Category Archives: Entrepreneurs

Meeting a founder’s team

Most investors state that, together with the market, founders are one of the two key determinants of a startup’s success. While this is true, a founder is only as good as the team they’ve built. As a result, meeting a founder’s team, consisting of the founder’s direct reports and any other key team members, is a great way to evaluate the founder and their startup.

The first benefit of meeting a founder’s key team members is that they reveal how good the founder is at identifying and attracting talent. The more impressed you are with a founder’s key team members, the more impressive the founder who built the team.

The second benefit is in observing the interactions between the founder and their key team members. Who speaks more often on issues pertaining to the team member’s responsibility? How does the founder address their team and vice versa? Do the founder and team members seem perfectly aligned, which is usually a sign that they are not expressing their differences in viewpoint, or do they point out where their perspectives are different and how they’ve decided to move forward to either test out the different hypotheses they hold, or despite their different perspectives?

Meeting a founder’s team in a series of one on one’s, together with holding a group session in which each key team member participates, is a half to one day exercise that greatly improves the quality of an investor’s investment decision.

Cynicism

The dicitonary defines cynicism as “an inclination to question whether something will happen or whether it is worthwhile”.

And indeed, many attempts fail, many promises are broken, and even successes are, on a long enough time horizon, impermanent.

But these are just reflections of the scientific laws which govern the world we live in. When you attempt to do something, by definition, there is a chance that the attempt fails. Promises are broken, either because people never intended to stick to them, or because circumstances changed such that it is no longer possible to keep them. And even successful outcomes are soon hopefully superceded such that the earlier foundations which paved the way for better outcomes are eventually forgotten.

However, these are the laws of the world we live in. As such, we cannot change them.

We can only decide whether to be cynical because of these laws or to accept the laws and push forward regardless.

What the founder will do

One of my first learnings as an investor was to focus not on what you can or would do with the company, but what the founder will do.

It’s a continual work in progress to take this viewpoint because, when you’re excited about the promise of an idea, your natural reaction is to think of all that you could and would want to do with it.

However, if you decide to invest, you often soon discover that the founder takes the company in a different direction than what you imagined.

If you formed your view of the company’s future without carefully listening to the founder before investing, this direction can be radically different.

If you listened well, although there will still be surprises due to the experimental nature of startups, hopefully these changes will be for the better and the general direction of the company will remain as you envisioned.

Aggregating user reviews across online services

In the offline world, you often don’t know the background of who you’re transacting with. To gain insight into this, you perform reference checks by asking people who you do know whether they know the person you’re about to transact with, and if so what their past experiences in dealing with that person have been.

Many online services allow for anonymity. This makes it more difficult to transact on such services than in the offline world.

However, an even greater share of online services, often based on real world identities, offer a more trustworthy environment for transactions than that provided by the offline world. They do so by aggregating and displaying the collective transaction reviews of a particular person for the viewing of future individuals who are considering transacting with that person. They effectively make available the references provided from people beyond your own network, and this makes it easier to reference check the person you’re about to transact with.

User reviews on sites like Amazon, Uber, and Airbnb are great examples of this.

The shortcoming of the user reviews made available by current online services is that these online services operate in siloes. When transacting on Amazon, you can only see the Amazon reviews of the person you’re transacting with. You cannot see the reviews of the same person on Uber. The same is true for other services.

So existing services miss the opportunity to reflect a more comprehensive and therefore representative view of the online trustworthiness of their users, new services miss the opportunity to jump start their service by reflecting the track record of their new users from the existing services that these users use, and individual users of one service either miss the opportunity to benefit from their good track record on other services, or are able to hide a poor track record to potentially abuse a new service.

This presents an opportunity for a company, likely new and independent but also potentially an existing company with a large number of reviewed users and user reviews, to aggregate people’s user reviews across online services, and make available this complete picture of an individual’s online trustworthiness.

Plan B

Plan A doesn’t always work out. That’s why it’s useful to have a plan B.

However, you can’t have a plan B for everything, all the time. There will be unexpected twists and turns for which you haven’t had the time to prepare a plan B.

When these occur, your best bet is to, to the extent possible, take your time. Although it doesn’t seem like it in the heat of the moment, a plan B often emerges, either in the form of a new way of approaching the existing opportunity for which you had designed plan A, or in the form of a new opportunity altogether.

