Be Your Own VC

I have to admit, at certain times over the past month or so, it’s been incredibly difficult to keep a positive mindset.  Frankly, it sucks to be turned down, being offered a position that isn’t valuable to you, being told a company doesn’t hire interns, or they only hire MBAs etc. etc. etc. For the sake of keeping a positive attitude, I started to list all of the benefits of being in my position compared to someone who already has a full-time job or has the job I want.  While the list was short, it was extraordinarily helpful in motivating me to continue working smarter and working harder to achieve what I set out to accomplish.  One of the most important items on the list was “the ability to be my own venture capitalist; right here, right now.”

Despite hearing this concept in a networking meeting I had this summer, it didn’t really hit me until I started to receive different internship proposals.  Instead of investing money in a startup (it takes money to make money), why not invest my career?  Basically, my thought process consisted of the following:

My long-term goal is to be a venture capitalist.  In order to achieve that goal, I know that I’ll need a hefty amount of startup and operating experience.  Therefore, when thinking of what I could do this summer that would align me with these objectives, I thought it would be fun, rewarding, and valuable to work at a startup.  However, as a junior in college, I’m looking for an internship that has the possibility of leading to a full-time job after graduation.  Especially at cash-strapped startups, full-time roles usually come with incentives that utilize a company’s employee stock option pool.  Putting this all together means I can potentially get equity in a startup that I work for (assuming I work hard, add value, and have a bit of luck).  As a result, I get to ask the same golden question VCs ask every day…Do I think the company that wants to hire me is sustainable and can it find a successful exit opportunity?

Now, it would be a hell of a lot easier to say ‘yes’ to the first internship proposal I receive and it would take a HUGE weight off my shoulders, but it wouldn’t really be smart…or fun for that matter.  Since starting this blog, spending four hours a day on twitter, getting my name out there, and networking as if my life depended on it, I’ve started to receive several different proposals which is where the fun begins.  I then get to do all of my own due diligence on the prospective companies, make my own growth predictions, talk to people the founders have previously worked with, assess the risk factors, analyze the market, and so many other things MD’s and their associates would have to consider when making investment decisions.  I also have to evaluate and understand whether or not I could add value to the business and make an impact.  What’s my personal competitive advantage that will propel this company closer to success or to an exit?  Will I simply be retrieving papers off of the printer, constantly doing data entry, or will I be thrown into real world situations where I will actually be receiving valuable experiences?  All of these are incredibly important questions that must be asked.  I’m not looking for an internship at a startup because I want to bulk up my resume in order to get a better job at a top tier firm right out of college.  I’m pursuing these jobs because it’s what I’ll have the most fun doing, where I can add the most value, and how I can propel myself closer to my long-term goal.

Unfortunately, with this type of outlook I’ve had to say ‘no’ to several positions for different reasons.  I didn’t think I would receive much value, the company wasn’t sustainable, the company was at too early of a stage for my risk profile etc. etc. etc.  However, I’ve promised myself to never ever EVER accept a job I don’t want to be doing.  Although this makes my search much harder, I believe I’ll end up much happier.  Of course, worse comes to worse, I can always go out and start my own company

So far, the main struggle I’ve run into has been sitting down face to face with a prospective company.  They expect me to be constantly selling myself, showing where I can add value, and talking about my track record…for good reason.  On the other hand, I’m just as interested in getting them to answer many questions I have in regards to my due diligence.  As of now, I’ve found the best way to solve this is to focus on getting the job during the meeting, and asking the due diligence questions after the meeting or via email.

Ultimately, this unique thought process and outlook has led me to greatly enjoy my quest for “the golden internship.”  I encourage anyone else in my position to start thinking in the same way.  Not only will you be able to end up somewhere you’re more comfortable being long-term, but it will also allow you to practice using many skills and resources that will be greatly helpful down the road.

Quote of the day: “The trouble with not having a goal is that you can spend your life running up and down the field and never score.” – Bill Copeland

The Value of Twitter

My first attempt at hustling for an internship was two summers ago.  I can’t stand applying for jobs using my resume because on paper I’m your average white college student that likes to play video games and hang out with friends.  Therefore, I made a goal over my winter vacation to meet with four industry professionals per week to expand my network in Minnesota.  I started with my dad’s friends and my friend’s fathers.  After each meeting, I would ask if they could put me in contact with anyone else that I could speak more about a specific topic we had discussed or about a position/career I was looking for.  Very quickly, my network started to build and I was meeting with some great people.   Twitter became an easy way to stay in contact with everyone I had met because I could easily find valuable articles or information that I could send to them and say, “Hey check this out, thought you’d be interested.”

