a career path in VC is that the world of venture is filled with people that are willing to take time to help someone along their journey. Hopefully, some of the insights I have learned can be a resource for other people trying to make their way into the big leagues. 

Fake it till you make it 

The biggest piece of advice I can give to someone trying to get into the world of venture capital, and the place where I think I did the best job in my process, is to fake it till you make it. This means that even before you start working in VC, you should start acting like a venture capitalist. Working in private equity at The Carlyle Group, I knew I was in a related field and at a blue-chip firm that would help get my foot in the door (which it definitely did, but I was on my own past that point), but I also knew that my day-to-day at Carlyle was nothing like what my day-to-day would be like working at a venture capital firm. At Carlyle, I was dealing with billion-dollar transactions that involved decades-old companies, compared to early-stage venture capital where companies may or may not even have a product in the market and any financial records are slim at best. This meant that I had to take it upon myself to demonstrate that I had what it took to be successful in venture. 

You are reading the first way I did this. I started this blog for a variety of different reasons, but one of the main ones was so that I could build a "thought-record" for recruiting firms to look at and see that I had put time and effort into thinking critically about startups and the tech ecosystem. My write-ups on specific startups and my sector thesis deep-dives also gave me something to talk about in interviews. This may seem contrived, but if there is one piece of advice you take away from this post, START A BLOG. To be fair, it doesn't have to be a blog per se, but if you are interested in getting into the world of investing in startups, you need to start creating some sort of content that demonstrates you have spent time thinking critically about, you guessed it, investing in startups. (sidenote: I think this advice is applicable for anyone looking to change fields. Get out there and start creating content around where you want to GO, not where you are right now) I chose to blog because I had some limited (and angst-ridden) experience blogging in my high school days, I wanted to get better at writing, and, as a fan of many blogs, I felt like I had a good idea for what other readers would enjoy. Content creation takes work and commitment. No doubt about it. Before you toss aside this idea as not being worth the effort, you should know that the other analyst that I work alongside at Rev1 also started a blog as a way to help get into the industry. Must just be a coincidence... 

The other way that I started acting like a VC was through angel investing. Now, I do not have the capital to qualify as an accredited investor (generally a requirement for angel investing), but I am fortunate enough that my father does and was interested in trying something new (he is in private equity, so investing isn't new, but investing in tech startups was). We read Angel (a book about angel investing by one of the best angels in the business), joined angel syndicates on sites like AngelList and Funder's Club, and were off to the races. I helped my dad analyze startup investment opportunities and was able to practice doing some of the things I now do in my job such as writing investment memos, developing front-end deal flow, and portfolio management. This experience of actually practicing some of the skills that I hoped to one day be performing professionally was absolutely invaluable. It gave me something to talk about in interviews and I believe it helped me to stand apart from the crowd of other would-be venture capitalists. I was lucky that I was able to get some exposure to this world by working with my dad, but you can still get this practice without a connection to an accredited investor. Sites like SeedInvest and WeFunder offer even unaccredited investors opportunities to invest in startups. You actually don't even need to make investments. You can sign up for these sites and just look at deals without making any actual investments. Maybe start a shadow portfolio where you track what investments you would've made and how they performed. If you see something especially promising that fits a firm's investment thesis, send it to the attention of a VC you have met through networking. It might not be something they invest in, but if it is thoughtful and fits their firm's investment guidelines, I have never met a VC that wouldn't be impressed. 

Whenever you are trying to make a career change into a field different from where you have tangible experience, you need to take it upon yourself to find a way to get exposure outside of your normal working hours. This is especially true in as competitive and nuanced a field as venture. Come up with a way to demonstrate that you are being thoughtful about whatever space you are interested in jumping into. Go to industry-specific events and meetups and connect with people that are actually doing the work you want to be doing. However you want to approach it, faking it till you make it will give you a leg up on landing the role you want. 

Take advantage of the resources that are out there

There are a ton of excellent resources on venture capital that you should be immersing yourself in if you want to work in the space. Below I have listed a few of my favorites. 

Podcasts

20 Minute VC - An awesome and bite-sized way to get smarter on the "wonderful world of venture capital". In each episode, Harry Stebbings interviews a venture capital investor or startup founder in about twenty minutes. I really enjoy this podcast and Harry is a super nice guy that was kind enough to be a resource to me during my job search. 