Consensus and the final decision maker

Flat corporate organizations are in fashion these days. The theory is that the best decisions are made by consensus, and that it’s important to strive towards building that consensus by giving everyone, independent of their seniority, the right to voice their opinion.

I support giving everyone the right to voice their opinion. Often the most junior team members have the most knowledge about an issue, so it’s important to draw on this knowledge during the decision-making process.

I also support decision making by consensus when this consensus can be achieved.

However, in many cases, it isn’t possible to reach consensus. Even after an issue is debated at length, there remain different perspectives on the right course of action.

When this happens, there needs to be a final decision maker. The puck needs to stop somewhere. In other words, when decision making by consensus doesn’t produce an outcome, the organization benefits from having a final decision maker decide on and state what will be done.

The alternative is that everyone leaves with their own idea of what needs to be done, the organization heads in multiple often opposing directions, and there is no accountability for the outcomes of these actions. It’s both inefficient and doesn’t produce results.

When consensus can’t be formed, it’s worth trading away a pleasant sounding but inefficient flat organization for an efficient and results producing final decision maker.

Anticipation

I remember when I was a child, I would wake up very excited the day when my favorite soccer club was due to play. I would wait in anticipation of the game throughout the day, and the feeling of anticipation was often as great, if not greater, than the feeling of watching the game in the evening.

The same is true for many events that you anticipate, both personally and professionally. The feeling of anticipation is greater than the feeling you get when the event actually takes place.

The feeling of anticipation may have evolved in this way so that we don’t lose sight of our targets. Without it, we might otherwise stop pursuing some long term targets that actually provide us with an evolutionary edge.

Similarly to the feeling of anticipation of a target often being stronger than the feeling of actually experiencing the target, the journey is often more rewarding than the destination.

Integrity, intelligence, personal energy, collective energy, adaptability, salesmanship, and ambition

In an earlier post, I wrote that the attributes of a great founder are integrity, intelligence, personal energy, collective energy, and salesmanship.

I recently gave a presentation on what makes a great founder, and in preparing for the presentation, realized that I was missing two attributes.

The first attribute is adaptability. Since a startup is essentially a series of experiments designed to solve different problems at different stages of the company, adaptability is a key part of being a great founder. Specifically, knowing what you need to do (intelligence) and doing it yourself (personal energy) or by attracting and motivating others (collective energy) isn’t enough. You also need to be able to change what you’re doing altogether when it isn’t working, or to change how you go about what you’re doing based on where your startup is in its life journey. This requires adaptability.

The second attribute is ambition. Startup outcomes are governed by power laws, whereby a portfolio’s best performing startup’s return can be exponentially greater than that of the second best performing one, the second best performing startup’s return can be exponentially greater than that of the third best performing one, and so on. As a result, each of the founders that an investor backs needs to have the potential to deliver that best performing startup outcome that will drive the investor’s fund level returns. And this requires being a very ambitious founder.

So the attributes through which I now define a great founder are integrity, intelligence, personal energy, collective energy, adaptability, salesmanship, and ambition.

No recognition

A good way to decide what to do in life is to think about what you would do if you were to receive absolutely no recognition for doing it.

Because chances are that, given the extent of competition and the role of luck in determining outcomes, this is what is going to happen.

However, counterintuitively, if you do such a thing with no desire for recognition, you just might do it well enough to be recognized.

Success and rejection

Jack Ma is the founder of China’s largest e-commerce group Alibaba. Although Alibaba started off as an e-commerce company, it has since expanded to offer other services like payments and cloud computing.

In the video below, Jack speaks about his personal story, how he built Alibaba, and Alibaba’s future plans. What particularly caught my attention was Jack’s perspective on being rejected. He was rejected by Harvard 10 times, Kentucky Fried Chicken in an application process where 23 of 24 candidates were accepted, and his local police department which accepted the 4 other applicants while rejecting only Jack.

He mentions that even at its current large size and negotiating power, Alibaba is still often rejected. This is a strong reminder that you need to want something to be successful, but the more you want, the more likely you are to be rejected. So success and rejection come hand in hand.

The full interview is below.