When I started looking to build my network in Boston, however, I didn’t have my dad’s relationships to start with.  I tried sending emails to people I wished to meet, but quickly realized one of the many roles of an executive assistant was not passing along my emails because frankly, they weren’t very important.  As a result, I took to twitter and want to encourage others to do the same.  I firmly believe that Twitter is the world’s greatest tool for business, but unfortunately, it is HIGHLY undervalued and HIGHLY underutilized.  I’ll admit it, when Twitter first started picking up steam I thought it was the dumbest thing since the Shake Weight.  Obviously my thoughts have since changed, but I think the idea of Twitter also brings up some valuable lessons that many people are under utilizing or don’t really believe exist.

1) There’s no such thing as a Twitter secretary…yet

One of the beauties I’ve found in Twitter is that very few people have others manage their own accounts.  Although I’m convinced Donald Trump has an assistant tweet for him, I have seen very few other people do the same.  But who knows, maybe declaring bankruptcy causes power hungry businessmen to speak in the third person these days…  Any who, if you’re trying to catch someone’s attention via Twitter, you know it’s going directly to them which makes it incredibly valuable tool for networking and keeping in touch.

As a quick example, I was recently assigned Brad Feld’s VC firm, The Foundry Group, to do an in depth presentation on for my class, “Raising VC Money.”  A few days before, I had seen another VC tweet a goofy picture of Brad and dared anyone to use it an a presentation.  So I replied saying I would, and in no time Brad shot me a tweet back saying “here’s my personal email address, if you need any help with the project let me know.”  I took him up on his offer, asked him some questions, and got them all answered by the next day.  If I had started that same interaction using the same content via email, it would have absolutely been stopped by his assistant.

2) The Pay It Forward Mentality

I have yet to figure out if this is specific to the VC/Startup community or if it’s true in other industries, but there is a huge “Pay It Forward” mentality with business people on Twitter.  My theory for why this is the case is simply due to transparency and ease.  When someone asks for help, receives help, or gets ignored, everyone sees it.  In order to keep a reputation, business people shouldn’t visibly ignore or offend others.  In addition, because each tweet is limited to 140 characters, it’s incredibly easy to help someone else out.  The perception of email is that replies should be a bit longer and more in depth which makes them a nuisance.  However, the ability to be short and sweet via Twitter means questions can be answered, reputations can be built, and pay it forward acts can be carried out in a matter of seconds.

3) Insider Information

Lastly, it amazes me what people put on the web.  Nevertheless, a lot of it ends up on twitter and can easily be obtained by anyone.  I’m not referring to insider information used for trading equities, but interesting and useful facts that can be used for any number of purposes.  I have used this the most in order to break the ice with people I’m trying to network with the first time.  People love to talk about themselves.  So being able to know as much as possible about your networking target can only benefit you.  For example, the ability to go up to someone and say “How’s your tennis game these days” or “Have you heard about the WWII Pilot’s watch they just found at an estate sale?” has enormous value.  It breaks the ice, starts a conversation, and makes people comfortable in talking about themselves.  All of this information is incredibly easy to find by simply observing someone’s tweets, reading their blog, looking into who they follow, or contacting people they know.

Going forward, I think Twitter is going to be used in incredible ways for business.  It’s not only a great tool for networking, but also customer relations, sales, marketing, research, and so many more.  It’s still insanely undervalued and underutilized.  I encourage you to think of unique ways you can use Twitter to add value to your business instead of telling the world what you had for lunch today.

Quote of the Day: The expert in battle seeks his victory from strategic advantage and does not demand it from his men. – Sun Tzu

It’s Not What You Do, But Why You Do It

It’s Not What You Do, But Why You Do It

Hands down, this is the single most important video any entrepreneur can watch.  It just so happens to be my all time favorite TED Talk as well as the phrase I live my life by.  I guarantee this will be the most worthwhile 18 minutes you will spend all day, so please give it a watch.  The mantra of “It’s not what you do, but why you do it” can be applied to virtually any situation you may come across whether it’s business, life, politics, sports, etc.

