Two years ago we started playing basketball with local startups. The purpose is to get to know people in a setting different from the way you typically meet VCs. It was spur-of-the-moment at first– a way to simply get a foot in the door with a company we were interested in. And all our team enjoy the sport, so why not? For me, it’s turned into something more fundamental to how I think about the relationships in my corner of the venture capital industry. This past week we enjoyed a best-of-five series with an exciting Utah company, ObservePoint (pictured). The time together was valuable, the sweaty exercise a plus. Here’s why:
Know your people, business aside. I’m not talking about life philosophy or feel-good business tactics here. Look, every venture capitalist is in the business of backing great people. We all say this. And it’s not lip service. We track all our best deals back to remarkable individuals. Fighters. Scrappers. Winners. And if VCs at large are people-focused, then early stage VCs are hyper-focused. Why? Because with more business uncertainty & greater odds of failure that’s a recipe for “you better have massive belief in these people.” And belief in a person in the very earliest of stages is all about knowing everything you can about them other than their business. Their business has little to no history for goodness sake! I will frequently stop an entrepreneur from telling me about how they started their business to repeat, “No, please tell me about you, before your business, aside from your business, and what will make you tick after your business.”
Press the flesh. A friend of mine and now fellow investor, Nobu, hails from Japan and happens to be one of Utah’s most active and successful investors. He was/is a major investor in Omniture (sold to Adobe), Allegiance (sold to MaritzCX), Zinch (sold to Chegg), Entrata (formerly Property Solutions) and many others. In a private conversation, he once commented to me, “My founders tell me that they see me more than they see most of their local investors.” Amazing. And telling. Nobu is appreciated by all those who he’s invested in (me being one of them). Our willingness as founders to talk to Nobu, to share the good and bad, is tightly correlated to the fact that he is consistently present and he cares.
When I follow the business too closely, I lose sight of the people. Several months back I was down on one of our founders. In hindsight there was nothing much different in their business than others we’ve backed (momentum ebbs and flows), but I was definitely feeling a lot of overly-critical dialogue going on in my head. And I think the negativity was coming out, at least in conversations with my immediate team. Then I spent some time with this person. I saw again the energy, vision, and indomitable attitude. We eventually got into the minutiae of the business. And when we did, I saw those business issues in a completely different and positive light. Imagine if I had been following this investment from afar, remotely, interpreting the business by the business metrics alone? When the beta’s high, or when you have a higher amount of volatility inherent in the stage of business, human metrics trump business metrics. As investors, we will tell you stories of great businesses run into the ground by bad operators. And we’ll tell you of bad businesses that were turned around by exceptional people. It starts and ends with the people, so don’t let the business be the excuse for losing sight of them.
The scrutiny between investor and entrepreneur cuts both ways. So back to the basketball game—we wanted to get to know a company and needed a creative way to make that happen. I wish I could tell you I was the calm, collected investor methodically both dribbling the ball and thoughtfully examining every move of our potential investment. Hardly. You see, I’m going after it too when we hit the hardwood. For better or worse we lose ourselves in the game (wasn’t that the point?) and are thus on display for others to judge. And like I told a recent founder with whom we competed, “just know that the same feistiness I’m showing will be in your corner when we get a deal done together.”
If you pick apart my previous three points, they all apply to founders “interviewing” investors:
- Know the people within the firm, not just the venture firm at large. I had a founder recently tell me “[VC firm] is the worst, needs to be called out, and I’m telling every other founder.” I indicated that not every partner will treat you the same, and though they had a one negative experience, I could point them to another founder who had a positive experience with a different partner of the firm. Opinions and styles vary and VCs are deliberate in employing different skillsets/experience to meet portfolio needs.
- Press the flesh. This can be hard as investors are constantly approached and can be tough to pin down. In our case, if all else fails, challenge us to a pickup basketball game 🙂
- When you’ve finally chosen an investment partner, don’t lose sight of the relationship. Though it’s been almost a decade since he backed me, I talk multiple times per week with one of my seed investors. We talk business, but we also talk life. We invest together, but we also go to concerts together. Life is too short. Partner with people you like and then take the time to like the people you partner with, especially during the sprints of your business relationship.
Playing pickup basketball as a means of reaching the people in our industry has its limitations. But it’s a ritual that builds some of the right muscle memory in our team. So here’s to the founders, the ballers, and both!
*Disclaimer: my female founder friends tell me that I need to open up the format for getting to know founders of all backgrounds. Agreed. We’re game for cycling, mountain biking, hiking, whatever your fancy. And this Winter, we look forward to time on the slopes.
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