Invest Like The Best - This podcast hosted by Patrick O'Shaughnessy is my absolute favorite podcast. It covers a wide variety of topics including investing of all types, as well as ways to lead a better and more productive life. The podcasts on venture capital are a great resource, but my favorite episodes are the ones that have nothing to do with investing at all. Patrick also has done a great intro to crypto series that is an awesome first step into that world.

How I Built This - This NPR podcast with Guy Raz is a super interesting and entertaining exploration about how entrepreneurs and business leaders built the companies they are famous for. Not every company explored was a venture-backed startup, but I have found interesting insights about the entrepreneurial journey in every single episode. 

a16z Podcast - Andreessen Horowitz's podcast is my favorite firm-sponsored podcast. They mostly showcase topic or sector deep dives from various a16z speaker events. Definitely a great way to get smarter on specific sectors.  

Angel: The Podcast - Jason Calacanis' podcast accompaniment to his previously-mentioned book on angel investing. Excellent interviews with both angel and institutional venture capital investors. Jason hasn't done an episode of Angel in a while, but he is also the host of This Week In Startups which is very good. 

Websites

avc.com - The definitive venture capital blog by the grandmaster of venture capital, Fred Wilson. Fred publishes a new blog every single day and is a surefire source of wisdom about both life and investing.

John Gannon's Blog - The go-to source for anyone trying to break into venture capital. John's site lists helpful resources as well as a constantly updated source of open positions at venture capital firms. 

TechCrunch - Cliche I know, but if TechCrunch is my favorite of the big tech news sites (others being VentureBeat, Recode, Hacker Noon etc) and somewhere I check at least once a day to get a view of what is going on in the ecosystem at large. 

Feld Thoughts - Brad Feld of Foundry Group is another one of the big-name investors in the space and his blog is a great resource on the ecosystem. He has also written some must-read books for anyone interested in venture investing like Venture Deals. 

Newsletters

StrictlyVC - A venture-only daily newsletter that covers the biggest stories and latest investments in venture. 

Axios Pro Rata - Dan Primack's daily blast of the latest news in business and politics.

Fortune Term Sheet - Another great newsletter written by Polina Marinova that covers a wide swath of the latest news in business. 

Network your socks off 

Does networking matter?

Yes.

Moving on.

But seriously, networking is a key part of any venture capital job search. The reality is that at most firms, networking will be a relatively significant aspect of most junior roles. If you can't network your way to decision makers at firms, how will you ever be able to network your way into meeting the best and brightest founders? To be honest, networking did not come naturally to me either when I first started my process. When I thought of networking, I thought of the overly-eager undergrad business students that would suck-up to anyone and everyone. I thought I was better than that. But I was so wrong about what exactly networking really was. It finally clicked for me when one of my colleagues described networking as meeting new people and hearing about their stories. I am an outgoing guy that enjoys meeting new people and making new friends and thinking of networking through this new lens helped it to really click for me and turned it from something I looked down on (and if I am being honest was anxious about doing) into something that I actually enjoyed. Now it is not all rainbows and butterflies. It is a skill that you need to practice like any other and it can be hard work. But like other skills, you will improve on it as you do it more and more. Networking through informational interviews with current venture capitalists is a great way to expand your network, learn more about specific firms/sectors of the venture ecosystem, and get your foot in the door. 

Getting into venture isn't solely about networking, but it is an important aspect of any job search. For reference, 3 out of the 4 final round interviews I had with firms came about because of networking. BUT I ended up taking a job at the one firm where the opportunity came from me responding to a job-listing online. I think my experience is a great demonstration of just how important networking can be, but also how it isn't the end all be all. 

Be flexible 

Have you gotten the impression of how difficult it can be to make it into the industry yet? If I have not made it clear, let me do so again. Something something more baseball players than VCs something something small number of job openings something something a lot of people trying to get into the space something something 4 partners for every 1 junior level person. 

You get the picture. Unless you have been part of a successful start-up, it will be difficult to get hired as a junior level person in the space. A way that you can mitigate this difficulty somewhat is by being flexible. 

This doesn't mean apply for anything and everything in the space (though that is a legitimate strategy). Instead, pick one or two characteristics that are really important and be flexible on others. 

I was very certain that I wanted to work at an early stage pre-seed/seed firm. I wanted to work with companies at the earliest level and really get in the weeds working alongside entrepreneurs. Because early-stage was a must for me, I decided to be more flexible on other things like where the firm was located. 