After sitting in on a pitch to a VC this week, I remembered how important this concept was for f0unders.  Venture funds have a lot of money and a even more entrepreneurs that need it.  They see hundreds of pitches each month and have to give a decision as to whether or not they wish to examine a company further based on very little information.  Knowing this, entrepreneurs can have an advantage by tailoring their pitch to be more intriguing than the competition using Simon Sinek’s concept (not to mention acquiring customers/users…).

As an example, I had some alone time with the entrepreneur that was giving his pitch to some VC’s earlier this week prior to his presentation.  The first question I asked (and always ask) is why did you decide to start company X?  His response was “Because the market is huge!”  This company specifically dealt with baby products that were sold to mothers; however, the founder was in his early 30′s, had no children, no wife, was male, not American and basically every other attribute he could have to place him farther away from his target market.  To me, his answers translates into “I want to get rich.”  To be fair, this is a perfectly viable reason for starting a business as well as a preferable answer for a VC (as opposed to “I want to be King” which implies having total control); however, I find it incredibly uninspiring and a turn off.  I would much prefer a response along the lines of “I’m trying to make a mother’s baby shopping experience as easy and convenient as possible so they can spend more time with their loved ones.”  Corny?  Of course, but it has a larger meaning.

Just as Sinek refers to in his TED talk, people are moved more easily on their emotions compared to impressive features.  In terms of a sales strategy, it’s much more effective to get a VC on board when saying why you’re so passionate about your idea/company.  Further, when your stuck in the trenches and need to fight hard to get your business out of a rut, I’d be much more confident investing in an entrepreneur with a larger vision compared to someone who is simply pursuing a large market.  I have faith they’d want their end goal so badly that they’d inevitably find a solution.  However, when someone is simply pursuing a large market, it’s much too easy for them to jump ship when the going gets tough.  Entrepreneurs are filled with ideas and they can easily start over with a new idea and a new funding campaign.

Peter Thiel’s favorite question for prospective portfolio companies is “If I’m going to be your 20th employee, why should I want to work for you?”  This question is brilliant because it assumes all of the large equity stakes have already been given out, so the employee isn’t going to get rich from the opportunity.  Instead, it focuses on the culture and vision of the venture and the founder’s/management’s ability to inspire and motivate others with their own vision.  I truly believe a Google or Apple or Zappos or any other innovative and highly successful company can’t be created if their employees are simply working for their salary.  Their ALWAYS has to be something bigger they are striving for in order to bring out the best in everyone!

After hearing the answer of “because it’s a huge market” from the entrepreneur this week, I had an immediate bias to not invest in the company.  Especially because I was sitting with a very well known firm that’s had a long history of success, I know they will have plenty other entrepreneurs walking through their doors with better visions for more successful and sustainable companies.  Moral of the story is that for any VC pitch, or any sales oriented task, or marketing campaign, or speech, or potential hire, or anything along those lines…start with your vision!  Don’t just list your features or your skills, tell a story, give some emotion, and state why you do what you do.  Trust me, it’ll be a hell of a lot more effective.

Quote of the day: “If you hire people just because they can do a job, they’ll work for your money. But if you hire people who believe what you believe, they’ll work for you with blood and sweat and tears.” Simon Sinek

A Little Hustle Goes A Long Way

For those of you who don’t know, I studied abroad last semester in Barcelona which was incredibly fun, I learned an insane amount (mostly out of the classroom), and I was able to travel ALL of Europe.  While I loved the experience, I felt like I missed a lot being gone for so long.  As a result, I took to Twitter in order to stay connected with Boston, especially the startup/vc community.  I rarely, if ever, shot out a tweet, but instead listened.  I closely monitored the big players, observed who knew who, who did what, where most people were located and what events were being held.  It was a great eye opener for me.  Oftentimes at Babson, I feel like I’m in a little entrepreneurial bubble that isn’t really connected to anything bigger, but it soon became clear what a great community was in my distant backyard of Boston.  I couldn’t wait to get back in town and get in front of all these people during my spring semester.  Therefore, I began to develop what I think is a unique social media strategy in order to hustle my ass off once I got back to bean town.  I hope it can serve as motivation to others in my position and show how accessible some of the most influential people really are.

