10k, Unicorns & the X-Factor
Let’s start off with full disclosure — I’ve invested in what M25 is doing in more ways than one, and inevitably have some inherent biases. I’m wearing multiple hats as author of this blog. I’m on the board of M25, I’m an investor in both funds M25 has launched, and I’m the father of the Managing Director of M25. That being said, I’m prepared to tell you by the end of this writing why I believe M25 is the “best thing since sliced bread”.
Malcolm Gladwell said you need 10,000 hours of practice to master anything. I know for myself at least, I didn’t practice that many hours on the piano when I was a teenager and forced to take lessons, hence I was far from being a master. Now in reality, if you are in “business-mode” 50 hours a week, can you be a master at your craft in a mere 4 years? I believe that simply putting in 10,000 hours isn’t going to open the door of mastery — the key is putting in the hours correctly.
We, meaning anybody who has invested in the VC world, all fantasize about the one unicorn we will be a part of. Oh the bliss of telling your friend while you are grabbing overpriced cold-brew coffee that the article on the front page of the WSJ, detailing the rise and impending IPO of [UnicornX], was in your portfolio in their Series A round. Sure, it might happen, but don’t count on it, as the fantasy is likely much more enjoyable than the ultimate reality for many VCs will be. When sitting in on a bevy of six minute pitches recently, which were really good by the way, I was already seeing visions of unicorns.
So, what is that secret formula to success in the VC world? What is the so called X-Factor? Let me rephrase that question — what is the true differentiator between responsible, successful venture capitalists and the rest of the pack? Or is it just dumb luck? Can this endeavor simply be quantified and basically all subjectivity removed? Or must possessing the ability to predict and objective subjectivity prevail? All good questions — I’m glad you asked.
As a board member of M25, I am just close enough to the action to be able to rationally compare M25 to the rest of the firms in the VC world. By reading the weekly update reports, studying and voting on portcos, and attending industry events, I get enough empirical and anecdotal information to ascertain how M25 is performing — specifically the quality and consistency by which they are executing. Speaking of measuring performance — looking to M25’s fund results to gauge performance is not feasible — it will be 7 years, more or less, and by that time potential investors in M25 will have committed or passed at least two fund participation opportunities. Yes, choosing a VC fund is not something that involves a nice neat equation. Choosing is hard, however I think M25 makes the decision much easier. Here’s how…
- 10,000 hours: The team at M25 are, have been and will continue to live VC. They do this stuff every day. They eat, breathe and sleep in the VC world. VC becomes an intimate and innate part of their being. This is all key, but not necessarily different than any other firm. What stands out is the analytical, objective, and index-based approach used by M25. Some may call it “gut” feelings, but it boils down to putting in the hours — correct hours.
- Unicorns are rare: M25 doesn’t live the lie that Unicorns can be consistently plucked out of the VC air. Rather, capturing them in your portfolio is all about possessing the correct process and program and diligently following this methodology in a disciplined manner. The team at M25 does not let emotion (greed and fear) rule their day. The team at M25 also has an enhanced accountability and governance process with the M25 Board and Strategic Advisor group. The emphasis on an index-based approach improves our ability to capture unicorns in our portfolio and reduces our reliance on unicorns for overall fund returns — this is also key.
- X-Factors are real and exist: They are not a myth. The X-Factor is a real phenomenon. When following and observing the M25 team in action, it is almost a virtualization of defining what the X-Factor looks like in real life. The probing questions to founders. The immediate recall that this “space is too crowded”. The awareness that “I’ve seen 15 of these CRM systems in the last three months”. Just sit back and watch — it all becomes crystal clear.
Let’s end with full disclosure. I’m wearing multiple hats. I’m biased. I’m also fully convinced that M25 is going to knock it out of the park (M25 is based in Chicago and it looks like the Chicago Cubs are set to conclude a historical year by winning the World Series — hence a baseball analogy is fitting).
About the Author
Brent Gutwein currently lives in West Lafayette, Indiana and his day job is acting as the managing partner of real estate management company Granite Student Living. Prior to founding Granite, Brent owned AAG Venture, LLC, a row crop farming operation and grain elevator that sourced and serviced the commodity needs of Morning Song Wild Bird Food. In addition, he was the CEO of Fred Gutwein Family Citrus, LLC, a Florida based family citrus operation for 10 years. Brent managed the production and finances of the citrus operation for Fred Gutwein Family Citrus, LLC as well as the strategic liquidation of the underlying real estate. Brent is also co-founder and President of Boulder Group — a real estate capital management firm providing individuals and institutions with professional, dedicated and focused attention to real estate deals. Brent received his Bachelor of Science and Masters in Business Administration from the Krannert School of Management of Purdue University. He holds an Indiana real estate broker’s license. Brent is married with three children. He is an avid runner and recently achieved his goal of running the equivalent number of miles as jaunting around the equator, hence he has decided to turn around and head back home…