What I’ve learned from Little League

As my friends know all too well, mine is a life immersed in baseball. Yes, there’s that venture investment stuff, but in between board meetings, team meetings, meeting new companies, staying in touch with my networks and breaking down the barriers to data entrepreneurship at Michigan and Columbia there is baseball. Both my kids are intense baseball players. My wife is a Little League executive (and holds a Ph.D in psychology, which helps) and division coordinator. And I am a long-time manager and coach of teams with kids ranging from ages 7-17, from Junior Minors all the way to Seniors. It has almost become a third career of mine (Wall Street, venture capital, baseball coach). Along the way I have learned a ton about strategy, human psychology - and life.

Newly-minted baseball teams and start-ups have a tremendous amount in common. Every Spring there is a Little League draft and the managers sit around and pick their teams, not dissimilar from kicking off a new start-up. Those of us who have been around Little League a long time know most of the kids, their playing histories, their personalities and their families. But this anecdotal knowledge is augmented with objective data that are generated in a common League-wide tryout the morning of Super Bowl Sunday. Players are scored on their batting, fielding, pitching and catching (if they pitch and catch), and there are various sub-categories in each of these areas. Think of these scores as their resumes and conversations with prior coaches as being reference checks. Drafting players, like hiring team members, is an inexact science but the goal is to get as much quantitative and qualitative data as possible to make the most informed decision you can. Assuming all the mangers work reasonably hard in the data collection process, there is a somewhat common view of how players rank by position based upon skill. But somehow, people’s draft boards look very different post facto. The reason: managers draft for different things.

Year after year, in my experience newer managers tend to underperform more experienced managers. Why is this? My hypothesis is that the newer managers tend to draft based on the theory of “best athlete available that meets my position requirements,” while the old timers tend to draft with a particular team construction in mind. This means taking into account factors such as “Is the kid a team player? Does the player show up for practice on time? Are they humble and do they work hard? Are their parents over-involved and stressing out the kid (and the coaches and other team members in the process)? Is the player a potential leader? Has the player previously been on teams with other kids where they’ve been successful?” In short, the objective function is building the best team, not assembling the most talented group of individual players. And in Little League, as in life, teams win when they function as a single unit and not as an amalgam of autonomous parts. So I have consistently passed up more skilled players in order to draft players who are good, but even more importantly, are good kids and fit within the team concept.

This is a movie I’ve seen many times before in start-ups I’ve backed. There is the seduction of hiring the “rock star, 10x performer, force of nature” contributor, even if they are a prima donna and most assuredly not a team player. I’ve witnessed this from the perspective of whether or not to hire these people as well as whether or not to fire these people who are already in the company. It is a very painful decision to make, but in my experience these people almost never work out in a start-up environment, where every person is so crucial to getting the business off the ground. Positive team chemistry and culture is critical at all times, but especially when a team needs to be working in perfect synchrony, backing each other up and focused as a single unit on the task at hand. Selfish but talented people mess up this dynamic, even if they can write beautiful code but piss off their team members or treat them in a disrespectful way. Fortunately there are talented people who aren’t destructive to a firm’s culture, and these are the people start-ups need to find. Optimizing for team, not simply talent, is the message. 

When building a high-performance team the question you should be asking yourself is: what is the goal and what are the resources I need to get there? Because the goal invariably requires multiple skill sets spread across several individuals, ensuring that you build the connective tissue among these people who are receptive to this “team first” notion is Job #1. It’s not about finding the brightest stars in the sky, it’s about finding those stars that make the constellation you want to call your own.

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Breaking through

I spend a bunch of time speaking at events, guest lecturing at friends’ classes and mentoring young people. It is something I feel passionately about and enjoy a great deal. I always try to be blunt, honest and unambiguous with my input, hoping that at least some of the take-aways will be employed by those hearing my words. But I continue to be surprised by the number of common mistakes made by start-up founders, and wanted to provide a short list of some of my hot buttons.

Post-presentation behavior: When I (or someone like me, be they an investor, a well-know start-up founder, etc.) speak at a conference, it is commonplace for a group of people to line up to say hi and chat for a minute. All good. Except what often happens is that a (most often young) founder will try to pitch me their idea. I hate this and it generally leaves a bad taste in my mouth. There are too many people and too little time for this to be successful. You do not have my undivided attention. However, the goal should be to be brief, on point and to either say something smart or ask a good question that relates to discussion. This way, you can send me an email at roger@iaventures.com and you might have seeded a dialogue. But if you force a pitch on me at this moment, forget it.