In an effort to start being recognized and building my personal brand, I began searching for influential people that didn’t have a huge online following.  There are VC’s like Mark Suster and Fred Wilson that have a HUGE following on their blogs, twitter, and other social mediums so it seemed a little too difficult to be able to get in front of these guys (although I’d still love to meet them).  Instead, I searched for people like Jeff Bussgang and Mike Hirshland who have blogs and tweet on occasion, but don’t necessarily attract a mass online following.  I began monitoring their media presence and attempted to create valuable comments and tweets in response to their posts with the hope that over time they would recognize me for my input (not my age) and I could meet them in person.  While this obviously took quite a bit of time, it’s slowly but surely starting to pay off.  After coming back from Barcelona, I made a goal to hustle my ass off in order to get involved in the Boston startup community so I can start building my own personal network (and hopefully find an awesome job this summer).

The last week alone has most definitely made my time commitment worthwhile.  To start, I was able to spend an afternoon with Jeff Bussgang at the Flybridge Capital offices downtown.  While getting great career advice from Jeff  was more than I could have asked for, he also allowed me to sit in on an entrepreneur’s pitch.  I got to ask questions, analyze the business, and make my own judgement after the pitch.  It served as an amazing eye opener as to what VC’s do on a daily basis, the type of questions that are asked, what an entrepreneur needs to know going into the conference room, how their answers translate into investment decisions, and most importantly what I actually need to start remembering after leaving business school (yes, you do actually have to know managerial accounting…unfortunately).  I’m now doing a short project to analyze the competition of the entrepreneur’s industry, which has also opened my eyes to many new perspectives an entrepreneur must examine.  All in all, it will serve incredibly useful for any future venture I am involved with because it won’t be my first time around the VC’s table (and I’ll already have been on the dark side…muahaha).

The next day, I finally got a reply from Mike Hirshland via twitter saying to meet him at a bar that night.  To be honest, I really don’t think he realized how young I was going to be, but I took him up on the offer anyway.  Despite having to show my ID before buying a ticket to an “R” rated movie (I look like I’m 15), the bar thankfully let me in no problem.  I seriously believe it’s because they thought I was his son.  Either way, I got to spend time face to face with Mike and learn a lot about his new firm, Resolute VC.  Going forward, I’ll hopefully be helping him out on several projects with prospective portfolio companies which is an amazing opportunity.  Despite sneaking into a bar and mingling with people that could have easily been my parents, I had a lot of fun and was able to get in front of another great influence within the Boston community.

Lastly, being from Babson I have obviously been keeping tabs on Matt Lauzon over the year.  After hearing about his involvement with Ruby Riot and the message of the event, pay it forward, I was immediately hooked.  It’s the perfect situation to get in front of a huge amount of people I’d love to get to know.  Further, it’s always tough to figure out how I can add value to these types of people.  I hate asking them to take time out of their day to help me when I can’t add much value to them.  However, the pay it forward theme of Ruby Riot is, in my opinion, an amazing opportunity.  After being on the wait list for a few weeks, I got an email yesterday that gave me 15 minutes to snatch a ticket…and I got it!  I can’t wait to be in a position in the near future in which I can  help other young hustlers out by connecting them with the right people or getting them a job.  For now, I’ve gotta work hard to get myself in that position and I honestly can’t wait for Tuesday night!!

After an amazingly educational and fulfilling week, I’m finally starting to see my social media strategy pay off.  There have been many times where it has seemed like a complete waste of time, but this week has definitely given me a ton of motivation to continue my search for a great summer job in the Boston startup community.  I had always heard how great the entrepreneurial scene was, but I never quite realized how possible it was to get my own skin in the game.  It’s such a great feeling to start having one’s hard work pay off, and I especially want to thank Jeff Bussgang, Mike Hirshland, and Matt Lauzon for making that happen.  I hope to be able to pay it forward to others in the near future.

Quote of the Day: “Action trumps everything” – Len Schlesinger, President of Babson College

Entrepreneurial Experience Is Just a Selling Point!

I’m back on the bloggin’ roll, so get ready folks!

I’ve been thinking a lot lately about whether or not a successful venture capitalist needs to be a successful entrepreneur.  I’ve read so many blog posts from various people with various yes or no answers that I’m going to put it to rest with my own opinion.  Here’s the conclusion I came to:

Venture capital is the selling of capital to entrepreneurs.  Plain and simple.  Most investors can spot a good opportunity when they see one, so each particular firm must sell their own value added resources to the entrepreneur.  Therefore, being an entrepreneur prior to being a venture capitalist is really just a selling point.  However, is that selling point necessary?

