The Beginning of the Beginning

Two months is a perfect amount of time to recognize how little you know. The first month of a new job feels most like happy-go-lucky play-acting, the next like a diminishing case of imposter syndrome. After eight weeks, the clothes feel, just, as if they are beginning to fit. At which point you realize that everything up to this point has been a prelude, an installation, not even the beginning of the beginning.

But there are many advantages in being a novice. An expert is someone who sees more problems than solutions; they have learned all the things that cannot work. One of my favorite authors, Thomas Mann, summarized the sentiment well, noting, “A writer is someone for whom writing is more difficult than it is for other people.”

I do not have the discern experience brings, but I am also less guided by it. Perhaps, even the beginner’s mind can offer some value. These are my observations from two months in venture capital:

1. Capital has an opportunity cost

You cannot invest in every good company. Which feels like a strange, and obvious thing to say. The simple fact of the matter is that funds have limits (especially those at the seed/Series A stage); every investment is zero sum. Putting in a $1MM check in one company, means not putting in $1MM into another. Or, to think of it another way, not investing $250K in four other companies. For every investment there is an anti-investment, a phantom winner, a loss.

Which means that you have to fall in love with a business. In my first few weeks on the job, I found the number of good, viable companies startling. Nearly all had a strong, sensible founder. Nearly all had reasonable traction. Nearly all had an idea worth bringing to fruition. On Shark Tank, or some other platform unbeholden to the constraints of a discrete fund, you might — in a flurry of name-calling and cheque-waving — fund them all. And you might do well. But the bar is higher than that. The bar is in falling love.

2. Technical knowledge is underrated and underrepresented

The people in the connected worlds of VC and entrepreneurship are far and away the most impressive I’ve had the pleasure of meeting.

Everyone is smart. Everyone has an opinion. Everyone (almost) has taken time to follow a passion, to walk an uncommon path for a time. But these diverse experiences have a familiar, similar shape: the form of the generalist. Generalists make for strong thematic thinkers and good learners; they’ve spent their lives tacking up steep learning curves, trading the plateau of one for the slope of the next.

In a world dominated by generalists, experts, especially those with technical knowledge, have an observable advantage.

At Red Sea Ventures, we have our own technical expert, Julian. After spending time working at Fortna as a distribution and supply chain software engineer (among other things), Julian understands the logistics space better than anyone. (If you’re curious to learn more, he recently wrote an excellent post that can be found here: http://bit.ly/2aApxvd)

You can see the tangible benefit of Julian’s knowledge throughout the venture process. Within the first few minutes of the first meeting, he’s able to listen actively, pick out the salient points, and ask the right questions. In the days after, he has both the network and knowledge to dig deeper, and test demand. If a deal is made (and sometimes even if it is not), he’s able to provide outsized BD value, sealing deals and securing pilots.

A generalist may be able to bring some of these skills to the table, some of the time. But, when it comes to winning a competitive deal, technical domain expertise is a hell of a kicker.

3. VC is a fickle game

This is most starkly evident when discussing bots. In a startling amount of time, they’ve gone from being treated with excitement to derision. The beginning of the summer was full of lively, hopeful talks about “conversational commerce,” “command line interfaces” and “platform agnostic chats.” The latter half has been marked by weariness, and disinterest.

I’m not sure what’s prompted such a dramatic shift, but if I had to guess, I’d say it’s a matter of hype and saturation. Too many companies have emerged in response to an overly optimistic outlook. I can only imagine that this remarkable delta has made it harder for bot-related startups.

4. Mission matters

At least at RSV. Though I expected social impact to factor into the team’s investment strategy in some respect, I’ve been pleasantly surprised to see how often it guides the process.

Several times during the summer, the team has taken time to think about what impact we hope to have as a fund; to determine what matters most to us. This process has been spearheaded by our founder and GP Scott (who has a unique ability to hold both short and long-term goals in mind at once), but has been increasingly adopted and emphasized by the entirety of the team. To be part of a culture that cares deeply about forging a mission has felt special. It is certainly something I will optimize for wherever I go next.