Getting in touch with a VC: The number of blind emails we get with a pitch and a meeting request is extreme. This exercise is a complete waste of time as far as I’m concerned. The signal/noise ratio is simply too high to do all the calls and take all the meetings people want. But there is one way people short-circuit a meaningful part of the deal funnel - getting referred into us by a trusted person. This person can be another investor with whom we’re close and done business. It can be one of our founders. The common thread is someone whom we trust and whose judgement we value. While we don’t take every meeting requested from referrals, the likelihood of getting a close look is infinitely higher than sending in your stuff and hoping that a meeting will take place. So use that entrepreneurial intensity, passion and ingenuity to network to someone who knows me or one of my colleagues and impress them sufficiently such that they’re comfortable making the introduction.

Networking: Even with all that has been written about the importance of networking, I see way too many aspiring entrepreneurs looking for a silver bullet for how to meet domain relevant people for collaboration, recruitment and support. Have you checked out relevant Meetup groups? General Assembly? Do you have specific experience where you might mentor other founders at TechStars or another accelerator program? Have you spent time doing research around events taking place at local colleges and universities? How about starting your own community around your particular area of interest? With even a little effort it is impossible not to find abundant opportunities to network, learn and grow. You’ve just got to do it. I have no simple answer. It just takes time and hard work. Kinda of like what it takes to be a startup founder.

Building your brand: If you are in the start-up world, either as an employee, founder, investor or aspiring to do any of the three, it is important to thoughtfully build your online and offline identity. The beauty is that these efforts are valuable for anything you might want to do, and, in fact, is great practice for what you’ll do when you land your dream role. Develop a thesis and take a stand. How can you add value to the community discussion? Start writing, but with a purpose. It forces clarity of thought, opens up your mind and lets people get to know you better. Create opportunities for speaking in public and sharing your ideas with others. This will help bridge the online/offline gap and build a more personal identity, as well as providing a forum for feedback and debate instead of living inside your head. And of course actively maintain a Twitter account and an up-to-date LinkedIn profile. These are table stakes for people wanting to get a quick snapshot of who you are and what you’re about.

Be passionate, be strong but be deliberate. The fact is that no matter how smart or hungry you are, it just takes time to network, acquire knowledge and experience and to feel comfortable in your own skin as a member of the start-up community. And this is a good thing. Life is a marathon, not a sprint, so be purposeful and focused without feeling like you’re behind where you should be. The worst thing you can do is be unfocused and reactive, letting the environment dictate your roadmap instead of the converse. This doesn’t mean be insular and block out external influences; it means remaining true to your mission. It’s just like my idol W. Edwards Deming used to say (paraphrasing): It’s about understanding the process. If you develop the best processes, positive results will follow. 

It’s all there within your grasp. Just be thoughtful. Listen a lot. And by all means, follow your passions.

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The response to the terror in Boston: Channeling for good

Yesterday’s horrific and senseless tragedy in Boston stirred up many of the same feelings I had on a beautiful September morning almost 12 years ago. Sadness. Anger. Rage. Confusion. And simply Why? Why did this happen? How could it happen at a time of celebration, peace and personal and community achievement? Words simply don’t do the feelings justice. I went to Twitter to get more facts about what had happened, and then looked for the Tweets of my many Boston-based friends to see that they and their families were ok. Finally, my feelings washed towards empathy, understanding how such a tragic event can both shock and ultimately cause a city, a community to come together in ways previously unimaginable.

As I’ve watched the many responses to the event pop up on blogs, Facebook, Tumblr and Twitter I’ve been both amazed and blown away by the stark message sent by all: We will not stop. We will not be scared. We will get busy helping, contributing - and running. I wouldn’t be surprised to see 2x the applications to the 2014 Boston Marathon given the vibe I’ve seen across the social nets. Many of my running friends across the start-up and investment communities have already stated their intention to run next year’s Boston Marathon, to simply say no to fear and to move forward in a constructive way. Props to all.

But perhaps the most surprising aspect of the responses I’ve seen is that rather than focusing on anger and thoughts of revenge, they’ve largely centered on feelings of sadness followed by calls to action. Donating blood, money and time. Running in next year’s race. Positive stuff. I don’t know if we as a society are getting better at reacting to crises or if violating something as pure and sacred as the Boston Marathon caused a specific outpouring of emotion, but I’m truly blown away by the tone of the messaging. To me it is a life lesson in how to handle crises being demonstrated on a mass scale. 

#respect

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Reflections on IA Ventures, 3.5 years in

I periodically write about my learnings as the leader of IA Ventures, principally to unlock what is in my head and in my heart. As an operating partner with people who are giving their lives to building their businesses and a financial partner with those who have entrusted us with their capital, this is a very serious undertaking. Sometimes I find it necessary to call a “time out” in order to reflect, assess and share. That time is now. 