NO! It’s not! That’s like asking if you have to be a successful player in the NBA before you can be a coach.  In fact, there are an extraordinarily high number of former players that would make absolutely terrible coaches.  Could you imagine a team led by Charles Barkley? Or Dennis Rodman?! Oy gvalt.   That said, however, guys like Doc Rivers and Phil Jackson both did pretty well as players in the NBA and are now extremely successful coaches.  It takes a unique breed to be good at both, so just because you were a successful entrepreneur doesn’t mean you’re going to be a successful venture capitalist.  Entrepreneurs, especially at the early stages, need to hustle day in and day out, they need to seek advice, scrap resources together where none exist in addition to many other things.  Being a venture capitals, however, is pretty much the complete opposite of that.  You no longer have control and instead need to sit back and be patient while the entrepreneur carries out any advice that you give while you hold all the resources and can use them whenever you’d like.  Obviously some entrepreneurs can do well at both, but many can’t.  In all of the venture capital cases I have read this semester (quite a few in just 3 short weeks), most have come down to whether or not the VC has had operating experience/been a successful entrepreneur.  I’m always skeptical though.  Just because someone says they are an entrepreneur doesn’t mean they can manage a portfolio, coach other entrepreneurs, or kiss up to the limited partners.  It takes a lot more questions and digging to determine whether or not a former entrepreneur is cut out for the job.

To go even further, there are also several NBA coaches that were never players in the NBA.  Or even in college for that matter!  Erik Spoelstra, the current Miami Heat head coach, is a fantastic example (although he warmed the bench in college).  Spoelstra started with the Heat 16 years ago as the video coordinator and studied the game inside and out.  The more he picked up, the higher he rose in the organization until becoming head coach a couple of years ago.  In my opinion, this type of ‘start in the mail room’ type approach is often overlooked and blown off in the VC industry.  Whenever I meet with someone in the industry I always make a point to ask what they believe the best path to take in order to become a successful VC.  99% of the time I’ve been told “go out and get some operating experience at a startup and start your own company.”  Frankly, this just tells me there is no right or wrong path to take.  If someone has the passion, perseverance, patience, and ability to work smart, they can achieve anything.

Quote Of The Day: “Yesterday’s home runs don’t win today’s games.” – Babe Ruth

 

Revelations

I’ve been doing a lot of reflecting lately about how exactly I should go about accomplishing my goals.  Given the title of the blog, one of those goals is to become a successful venture capitalist.  Frankly, I’ve been working my ass off lately trying to find an internship that will lead me down this path, but all I’ve accomplished is incredible amounts of frustration.  However, thanks to my dad, I’ve realized some pretty significant factors in achieving this goal.

Simply put, venture capital is the selling of capital.  Just because I have money that I want to put to work in specific companies doesn’t mean they’re going to accept it.  If a company is promising enough to invest in, they’ve probably got multiple investors that want in.  So what’s going to make me a valuable VC is the experience and knowledge I have in any given industry that I can pass on to entrepreneurs that will lead them towards success.  The beauty of this realization, given my age and career experience, is that it can literally be ANY industry.  Therefore, I really just need ANY job this summer where I can learn valuable skills and knowledge.  Obviously, my main concern has always been to enjoy the work environment I am in and the people I am working for/with; however, I just need something.  The commitment on my end then has to be going way above and beyond my allotted task in order to know the entire process involved, if/how that process can be made more efficient, how the process fits inside the sector, and know the sector inside and out etc.  For example, I used to work for a check cashing company where literally all I would do was add up all the checks and make sure the totals matched the number printed on a summary sheet by the cashier.  I HATED it and I constantly complained about how inefficient it was.  If I had that same job now, I would have found out everything there is to know about the process and where it fits in the overall scheme of the check cashing business.  Who knows, maybe I would have found how to innovate and improve the system by creating a new type of software.  Either way, by gaining real industry knowledge, I definitely would have been incredibly valuable to other firms in the industry when looking for a full time job later on.

So in terms of finding something good this summer, I’m a little less stressed after this realization.  What I really want (ideal situation) is to find a mentor.  I’m no longer focused on a specific path that will best prepare me for my long-term goal.  Instead, I really want to find someone who has a vast amount of industry knowledge that would be willing to take the time and share what they know with me.  In return, I will gladly complete any tasks they need done or brew any blend of coffee they prefer. The value I will add to this person or their firm is the mindset I bring to work each day.  I’m committing myself to knowing all there is to know about the tasks I am doing.  I have a vested interest in making your processes more efficient or finishing tasks in a better way that will benefit the firm.  It doesn’t take a 4.0 from Harvard to find some numbers and plug them into a model.  Within reason, anyone can do that job.  However, I’d much rather hire someone who has the passion, skills, and vested interest to make my firm more efficient and profitable.

