A Venture Capitalist’s Second Birthday
My goal for these yearly posts (year 1 summary here) is to give people a view into what VC is really like since there seems to be a black hole as to what we really do and how it gets done.
Today is my official two year anniversary in Venture Capital.* I feel old, but really it’s more akin to being a toddler as the journey to being a fully grown VC can take the better part of a decade,** and I’m still learning how to walk.
I still consider myself a recovering mechanical engineer making it up as I go. I’m not sure how much longer the transition period is until I’m fully recovered, but I think it is once I no longer feel like I can build something, which I hope never happens.
This is a big anniversary for a baby VC. For those who don’t know, VC is an ‘up or out’ job meaning you either get invited to stay or not and that cycle is usually two years. For most, this job has an expiration date, some self-imposed and some forced, so I consider myself lucky to still be here sharing my thoughts with you all.
This year was considerably more concentrated than year one. We did two of my deals at Wildcat, I now “observe” four boards of our existing portfolio companies, and I made an angel investment in a triple bottom line company that I’ve been advising for over two-and-a-half years. Additionally, I went from going to a lot of events to speaking at a lot of events.
In writing this I realize I didn’t publish any of the content of my talks for the year (facepalm), so I’ll have to do that in a later post(s), but the highlights are:
- Keynoted the Einstein AI Event on the future of work: Deck
- Spoke at UVCA’s Davos event with Andrey Kolodyuk, Vivek Ranadivé and Vitaly M. Golomb ✈ on the future of technology investing: Video
- Spoke at Horasis Global Initiative in Portugal on the future of robotics and ended up on roundtables on the future of capital and the future of labor. Here is some footage from the roundtable on the future of capital- my cameos are with 17 minutes and 5:10 minutes left.
- Spoke at Augmented Reality World Expo on who will win in this chapter of AR with the amazing Adaora Udoji: youtube.***
Venture Capitalists are first and foremost money managers and we have a fiduciary responsibility to make as much money as possible for our investors. As such, the most important yardstick that younger VC’s are measured against is how many deals you bring in that get done by the partnership and you get promoted on how good those deals end up being. As a low-volume shop, we don’t do that many deals a year, I am happy and humbled to say that two of our full-up investments in Wildcat’s first fund were deals that I sourced. The trust building that comes from that within the partnership is an awesome start, but it’s a long road ahead.
The first is a mapping company What3words, which you can read all about here. Reading this from the comfort of a major metro area, it might be hard for most Medium readers to rationalize the problem w3w solves, but for anyone who has been to a developing country or a country that doesn’t care that you speak English (i.e. Japan), you know how hard it is to navigate. This problem touches 4 billion people globally, and if you ever find yourself in a situation unable to communicate where you are or where you’re going you’ll be thankful you downloaded the app. Here’s the download link in case you need it ;).
The second was LeaseLock, there is a new post coming out specifically about them soon, but the short summary is that you hate your security deposit, but your landlord/property manager hates your security deposit even more. Moving that painful upfront cost to a monthly fee is a win-win scenario for all parties and gets more deserving renters into apartments. Reichen, Derek and their team just launched their new product offering at the end of Q2 and are absolutely groovin’.
Truth be told, the scariest thing I did all year though was commit personal capital to an investment in Position Limited. Ron and his team are rebuilding supply chains in favor of the original producers, and this admirable company has their first product launching next year. Supporting the cause is easy: buy stuff from people not brands.
Work travel is fun right up until it isn’t. I’m writing this article sick in bed from all the work travel on the summer circuit, and I think that alone will be a forcing function for me to stay more tightly rooted geographically. I still have my airline status, which I’m thankful for because with portfolio companies from London to Los Angeles that is the only thing that makes flying United tolerable…
I think about VC similarly to a PID curve (see picture below). When you first join VC you hit the ground running and there is a lot of pressure, mostly around timing as outlined above, to see what you’re going bring to the table. While you are hustling like crazy and growing your network you end up falling into a band- did you overshoot (K=1.6), undershoot (K=0.5), etc. and over time it starts to level out an equilibrium (Reference).
I think about that first spike as the hustle it takes to find your first deal, and the rest of the time after that is an oscillation in time spent between finding new deals and managing your existing portfolio companies until you settle into a steady state and it starts to become “normal.”
