From operator to investor

Four months spent at the Frontline

After 19 years in operating roles, last summer I left my job as a VP at Twitter to learn a new trade, startup investing. Many people have asked what the transition is like. So here goes…

It’s the 12th of September, 2016. My first day as a VC. I’m listening to one of my new colleagues talk about a term sheet.

“That’s called double dipping,” he said, looking at me.

Don’t blink, I thought. Wait for clarification, buy time.

“Participating preference shares,” he added, still underestimating my ignorance.

I returned to my desk to google double dipping and, after an unsavoury first set of results, refined the search to double dipping vc. This led to further research about the advantages and disadvantages of such an instrument.

And so it went for my first couple of months on the job. Frequently confused, occasionally faking it, always learning, trying to figure out the right answer without the right data. It reminded me of business school ten years before, where I was an engineer surrounded by bankers and consultants. The only guy (or so I thought) who had never heard of WACC.

Over the past decade, I had held a variety of managerial and executive roles at Google and Twitter, and presumed that many of my skills would be directly transferable to venture capital.

Wrong.

Switching from operator to a venture investor is like attempting tennis after a lifetime of football. Fitness, balance, and ball-skills are all transferable between the two sports — eventually. But they’re not much help at first, when you’re learning how to grip the racket and return the ball without looking like a clown.

We take for granted the muscle memory that enables us to go about our daily lives. Its sudden absence in a new pursuit is exhausting and humbling, an unwelcome reminder of how rarely as adults we try to learn something completely new.

So how does the new job compare to the old? They’re both general management roles insofar as they both require broad business skill-sets — executive competencies such as leadership, influencing, bias to action, and strategic thinking, and functional expertise in sales, HR, operations, finance, and product. Both require you to wear many hats.

I used to boil my old job at Twitter down to three things:

  1. Ensure direction and strategy are in place
  2. Create an environment in which people can do their best work
  3. Remove obstacles for my team

My new job seems to come down to this:

  1. Find interesting companies and spot emerging sectors
  2. Assess investment fit for Frontline
  3. Help portfolio companies succeed

Marc Andreessen says operating is 90% action and 10% thinking, whereas investing is 90% thinking and 10% action.

While the 90/10 split is provocative, his underlying point is less surprising. It’s inevitable that as an investor you’re less hands on in any one company. “Nose in, fingers out,” as Eric Schmidt used to describe the role of the non-exec director. Beyond this glaring distinction, here are some other observations I’ve noticed.

Differences

Intellectual challenge: VC is largely an individual contributor role. While a supporting team would be nice, I don’t need one to get the job done. In my old roles, I could achieve nothing alone and was always surrounded by people: open-plan seating on large floors, back-to-back staff meetings, business reviews, 1:1s, career chats, interviews, performance reviews, town halls. With such a heavy focus on leadership and team dynamics, each day required emotional dexterity. Revealing my inner introvert, I sometimes went for a 5-minute walk during the day to escape the human bombardment.

Venture, on the other hand, seems individualistic and reflective; more of an intellectual challenge than an emotional one. (“That’s because you’re not on a bunch of boards yet,” a veteran investor assures me. “The emotional burden will come!”)

Variety: Venture reminds me of the Twitter app: a discordant torrent of seemingly disconnected information, new plans, and new companies. Astute and asinine, important and trivial, jarring and uplifting, coming at you in a deluge day after day. While my operating roles provided variety across business function, VC goes further by cutting across sector, revenue model, and business culture. At Frontline we specialise in software and yet we’ve seen almost 350 companies since September; I’ve assessed about 60 of them.

Transferable learnings: One of the silent killers at bigger companies is the accumulation of company-specific skills, rather than transferable ones. In venture, almost everything you learn is transferable. Since the firm itself is tiny, your focus shifts to the external market and portfolio companies.


Yet, despite all of this, operating and venture roles have much in common.

Similarities

Long-term focus: Several experienced investors have told me that it takes ten years and a down-cycle to know if you are any good at this game. And while an individual deal or exit may cause jubilation, the deeper satisfaction comes from building a successful portfolio, watching gems emerge, and seeing the mist rise in a new market.

I would argue the same is true for most operating execs. Joy from hitting quarterly numbers or shipping a feature is fleeting; the deeper satisfaction comes from the longer journeys — a team built, a strategy implemented, a change led.

Assessing people: This is at the heart of both operating and VC roles. Recalibration is required, however. Early-stage founders display a more spectacular kaleidoscope of strengths and weaknesses than big tech operating execs, whose edges get smoothed out by corporate erosion. But people are people, in large companies and small, and the people skills I gained at Google and Twitter are (to my great relief) largely transferable. Sensory toolkit of choice: an eye for talent and a nose for bullshit.

Diagnosis: They are both problem-solving jobs. Early in my career, given my engineering mindset, I tended mostly to notice technical problems — a sub-optimal product, strategy, or process.

Now I tend also to notice people problems — misaligned incentives, misplaced talent, or untapped motivation. Being able to distinguish between the technical and people problems is as crucial to an investor as operating exec.


My perspective on investing will inevitably change with experience. The standpoint of the novice is fleeting, however, and worth recording for that reason. When I started at Frontline four months ago, I expected the jobs to be different and, sure enough, they are. But I underestimated the extent to which exploring — finding companies, researching industries, meeting people — is the essence of venture. It is a rare privilege.

We have seen an increasing number of experienced operators switch to venture in recent years. It’s a long list even among my former colleagues at Google and Twitter: bryan schreier (Sequoia), Wesley Chan (Felicis), Elizabeth Weil (137 Ventures), Tom Rikert (Next World Capital), Adam Ghobarah (Google Ventures), Gretchen Howard (CapitalG), Brent Hill (Origin Ventures), Josh McFarland (Greylock), Christian Hernandez (White Star), Rob Moffat (Balderton), Satya Patel (Homebrew), and dick costolo (Index).

Will I be any good at my new sport? I asked several seasoned investors in the US and Europe if having such experience is an advantage. Half of them nodded reassuringly and said “oh yeah, for sure.” And the other half? They cheerfully dashed my hopes and said the opposite. “Nope. Completely different jobs!”

Who’s right? I guess we’ll find out in ten years.

Some of Frontline team in Budapest recently: (left to right) Stephen, William McQuillan, Thomas Olszewski, Shay Garvey

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