Let me tell you, when I started my search a year ago, I did not expect that I would be writing this blog post from Columbus, Ohio! Being flexible will open up more opportunities for you and you just may end up falling in love with a place you never expected like my wife and I have with Columbus!

Why VC

Now that I have given you my playbook for getting into VC, you should step back and ask yourself if this is really the sector you want to be in. I can personally attest that it is not as glamorous as Techcrunch headlines would cause you to believe. There is a ton of hard work and grinding. The feedback loop for success is very long and for failure it is jarringly abrupt. If you are motivated strictly by financial upside you are better off going to Wall Street. 

But for the right kind of person it is absolutely awesome!

I love what I do. I believe venture capital is a service industry whose customers are your founders and I love working alongside brilliant and motivated entrepreneurs to build game-changing companies. I am excited to go into work every day and gone are feelings of anxiety on Sunday nights. I love getting up to speed on new companies and learning about technologies that I didn't even know existed the day before. I love creatively solving problems and brainstorming ways for founders to run through the walls in their way. I love helping to build an ecosystem and I love working alongside people that are just as passionate as I am. 

If venture still sounds like the place for you, give me a call (or reach out to me on twitter).

I'll be your first informational interview. 

Red, White, and Blues

Photo by Aaron Burden on Unsplash

It is the 23rd of July and I am writing a post about Independence Day. Better late than never I suppose. The truth is that I started this post around the beginning of the month, but it was something that took a lot of time as it was important to me that I got it right.

Something about the 4th of July has always made me stop and think. I don't know if it is the fireworks, the flags, or the hot dogs. Maybe it is the fact that the broad brush strokes of Independence Day never change year to year, which serves as a great measuring stick for how much my life has. 

This year there was a lot to think about. If you were to listen to the media and your Facebook feed, things would appear like they have never been worse. Partisan politics, trade wars, and children being ripped out of their parents' arms are just a few of the negative images that you would get blasted with if you were to so much as glance at a newspaper stand (do those exist anymore) or flip on the news. Things seem pretty bleak. For the first time, optimism among Americans under the age of 35 is less than that of people 55 or older. 

But I don't believe that things are as bad as they seem. The 24-hr, commercial fueled news cycle is in the business of sales, and unfortunately, drama sells more than optimism. It is important to remember that things are rarely ever so bleak as the media makes them out to be (nor are things ever as perfect as your friends' Insta stories make them appear). That's why during times like this, I like to take a step back and think of everything that is going right! Here are some reasons to be optimistic about America. 

The Revitalization of Small-Town America

Rumors of the demise of small-town America have been greatly exaggerated. The state of our nation has people very worried. The difficulties and divides facing our country are very real. Partisan politics and national outrage dominate the headlines of the day. Cultural, ethnic, and socioeconomic divides seem to be deepening. A 2016 study by the Atlantic found that only 36% of Americans thought the country was headed in the right direction. 

Dire as things may seem, there is a different story going on in local communities across this country. 

In the same Atlantic poll, two-thirds of Americans said that they were satisfied with their own financial situation and 85% said that they were satisfied by their position in life and their ability to pursue the American Dream. It is not a stretch to believe that sentiments likely have improved over the past two years with the economy the strongest it has been over the past 9-year expansion and with the jobless rate near 20-year lows and wages growing in step.  This dichotomy between national and local sentiments is indicative of the resilience of America and our local communities. We may fight and kick and scrape at the national scale, as we segment ourselves by political affiliation, sexual orientation, race, and any differentiating factor we can find, but spend some time walking around main street America, and you will find that people treat each other as neighbors. They treat each other with respect and kindness. The media and our technology have allowed us to dehumanize one another, but at the micro level, we still see each other as human. Two people that may yell and scream at each other over social media are happy to help each other carry in the groceries in the real world. 

I have been fascinated by the story of James and Deborah Fallows. The Fallows are journalists that have time and time again upended their lives to follow the biggest story of the day. They spent the 90's following the rise of tech giants like Microsoft and Amazon while living in Seattle. During the 2000's they lived in China and were there to witness firsthand China's economic explosion onto the world stage. In recent years, they have turned their eyes on small-town America where they embarked on a multi-year journey to visit small towns across the country and try to understand what is happening in everyday American communities. Their findings are that the state of our union is much healthier than would appear to outward observers. In their travels, they attributed these local revitalizations to the following drivers. 