Quote of the day: “The only place where Success comes before Work is in the dictionary.” – Donald Kendall, first CEO of merged Pepsi-Co corporation

View From the Outside

There’s been a lot of talk lately about the “seed stage” bubble in the VC world…or whatever you’d like to call it.  Frankly, I don’t get it and I don’t agree with the way things are being run.  Here’s why:

1) The rise of the incubator: Part of the reason for this bulge in early seed stage investing has been coming from the insane growth in popularity of the incubator.  Yes, I do agree that programs such as Tech Stars and Y Combinator have been extremely successful at innovating a stagnant VC/Angel industry.  However, it is the imitators that I’ve constantly been hearing about and interacting with that are causing the problems.  Recently, every city has gotten the idea in their head that they want to create an entrepreneurial community and has started an incubator type program to make that happen.  In fact, one was recently launched this August in my hometown.  Therefore, I decided to rent space in the same office/collaboration space and observe from afar while networking with many of the participants.  Unfortunately, it was horribly run.  The heads of the program were rarely, if ever, in the office helping out the teams, mentors were never there and hard to get in contact with, and the teams were left to fend for themselves.  How is this going to benefit the incubator or the entrepreneurs?  It’s one small step away from gambling, in my opinion!

I truly believe the VC industry needs to be changed further through innovation.  I’m sick of all the imitators out there.  For one, I don’t think a 3 month program can teach entrepreneurs how to be sustainable for the long-term.  I think it’s incredibly important for the incubator/investor to teach the entrepreneurs instead of give advice to find immediate business success.  What I mean by this, for example, is that it is much more useful to teach an entrepreneur how to find and hire quality engineers rather than connecting them to quality engineers you know of.  Further, teaching them how to realize when they need to pivot instead of telling them they’re current business isn’t sustainable and needs to be changed.  I view early and seed stage investments as a long-term bet on the entrepreneur’s career, not their current business plan (that is almost always changed along the way).  Therefore, why not begin teaching your seed stage companies how to spot problems, how to hire, how to network, how to raise money, what to look out for.  That is a true value added service.  I would be MUCH more comfortable leaving my investments in the hands of others or on their own after giving them this knowledge.  If I wanted to gamble, I’d go to the casino.

2) Rapid investment rate: Another trend I completely disagree with is the shorter and shorter period of time VCs are taking to invest in seed stage companies.  Menlo Ventures just announced they will be making seed stage investments of up to $250,000 anywhere from 24-76 hours after speaking with the entrepreneur.  That’s their commitment and many other firms have been doing the same.  Seriously, guys?  What has this industry come to?  It’s becoming a race to beat out the angles and super angels and take this “spray and pray” mentality.  Essentially, your sacrificing $250k and buying a call option in the entrepreneur.  If you like what you see later on, you can make your larger continuation bet on his/her company.  To be honest, this just doesn’t make sense to me.  If I’m going to commit my fund’s money, I better be sure as hell I can get along with the team I’m investing in and that they will be open to my help going forward.  24-76 hours isn’t anywhere near enough time to get to know the people you’re investing in!  Again, it’s a complete gamble.  As an investor in a VC fund, my blood would be boiling!

I’m a firm believer in the methodology of getting to know the entrepreneur/team in which I am looking to invest.  If I believe we will be a good match and I can add value to their company, then I will take the leap of faith and invest.  Once invested, I will use every resource imaginable to help make their company a success.  In fact, that’s what draws me most to becoming a VC; getting to roll up my sleeves and help the teams I am invested in while teaching them methods to be sustainable going forward.

I’m sick of hearing about these less than stellar incubators and rapid investment rates.  The industry is heading down a slippery slope.  While it’s currently as frothy as ever, it won’t be for long if these mentalities keep up.

