Y u do dis doe?

Motivations behind venture capital and entrepreneurship

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.

Would you rather get rich or change the world?

penalty flag venture capital get rich or change the world.jpg

As part of my entrepreneurship concentration in college I took a few classes on entrepreneurship and venture capital with a professor that had been both a successful entrepreneur and venture capitalist. I thoroughly enjoyed his brusque and brutally honest style (he was known to carry around a yellow football penalty flag that he called his “Bullshit Flag” and was he did not hesitate to throw it whenever people got a little too fresh with the truth). One of the common questions he would ask us to ponder is would you rather invest in an entrepreneur interested in getting rich or changing the world. Invariably whenever he asked this he would then have us raise our hands depending on our answer.

I was always in the minority (or sometimes the only one) that said they would rather invest in an entrepreneur that was trying to change the world.

His argument is that the world of venture capital is tough and that only the fittest companies survive. If an entrepreneur isn’t dead set on getting rich, they won’t prioritize growth the way that you, as an investor, need them too. A focus on changing the world to stop short of the best financial outcome when it is just over the horizon. My response was always that there are a ton of ways to accrue wealth in this life and that only entrepreneurs that are truly passionate about solving a problem in the world will succeed. I believed that the wealth would come from the offshoot of that success, just not as its primary driver.

Of all the things I learned in this class, it was this conversation that always stuck with me the most (though I doubt I will ever forget his bullshit flag either!).

Would you rather get rich or change the world?

This is a question that I have been pondering and discussing a lot recently as I have had the opportunity to work with founders that clearly come from both camps. There are a lot of strong arguments people make for supporting the team trying to get rich. They will act in alignment with our goals as investors. They won’t settle for a less than excellent outcome. They won’t get pulled in different directions by their altruistic goals.

And at the end of the day, I have to admit I agree with a lot of the get rich argument. It makes sense from the perspective as an investor with a fiduciary responsibility to their LPs. And anyone who knows me will tell you that I am as much of a free-market capitalism loving libertarian as the next guy.

But I can’t help believing that the best investments are made in founding teams that truly believe that it is up to them to change the world. Teams that have experienced the problem they are fixing personally and who genuinely think that if they don’t solve this issue, no one else will.

I want to invest in the next Elon Musk, who thinks that it is his personal responsibility to make mankind an interplanetary species, rather than the next Jeff Bezos, who saw the online trend before anyone else and took advantage of it to build one of the world’s most dominant businesses. Now obviously investing in either the next Musk or Bezos would be an incredible investment, but the choice is clear to me.

I want to invest in the dreamers that have a mission and a purpose permeating everything they do. I want to invest in the builders that believe that tomorrow will be better than yesterday and that no problem is insurmountable. I want to invest in the founders that will never give up because they can’t stand the thought of letting the problem they are trying to solve effect one more person.

I want to invest in people trying to change the world.

If they win, we all win.