As I’ve written before, our most valuable resource is time, not money. Given this realization, we’ve continued to emphasize lead-managed investments or relationships where we are co-lead with a partner and firm whom we like and respect a lot. This necessarily means writing somewhat larger checks and working to own more of companies driven by compelling teams possessing great chemistry, rich skill sets and bold visions. The result of this strategy is to take somewhat longer to close an investment, but to have established an even deeper relationship with our founders, their customers and other key players in their ecosystem. I can’t tell you how many times I’ve referenced my friend and co-investor Mark Suster’s memorable post Invest in Lines, Not Dots. His advice cuts both ways - not only is it important for we as investors to get to know our potential founders well, but for founders to get to know us as people and potential partners, too.

This also works to cement one of my absolute bottom lines as an investor: our founders need to want to work with us as much as we want to work with them, and if there is a “fire drill” to consider an investment or a sense that founders are optimizing for round price and not for who-is-the-best-partner-to-build-the-best-business, we’ll simply agree to disagree and bow out. No hard feelings, but these are simply not the situations that comport with our notion of deep partnership. I’ve also been amazed and impressed at the due diligence our potential founder/partners are doing on us, and value and appreciate the thoughtfulness and the time they take to make sure we’re the right fit for them. 

It is important to note that the above in no way has impacted the stage at which we invest in companies, which continues to be seed stage/first money in (or first institutional money in) or early Series A. Our fundamental philosophy is that we are best-suited to help build companies from Seed through Series B stages, and this is closely tied to our belief that we are building a portfolio that sits at the optimal point of the risk-reward continuum. We’ve always believed that “small is beautiful,” and continue to cultivate deep relationships with larger firms to partner with us at later stages of a company’s development. It is very hard to be good at everything, and we’ve deliberately chosen to focus on the early stages of a start-up’s life.

This approach also has also worked to shape our reserve policy. While we have always created significant reserves for follow-ons, we are now firmly settled into a “life cycle” approach: we are positioned to lead Seed and Series A rounds, with sufficient reserves to do our full pro rata in Series B rounds. We have done and will do select Series C participations, but only where we expect the marginal return on our capital to be in the 7-10x range or higher. But as companies experience rapid growth and begin to scale beyond our early-stage competency and capital base, we allow ourselves to get diluted down from the early high ownership levels to still significant but lesser levels as fresh capital is better deployed against new opportunities. This is a natural and comfortable hand-off that takes place from early stage to growth stage, and we are not in the growth stage business. And that is fine with us.

Likely the hardest thing about building a business for the next 50 years is team construction and company culture. While I work hard to create a particular culture that I hope is retained well beyond my leadership of IA Ventures, team construction is a delicate balance that needs to evolve as the business grows and develops. Venture capital is a people-powered business and one which doesn’t scale particularly well (at least in the way we interact with our partner companies). Therefore growth requires more people, each new person adds to and changes the culture to a certain degree. Core principles are retained but style and chemistry dynamically adjust to new people who have entered the system.

So as culture and vibe are shifting and incorporating new inputs, the nature of communication necessarily changes in response to more specialized roles and responsibilities. New analyst? That changes things. New principals and partners? I can only imagine the shock to the system. It’s not that shocks, jolts and new dynamics aren’t good; in fact, they’re mostly great! But getting the balance of skills and styles right that all fit within the culture is not an easy task. This is why we’ve been super deliberate when bringing on new team members, and our approach has worked thus far. But the stakes continue to grow as the firm grows, and as we are all so busy traveling and spending time with our companies it is challenging remaining centered, strong, focused, synchronized. Mindfulness is one thing: successful execution is something else entirely.

In the time I’ve spent building the IA Ventures business, it has become abundantly clear that I am facing exactly the same issues as those founders whom we back every day. Articulating and selling the mission and the vision of the firm. Clearly communicating the value and benefits of our product. Closing business. Staying close to and getting feedback from customers. Recruiting. Understanding the competitive landscape. Proactive strategy development and planning. Marketing and PR. To say that I have empathy for the startup founder is the understatement of the century. I get it. Believe me, I get it. Few things are as exciting or rewarding as building a business, but it is also among the hardest things I’ve ever done. But 3.5 years in, there is nothing I’d rather be doing. Thanks to Brad, Ben, Jesse, Julie, Joey, Adrian, Drew, and all of our founders. You’ve pushed me hard, yo! The best is yet to come…

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