We are experiencing a frenetic time. I rarely talk to any startup entrepreneur or VC who doesn’t feel it and somehow long for simpler times despite the benefits we all enjoy from increased enthusiasm for our sector.
For entrepreneurs there’s too much money sloshing around. One would think entrepreneurs would never want less available cash – until such time as their competitors ridiculously and unnecessarily all raise $50 million in the name of a “land grab” thus making it much harder for your totally reasonable company to attract investors.
There’s too much PR and too many tech blogs and too many newsletters and aggregators and Twitter summarizers to even try to catch everything that’s going on and equally there’s so much noise that it becomes harder to be heard.
There are so many events to attend that one could become a full time conference attendee and you could easily feel like you’re missing out with each event that happens without you and of course there is Twitter and Instagram and Snapchat to remind you just how fun it was for everybody else. We always look like it’s only fun in our Instagram photos, don’t we?
It’s impossible to get offices so you pay too much or pile in too many people and have two few bathroom stalls or you located in a crappy neighborhood. Of course your friend’s company raised $50 million and offers it’s employees free kombucha and desk massages. And even this can’t stop their employees from fleeing after two years of vesting to move on to the next hot startup.
For investors life is no different. There are too many deals to look at, too many seed funds or angels asking you to look at deals and weekly “demo days” with manicured and monocultural presentations crafted by experienced story tellers to help even the mundane idea sound like it will. Blow. Your. Mind. Everyone is a rock star developers, every company is crushing it and when they’re not crushing it they’re killing it.
There are too many pulls & tugs at our elbows for time, for coffee meetings, for advice or speaking engagements or cocktail parties or dinners.
The best of the best in our industry are feeling it, too. I promise it’s not just you and I hear it from nearly everybody I know. The world seems to be spinning just a bit too fast these days.
What is one to do?
I often tell people that in some ways it’s easier to build great companies in down markets. Greatness in execution stands out more and doesn’t get drowned out by the inevitable over-funding of one’s competitors. And as I like to say, “In a strong wind even turkeys can fly.” But as entrepreneurs you don’t get to sit these years out and as investors we don’t get just let a few years pass and return back to the market. One needs to be in during bull markets and bear markets.
In some ways having seen these trends before and being a bit more mature (code for I’m 47) I think I feel just a little bit less pressure than I did when I was younger. I feel more comfortable in my skin and accept that I can’t return every email, I can’t take every startup pitch, I can’t attend ANY demo days (did I mention I don’t like demo days?), I can’t be at every great out-of-town meetup and I certainly can’t “chuck in money to every party round.”
Yet through all of these I meet teams that are just hard-wired to be a little bit more focused and insular than the rest of the field and it shows. The other day I was with the founders of Vidme – Warren Shaeffer and Alex Benzer – who are two of my most favorite founders to work with almost precisely because their behavior is antithetical to the frenzied market behavior. We were discussing whether they were going to attend one of the biggest conferences in the video sector this year where many of our industry’s startups spend tens of thousands in attendance fees, sponsorships, parties and transportation. They simply said, with shrugged shoulders and without trying to make a big deal about it
“Yeah, we think about going every year. But honestly 10 extra hours in the office each day we would be there is way more productive. Right now we’re shipping code at such a frequent rate and our organic growth has been so strong that we don’t think it would be a good use of our time to attend.”
I know that sounds kind of obvious and many readers would say, “duh” but I promise you it’s much harder to live by these principles when everybody else is doing the opposite. I really don’t understand why so many first-time entrepreneurs are becoming “mentors” or “advisors” to other startups when that is a distraction to your own success.
My general advice is to do less.
Easier said than done. Do less. And do the things that you ARE doing better and with higher quality. Have a shorter to-do list with more things that are in the “done” category. Do fewer business development deals but make the ones you do have more impact. Hire fewer employees until you’re bursting at the seems with work for the ones you have. Score a beautiful and functional office but rightsize it for today not 2 years from now.
You don’t need to be hot. You need to be successful and those are two different things. Success often comes from doing a few things extraordinarily well and noticeably better than the competition and is measured in customer feedback, product engagement, growth in usage and ultimately in revenue growth.
I offer the same advice for many of my friends who are newer VCs.
I see many rush to have one’s name on TechCrunch alongside other famous investor names so some do more deals of less consequence. They are more deals to spread their bets but less consequence because your $250k alongside 10 other investors in which you have limited influence or ability to increase ownership or set direction is almost zero. Buying logos for your website will only work in the short term. The yardstick you’ll ultimately be measured by is cash-on-cash returns and it turns out that’s a much harder thing to produce.
The best investors do less.
They take fewer bets, they don’t mind being counter-conventional and investing in things that make others scratch their heads. They don’t feel the need to do a deal in NYC today, India next week, SF the following. Markups do not equal success and sometimes equal zeroes for early investors.
My best deals took a few years to mature to a point where people started telling me, “Wow, that’s an amazing story. They’re doing how much in SaaS revenue? You own how much?” Overnight successes, all. If by overnight you mean 2-3 years of people second-guessing the category followed by 2-3 years of steady growth, followed by large numbers categorized as overnight success and 9-10 years later a chance at an IPO.
I know that I had things easier as a new VC because I came into the business in 2007 when the market was frenzied like today but an order-of-magnitude less so and the world wasn’t living in public. And with the crash of Sept 2009 – March 2009 the market cleared out created an open field in which to invest, go slowly, learn and let companies mature before they felt the need to be “hyped.” So I had a great apprenticeship period between 2007-2009 followed by a set of concentrated investments in 2009-2012 of which some already didn’t succeed and others have really blossomed into market leaders now reaping the benefits of product-market fit.
These days I find myself doing less. Not less work but fewer “things.” I have been spending a lot more time with existing portfolio companies as they all are trying to “level up.” I spend more time helping manage Upfront Ventures so that we as a firm are better prepared as a team to succeed vs. just any individual. I spend more time an executive recruiting of key talent for portfolio companies in which I’ve invested and more time in product reviews.
I still plan to keep more normal pace of investment which is 1-2 deals per year. Year in, year out. But one could easily feel the need to do 3-4 deals per year given the sheer magnitude of what is out there these days but for a focused VC (*some funds do many more investments / partner but invest more in syndicates with strong leads and that model works, too) that number is just not manageable. Across our partnership we will do 10-12 deals per year and with 5.5 partners and now principals making investments that number is the right-sized fit for our firm.
It’s true that my job requires more travel than I’d like. And it’s true that I still take a whole lot of first meetings with entrepreneurs. It’s also true that many companies I meet raise big rounds of capital within months of our meeting and I could easily feel like I’m “missing out.” A startup company’s success that is funded by other VCs isn’t missing out. I can’t do every deal. I can’t add value in each situation. And there comes a point where taking on too many new deals comes at the expense of the quality of my time with existing portfolio companies.
So I choose to do less, more.
(Cross-posted @ Both Sides of the Table)