To frame it another way, my former bosses, Patrick Meagher and Brad Knight currently of Katerra, once told me that undisciplined product development looks a lot like 4-year old’s playing soccer- everyone running together to where the ball is. That was me last year- zigzagging across the country running around like crazy from event to event- aka. I overshot my PID curve looking at everything trying to get a footing somewhere.
Why is the early venture journey so chaotic? There are two key reasons:
The first thing to acknowledge is that Venture is not a “normal job.” Normal jobs have clear KPI’s, career paths, and tight feedback loops if you’re doing poorly. These things don’t really exist in the same form here, and there is a lot of grey-area to navigate. Why? Because, on the whole, when you first come in you don’t know the 5 W’s and the H of sourcing, you don’t know what a “good” company looks like, you have no theses, you have no idea what you should be looking for, and building this tool-chest is challenging.
The second is that any strong partnership is built on a foundation of trust. Trust is something that is earned over a long period of time, and you cannot rush the pace of trust. This is probably the hardest thing for junior, mostly millennial, VC’s to rationalize, and why they jump ship for greener pastures.
For both myself and also a lot of my peers, the stressors from the uncertainty of the job manifest themselves as mild existential crises.
How do people push through it?
I can only speak for myself, but I use a question framework based on Karl Ove Knausgaard’s books**** to learn and relearn, and I ask everyone I meet four questions:
- What is the most interesting thing you’ve learned recently?
- What is something you want to be learning about?
- What are some problems you are facing right now?
- What are some specific challenges preventing you from solving that problem or from learning what you want to be learning about?
These questions allow me to learn about new problems and what excites the people around me. This is important because a lot of the actual job is the same, and it’s really the people and problems that keep me motivated.
Meeting with founders everyday gives you the privilege to learn in a matter of minutes what it took someone years to learn themselves.***** As a VC this enables you to get a picture of an entire market you’re keen on, but it’s a fine line idealistic young VC’s dance: how many meetings can you realistically take with entrepreneurs that are 110% committed to the future they are building before you snap under the weight of being their arbiter of truth?****** This took the form of several of my peers and friends going on to start or join startups in addition to a light exodus from the Bay Area. I will of course miss them as they kick off their exciting new chapters, and I am wishing them nothing but the best in their journeys- come back and let me cook for you!
By most measures these first two years seem to have gone well enough, and whatever this thing is that I’m currently creating is still forming around me so it’s really too early to identify, much less measure. I still have a lot to work on- organization, timeliness, etc.- but there is a foundation to build on here, and it’ll be interesting to see where it goes.
Thanks for reading, and maybe I’ll see you next year.
Sincerely,
Nathaniel
*I told our community director that I was two years old this week, and she responded with, “ONLY two years?! It feels like an eternity”…Thanks ;). Melissa doesn’t have a Medium so I can needle her from here : ).
**For the uninitiated, if all goes well, that’s about how long it takes these companies to get big, and it is also approximately the time it takes to become a GP if you start from zero.
*** Giles Rhys Jones I volunteer myself for one of your (in)famous media training sessions
**** “As your perspective of the world increases not only is the pain it inflicts on you less but also its meaning. Understanding the world requires you to take a certain distance from it. Things that are too small to see with the naked eye, such as molecules and atoms, we magnify. Things that are too large, such as cloud formations, river deltas, constellations, we reduce. At length we bring it within the scope of our senses and we stabilize it with fixer. When it has been fixed we call it knowledge. Throughout our childhood and teenage years, we strive to attain the correct distance to objects and phenomena. We read, we learn, we experience, we make adjustments. Then one day we reach the point where all the necessary distances have been set, all the necessary systems have been put in place. That is when time begins to pick up speed. It no longer meets any obstacles, everything is set, time races through our lives, the days pass by in a flash and before we know that is happening we are forty, fifty, sixty… Meaning requires content, content requires time, time requires resistance. Knowledge is distance, knowledge is stasis and the enemy of meaning.” — Karl Ove Knausgaurd My Struggle, Book 1
***** I saw this as a tweet from a famous investor recently. I thought it was Jason M. Lemkin or Jason Calacanis that posted it, but I couldn’t find it so paraphrased it for you above. If anyone knows who said this please let me know so I can give them proper credit.
****** The conviction level of having an armchair thesis is not the same as putting your skin in the game and building a startup.
******* Vive la Tarte is still life, but I had to cut out the cheesecakes. I’ve been there so many times that I’ve watched the entire staff cycle through. I don’t know who that says more about me or them…