Distance-Traveled: a new diligence framework for entrepreneurs and their phenomenal capacity
by Samala
They love to say, “We’ve always done it this way.” I try to fight that.
— Rear Admiral Grace Murray Hopper
Technology’s incredible pace is opening borders to entrepreneurship beyond geography and beyond verticals. And as tech becomes more and more commoditized, it’s providing us a fascinating investment landscape where the execution, ingenuity and leadership of a team are the strongest signals of success within a compelling market case. New models of who founders are, what problems they’re solving with technology, and what makes them succeed are now more possible than ever.
Despite this, the enormous amount of capital being deployed in the startup ecosystem is jarringly one-note. None of this is news.¹ We have data showcasing the pervasiveness of the problem.² We even have data demonstrating what success looks like in rare occasions the conventional framework isn’t used.³ What we haven’t had is a structural, systemic and superior framework that can supplant how conventional venture operates; a model that captures ingenuity available from technology’s latest pace. It’s what we’re building at Jump Canon, and what we’re excited to start sharing with you.
Problems with Diligence in Early Stage Venture
Excellent investment decisions in venture are supposed to be couched in an ability to identify cognitive biases and other blind spots in the face of extraordinary opportunity.⁴ Part of that expectation is to reduce the risk of exercising incomplete (at best) or poor (at worst) judgements that can result from a limited perspective. Most venture capitalists practice this through the lens of a meritocracy; if you have an outsized vision or opportunity and will work hard to achieve it, you’ll raise capital. The reality is pedigree and pattern matching persist as the popular modus operandi when it comes to diligence, rather than an objective understanding of a founder-to-market-to-risk ratio.
To an extent, that’s understandable. Companies have limited data points at their founding, making early stage investing largely an art of picking teams. However, leaning on pedigree and pattern matching for diligence isn’t just laden with structural, social and cognitive biases, it also introduces ingredients that can foster unhealthy company culture, outcomes and returns.⁵ ⁶
This leads to another prevalent and seemingly benign form of outsourcing diligence called “social proofing,” or validating someone else’s credentials and potential based on proximity to one’s own social structure. On its surface, this isn’t an egregious practice. However, when left uninterrogated, especially at the venture level, the inclination to only see value in recognizable patterns in relations between individuals, groups and institutions comes with some rather large downsides:
- Oversaturated pools of founders
- Missing out on completely new markets
- Investments in poor, costly culture that leads to poor, costly outcomes
A Better Way to Evaluate Founders, Opportunity and “Risk”
To break out of this pervasive approach, while being diligent opportunists when assessing a founder, their market, and their team, we’ve created a new diligence framework: “Distance-Traveled.” We start with three questions:
- What has the founder earned and built, beyond what they inherited?
- What challenges and circumstances have they overcome?
- What net value have they produced?
The larger the distance traveled, the larger the grit, persistence, leadership, empathy, stress tolerance and resourcefulness that’s expected of top performing founders. These are the ingredients every VC wants to see when they ask, “does this founder have the extraordinary capacity to execute?” Our framework at Jump Canon allows us to quantify and assess that answer, strategically and meaningfully. “Distance traveled,” as a wider concept, has been used in the past to broaden talent in hiring pools. We take the core of that idea, a person’s unique narrative, and use it to quantify the tonnage of a person’s demonstrated capacity to execute.
In contrast, the framework applied by conventional venture supports founders within a paradigm defined by perceived “past performance” and pattern matching, resulting in the largely straight, white male allocations we see today that mirror the venture industry itself. This limited scope leads conventional VC’s to overlook ingenuity markets outside of their homogenous in-group,⁷ resulting in the perception of an “ingenuity drought” taking hold in Silicon Valley.⁸
Indexing on those pedigreed and “social proofed” results has also pushed venture to define and confuse what risk truly is in an entrepreneurial context. Conventional venture improperly defines risk as a founder’s circumstantial ability to take risks, rather than their inter-personal capacity to take risks. In other words, a founder’s context to take risk does not equate to their capacity to take risk. Evaluating founders by their Distance-Traveled leads to investments in founders who have a demonstrated capacity for risk. Where conventional venture equivocates that risk, we see assets, indices for success, and unexplored opportunities.
Setting a New Trajectory
One of the brightest examples of the Distance-Traveled framework in practice is Ana Pompa Alarcón Rawls. Ana’s entrepreneurial story began while holding space in two worlds, as an immigrant and an expectant mother of color. She recognized that no space existed for women to discourse and strengthen one another, all the while feeling safe, supported, and elevated. In the process of building that space, Ana quickly realized an integral insight every CEO must learn: that she, herself, cannot scale. It’s a hard lesson the average founder develops often too late in their companies life cycle, one every investor pushes their portfolio to learn. And it’s one Ana recognized within just three months of starting her company.
Ana’s capacity to understand her company and build for her risks is a direct by-product of the distance she has had to travel in her own narrative, one that is enormously hard-working and effective yet not always well-resourced. And it’s how she has built the rocket ship that is findSisterhood.⁹
Distance-Traveled is one of the tools we’ve created after quietly spending the past year and half with spectacular, unconventional and unprecedented founders like Ana. We’re so excited to elevate her story and others, and share more on a model of venture that captures the enormity of both their incredible work and the opportunity they offer.
Like what you’ve read? Feel free to…
- Get in touch with us: partners@jumpcanon.com
- Hit that clap button a bunch of times, share this piece with your folks and follow Jump Canon here on Medium
- Share your Distance-Traveled story on Twitter with #DistanceTraveled
- ^ Valentina Zarya, Fortune, “Female Founders Got 2% of Venture Capital Dollars in 2017.”
- ^ Dana Kanze, Laura Huang, Mark A. Conley, E. Tory Higgins.
Academy of Management, “We Ask Men to Win and Women Not to Lose” - ^ Vivian Hunt, Lareina Yee, Sara Prince, Sundiatu Dixon-Fyle, McKinsey.com, Delivering through diversity.
- ^ Transcript of Charlie Munger’s talk at USC Business School in 1994, A Lesson on Elementary Worldly Wisdom.
- ^ Katie Benner, New York Times, “Women in Tech Speak Frankly on Culture of Harassment.”
- ^ Susan Fowler, “Reflecting On One Very, Very Strange Year At Uber.”
- ^ Rich Kerby, “Where Did You Go To School?”
- ^ Greg Ip, The Wall Street Journal, “The Economy’s Hidden Problem: We’re Out of Big Ideas: Dwindling gains in science, medicine and technology hold back growth; is America too risk-averse?”
- ^ Jia Wertz, Forbes, “This Anonymous Social Network Allows Women To Be Honest Rather Than Portray Perfection.”