Quote of the day:  “There is a very easy way to return from a casino with a small fortune:  go there with a large one.”  ~Jack Yelton

The Case for Failure Cases

I’m currently in an international management class where each week we read a few Harvard Business School cases and discuss them in class.  In addition, many of the core classes back at Babson involve reading and analyzing HBS cases.  While I admit I have learned a lot from these classes in the sense that I have developed a framework for analyzing companies, especially when it comes to seeing whether or not they can deliver value or expand to other markets, I don’t really like the cases I’m reading.  Every case has focused on industry leaders and their success.  I feel like I’m being led astray.  In short, I have never, ever read a case in which a company has failed or even struggled.

For example, yesterday I read an HBS case on Ikea for the 3rd time in two semesters (go ahead and give us some different cases already, sheesh).  Anyways, it starts out something like: the founder of Ikea got a chunk of money from his father after graduation and decided to start a business selling furniture through catalogs.  All of a sudden, boom, he had great success and Ikea began expanding throughout Europe.  Despite giving us youngins a framework for analyses, this case (and every case I have ever read) gives absolutely no insight into the companies early failures, pivots, validation of assumptions, product testing, etc. etc. etc.  Basically all of the juice that actually teaches us how the “real world” operates.  I realize there is a limited amount of pages the author can use, but this is a huge problem for me.  If I were to build a business based on the knowledge I’ve learned from these cases, I would simply have an assumption that there is a void in a specific market, and based on my gut feeling, create my product and jump right into the scheme of things.

Obviously, there is a lot more to building a business then spotting an opportunity and going for it.  There are some key lessons that need to be taught in the classroom such as how to spot and validate assumptions or how to go about developing a product before achieving mass market success.  Despite what I said in my last post, I’m not a total Eric Ries/Lean Startup hater.  I think he hits the nail on the head by explaining the need to eliminate as many assumptions in your business plan as possible.  He gives a great example by explaining Steve Jobs’ idea to create the ipod.  Believing an ipod will be a big hit comes along with several assumptions.  Mainly, you are assuming people will listen to music using headphones in public places, and you are assuming people will pay to download music.  Jumping straight into product development is incredibly risky since there is, in fact, a way to assess the validity of these assumptions before wasting precious resources.  The creation of Walkmans by Sony validated the assumption that people will listen to music in public; however, Napster is an antilog showing there is a mass of people not willing to pay to download music.  Therefore, Jobs’ gut feeling solely becomes whether or not people will buy music online.  He can then use many methods to get insight into whether or not this may be the case, before spending hours and boatloads of money developing a product that completely flops.  Where would I have found this knowledge or basis for understanding in the current case studies?!  In fact, I would have learned to believe in all of my assumptions, whether or not they can be validated, and just go for it.  Go big or go home!

The ability to analyze and validate your model’s assumptions is one of many extraordinarily valuable tools an entrepreneur can have that is not talked in case studies.  It would be great if HBS, or any other university, started writing a series of cases on companies that didn’t make it, or if they turned the spotlight onto the early days of successful companies in order to see this process play out.  I think it would give students a greater understanding towards how many successful companies actually experienced a pivot.  Or how many hit a wall and needed to change up their strategy at some point in time.  The number one thing I have heard from entrepreneurs is that they’ve learned the most from the times they’ve failed.  Nobody gets it right the first time.  Even Groupon, the fastest company to achieve $1 billion in sales, started off as a completely different business!  (It was originally a collect activist platform.)

Ultimately, students need to start reading some cases focused on the struggles, the failures, the pivots, and the hard work it took to finally achieve success.  Everyone leaves class thinking how easy it is to make bank if you just have the right idea at the right time.  In fact, that’s completely and utterly untrue, and the top business schools should give us some real world examples.

Quote of the day:  ”The men who try to do something and fail are infinitely better than those who try to do nothing and succeed.”  - Lloyd Jones

Picasso the Entrepreneur

I saw a fantastic video the other day that really got me thinking about entrepreneurship.  It was produced through a series titled “Now I Know” that interviews experienced entrepreneurs on lessons they have learned or insights they may have.  This particularly clip (2 minutes, you have to watch it!), was done by the wise old Steve Blank.  Check it out before continuing to read:

There is a lot I have to say on this topic, so bare with me.  The day before watching this video, I picked up the book “Lean Startup” by Eric Ries while flying back from Amsterdam.  I’d heard a lot about the book, so I thought I’d give it a shot.  In short, it attempts to give a scientific method to teach entrepreneurs how to go about building their business and develop their products.  While I do firmly believe entrepreneurship can be taught (I go to Babson for a reason, I wouldn’t be dishing out 50k a year if I didn’t think this was true), I highly disagree with the mantra that there is a specific formula or process to achieve entrepreneurial success.  I’m about one quarter of the way through the book, but the vibe I’ve been getting so far is that if you follow the lean startup method and release iterations of your product as Ries explains, you’ll find the right answers to succeed.