Civic Governments - Polls have found that while only a quarter of Americans believe that the national government is doing the right thing, as much as three-quarters of Americans believe in the steps that their local governments are taking. The Fallows observed this first hand across an array of communities of differing ethnic and socioeconomic backgrounds. They believe that these rejuvenated local governments are caused by the increasing quality of local government workers as well as the rise of technologies platforms which allow for easier interaction and adoption between governments and their constituencies. 

Immigration - The Fallows found that despite the increasingly vitriolic national rhetoric around immigration issues, cities that were actually acting as the landing ground for new immigrants were doing an exceedingly good job of integrating them into their communities. Medium-sized cities that take in many of the refugees coming to this country have celebrated them and now immigrants make up a vital and impactful part of these diverse communities. 

Talent Dispersal - There is a growing trend of highly skilled, highly educated workers moving and returning to small towns across the country. People are tired of brutal commutes, high costs of living, and status-obsessed cultures of our major coastal cities. As someone that is a part of this phenomenon, I can confidently say that my wife and I are loving our choice. People are noticeably more warm and friendly in Columbus than they were in DC and there is a real sense of community that you can get in a smaller town than you would ever get in a big city. Cities like Columbus are big enough to have a ton of things to do and all the modern amenities you could ask for, but small enough to maintain a community identity and avoid issues that bog down big cities like traffic and skyrocketing rent. 

Schools - Our education system has issues and in many places lacks resources, but small town communities are developing creative solutions to this problem. An emphasis on community colleges and trade schools helps to equip people for fulfilling careers without the overwhelming financial burden of attending a traditional 4-year institution. College is not for everyone and small towns are leading the way in rethinking what a more flexible and inclusive system of higher education could look like. 

Libraries - One of the most interesting findings the Fallows made was the health of libraries across our country. Most would expect that Libraries were dying the same slow death that has plagued chain bookstores. What the Fallows found (and what nearly every measure of engagement backs up) is that libraries are actually becoming more central to our civic life than less so. Libraries have become community meeting grounds where educated and trained librarians can help connect people with the resources they are looking for.

Manufacturing - The face of manufacturing is changing and small towns are the benefactors. Modern manufacturing is not synonymous with giant plants and factories. In many small towns throughout the country, old factories are being renovated and turned into small high-tech development work spaces. I see this trend myself everyday. My company's cutting-edge work space with all the neon colors, exposed brick, and open rafters you would expect from a startup organization, used to be a mattress factory!

Downtowns - There is a huge trend of downtown revitalization going on across small towns. According to Fallows' article, as many as 1,000 downtown-revitalization efforts are currently underway across the country. Columbus is a very cool poster child for this with one of the most successful downtown revitalization efforts. Other cities like Pittsburgh, Cincinnati, and Detroit have had hugely successful revitalization efforts and turned neighborhoods that were once rundown into vital hubs of culture and community. 

Conservations - Local governments and private individuals are working together across the country to conserve monuments, national parks, and wildlife refuges.  

The sun has not set on America. Small towns are shining examples of the values that we, as a nation, aspire to.  The question remains, will the current toxicity of our national discourse trickle down into our towns? Or can grass root movements in our towns foster increased innovation, collaboration, and understanding at the national level. I sincerely believe that it can be the latter. 

The Democratization of Entrepreneurship and Innovation

A renewed focus on entrepreneurship in non-traditional tech centers is spurring a wave of innovation across America. This has been an often discussed topic on this blog and it is a phenomenon that I am fortunate enough to be experiencing first hand. This may be a bit repetitive with my prior reason for optimism, but I wanted to really shine a light on this phenomenon and bring in some of my personal experience. 

I believe entrepreneurship and innovation should be the utmost concern for any modern society. Launching new and innovative companies not only spurs the economy but creates better paying and more fulfilling jobs for workers. For a long time, certain cities have created the lion's share of new enterprises. The poster child for this is Silicon Valley. The cradle of American innovation. Silicon Valley got its name from the development of silicon semiconductors that began to be produced in the 1950's. The innovation occurring in the San Francisco Bay area has, is, and will continue to be vitally important to our future. Other traditional tech ecosystems like New York, Boston, and Los Angeles have their own track records of innovation, but for some time now, the flow of venture capital funding has been too highly concentrated.  In fact, 3 states receive as much as 80% of the venture investing in America. There are a variety of different drivers behind this, between the historical performance of startups from the region, popular (if inflexible and outdated) narratives around where you can scale a startup, and where investors are actually based (most investors want to invest in startups within a 20 minute drive of their offices).

