Table stakes

As the new year began, I reflected on my learnings for the year.

In business, one of my key learnings is the difference between what it takes to play the game and what it takes to win the game. I’m going to refer to the former as table stakes. Table stakes represent the limit that a poker player can win or lose in a single hand based on how much money they have on the table at the beginning of the hand. Different poker tables require different minimum amounts of money to play at the table, and these are table stakes.

As an investor, having money to invest is an example of table stakes. You get to play the game, but this doesn’t mean that you’ll win.

In order to win, you need to have correct insights on the evolution of markets. You don’t need to be completely right because entrepreneurs will determine what’s completely right by adjusting their execution in light of new information and their learnings about the market. But you do need to be directionally right.

You also need to be an excellent judge of people to determine which entrepreneur will execute best, and adjust their execution as necessary when new information comes in, to win the market.

Finally, you need to get the entrepreneur to accept your money. This requires showing them that you’ll be a supportive partner. This includes actions like being transparent in your deal terms, not fighting over the details, helping them with hiring, opening the door to business partnerships, and helping them navigate future funding rounds. However, this doesn’t mean that you need to agree with all they do. Being supportive also includes telling them when things aren’t working. Often our harshest critics are the ones who care about us the most.

As an entrepreneur, being smart and ambitious are examples of table stakes. There are enough smart and ambitious people in the world that if you’re not smart and ambitious, you’re unlikely to be able to make up for it through perseverance alone.

However, in order to win, you also need to be perseverant. You need to think on a ten year horizon because building a successful business doesn’t take place overnight. Seeing your business as your life’s work will make the obstacles you encounter seem small in comparison and ensure that you keep going.

You also need to be resourceful. You need to be able to convince people to work with you even when they have more attractive salaries on offer at larger companies. The same principle also extends beyond your team. You need to be able to drive your limited resources to those areas where they’re likely to produce the greatest return.

Finally, you need to be a great communicator of your vision. Clearly conveying a far-fetched yet achievable vision will not only help you in recruiting, but also in keeping your colleagues motivated on the job, fundraising, and setting up partnerships.

These are just some examples of table stakes versus what it takes to win for entrepreneurs and investors. There are many more. I look forward to discovering them, distinguishing between them, and integrating them into my decision-making to continually refine my life’s work.