However, I found it interesting that Blank pointed out how we are using scientific methods to master an art form.  If Picasso or Pollack had ever done exactly what the textbooks were teaching they never would have been close to as famous and immortalized as they are today.  In fact, if you think about it, every painter is famous not because their technique is better or worse than anyone elses, but because they innovated and created new techniques or styles to see different perspectives.  That is true entrepreneurship.  If all founders were to follow the same methods or do what others have done I’m sure they could create profitable companies, but it’s the innovation and different perspective that makes a good business great.  This is the main reason it’s a cardinal sin to give a pitch to VC’s and say “We’re the facebook of B2b” or “We’re the Groupon of the restaurant industry.”  If you want to create a successful startup, be yourself and go about it in your own way.  Everyone is different and everyone has their own unique perspective on life, business, and how things need to be run.  Courageous founders take the leap of faith to create a company because they truly believe their team’s perspective is what will drive them towards success.

A perfect example of this can be seen with the Israeli startup Better Place.  The company believes they can add value to the nation of Israel by getting the entire country off of oil.  How might this be done? Their answer was through a brilliant innovation in the business model.  The problems with electric cars has been the high cost of the battery. People are paying for the lifetime cost of the battery upfront when they purchase the car.  But gas is also extremely expensive for people buying normal cars, we just don’t pay for it upfront.  Better Place’s solution was to own the batteries and create charging stations throughout Israel just like we have gas stations.  When you’re electric car’s battery gets low, you drive to a charging station, and the company has created machines to swiftly and smoothly swap out the current battery for a fully charged battery. Better Place owns the battery, it’s brilliant!  In my opinion, science and the lean startup method would say to keep working on the batteries in order to produce them at cheaper costs until they are affordable for consumers because that’s what market research has shown, but innovation stole the show as usual.

Quote of the day: “If I had asked people what they wanted, they would have said faster horses.” -Henry Ford

Welcome!

Welcome to my brand spankin’ new blog!  My goal is to keep this puppy updated regularly (a.k.a at least 3-4 posts per week).  As the title states, I’m doing everything possible to achieve my ultimate goal of being a venture capitalist.  Therefore, I will be using this blog to share my thoughts and analyses on what I’m currently reading, experiencing, developing, and thinking in terms of the venture capital and startup industries.  Hopefully, y’all find value in the content I post and even spark some debate in the comments section!  I’m always open for suggestions or an opportunity to debate.

Why Venture Capital?

I have an insane amount of reasons, but here are a select few:

1) I’m obsessed with entrepreneurship, plain and simple.  The ability to take action on one’s dream/vision in order to solve a problem or take advantage of an opportunity is incredibly valuable.  I’ve always liked to joke around with the saying “if money is the solution, you don’t have a problem.”  If an entrepreneur has the passion and capability to take action on their vision, capital shouldn’t be something that stops them.  Why not take the opportunity to supply driven individuals with not only money, but also advice, helping hands, manpower, and other connections to further pursue their dreams?

2) In middle school my goal was to start a hedge fund because I loved investing in equities and currencies.  I was especially fond of making long-term investments based on macroeconomic factors.  It took me a long time to finally ask myself: why should I let my money sit in a company for years, but have absolutely no say in what they are thinking or doing?  Since I entered the working world (8th grade), I’ve greatly enjoyed working for, helping out, and consulting with startups to share my ideas and strategies.  Obviously, not all are taken, but it’s an incredibly fun working environment and the ability to work with several companies at the same time is amazing, in my opinion.

3) I love to debate business strategy.  I’m constantly reading about companies and the actions they are taking to succeed.  Comparing it to my opinions using my own knowledge and arguing about it with friends.  There is always something to learn from the actions of other companies and I try to apply those lessons to the companies I work with.

I’m looking forward to getting FutureVC off the ground and supplying it with valuable content!

P.S I’m obsessed with quotes especially if they are motivational and focused on business.  Here’s one of my favorites which pertains to the creation of this blog: “Go after what you want because it’s not going to come after you.” -Unknown