What is NOT a reason for this concentration of capital is that 80% of talented entrepreneurs and high-quality startups in this country reside within just 3 states. 

There are innovative companies and entrepreneurs with game-changing ideas all across the country.  I uprooted my life and moved halfway across the country to a state I had never been before based on this belief. And that belief is paying off! I have been hugely impressed with the quantity and caliber of entrepreneurs and new startups that I am seeing in the Midwest. People are skilled, optimistic, and collaborative. Talented individuals come from diverse backgrounds and have new ideas about how they can make an impact. Cutting-edge research institutions and large corporations are coming alongside budding entrepreneurial ecosystems and supporting them with funding and partnerships. And investors are starting to take notice. Revolution, a DC-based venture firm headed by AOL founder Steve Case, has been at the forefront of this trend with their $150 million Rise of the Rest seed fund. But they are not alone. Drive Capital was funded by ex-Sequoia partners to invest in the Midwest in what they called "the opportunity of our lifetime." HighAlpha, an Indianapolis-based venture studio similar to Rev1, just closed on a new $100 million seed fund. More and more investors are starting to take notice of the Midwest and I believe that the number of investments and high-growth companies in the region will only increase.

I have really enjoyed the brief amount of time I have been able to spend here in Columbus. I have been very impressed by the maturity and quality of the entrepreneurial ecosystem and I am excited to get a front-row seat to the region's continued growth as I work everyday to help support entrepreneurs! 

The Re-emergence of America as the Solver of Tough Problems

America is once again throwing its full weight against difficult problems. There are natural cycles in economic and technological development. One that I have clearly seen over my lifetime is the cycle between creating markets and saturating markets. New markets are built by creating innovative new infrastructure technologies. These platforms enable a host of new products and services to be developed that were too expensive or difficult to be built before. As the cost of creation comes down, more and more players seek to take advantage of the new market opportunities and the market becomes saturated. Margin dries up as products and services are commoditized, incenting people to seek new opportunities and the cycle repeats as value accrual cycles back and forth between infrastructure development and building on top of existing platforms. 

People solve tough problems (creating markets through critical infrastructure) => people solve easy problems (building on top of that infrastructure) => incentive to solve easy problems decreases (oversaturation/commoditization) => people start working on tough problems (building new infrastructure)

We have seen this play out in a variety of different areas.

In the early days of the web, all the value was created by the companies like AOL and Netscape that were building critical infrastructure. As the platform developed, huge opportunities were created to develop on top of existing infrastructure. These easy problems were solved and a bubble was formed as too many people were chasing value in a saturated market. 

The next major infrastructures developed were mobile and the cloud. Innovations like the iPhone and Amazon Web Services created huge booms as millions of companies and ideas now had the platform (mobile) and ability (AWS and other commoditized services driving the cost of development down).  Since the creation of these major pieces of infrastructure, much of our innovation has centered around the solving of "small problems." Social networking app after social networking app. Photo sharing site after photo sharing site. Our best minds have been focused more on developing uses for existing infrastructure than on developing new innovations themselves. To be clear there isn't anything inherently wrong with solving "small problems." It is a natural part of development and leads to huge amounts of value creation. But the key to a nation's long-term future is its ability to solve tough problems and create the next infrastructure that enables new waves of innovation. It is this exact capability that turned America into the great superpower that it is today. 

I am optimistic because the United States is once again at the forefront of solving tough problems. We are leading the way in developing the next generation of game-changing technology. Genetics, Driver-less Vehicles, AI, and cryptocurrency are just some of the next generation of infrastructure that America is leading the way in building. All of this without mentioning Elon Musk, who is basically Secretary of Tough Problem Solving with his efforts to stop global warming (Tesla and Boring Company) and make humanity an inter-planetary system (SpaceX). Solving tough problems is what made America great. A renewed focus on solving the toughest problems mankind has to offer will make us great again. 

Photo by Julius Drost on Unsplash

America is not perfect. We have our issues. A bunch of them. And they are not always easy. But America is also not down and out. It's the bottom of the 9th and we've got them right where we want them. 

Time to swing for the fences. 

Happy (belated) Independence Day.