It might be said that a conventional path to venture capital is one preceded by time running a startup. In January this year, I stepped in as CEO of portfolio company, Data Republic, a business I founded but only operated for a hot minute, until now. With the support of my fellow partners and team at Reinventure, I have stepped back from most of my proactive VC duties for a while (aside from existing board roles), and have picked up the reins at Data Republic on a full-time basis.
Nine months into this experience, some hard truths have hit home about being a VC ‘on the journey’ with a startup founder vs. being the person in the hot seat.
The strange thing is, I have done this before. I co-founded a startup, Gizmo Corporation, that went from 0 to 150 people inside 3 years, was BRW Fast 50 two years in a row and then didn’t pan out for a range of reasons (some of which shaped my path to becoming a VC).
But that was a while ago and memory can clearly play tricks. I’ve realised that founding a startup has some serious parallels to those early years of being a parent with young kids. When you’re in the thick of the sleepless nights, tense relationships, and not feeling like you really know what you are doing you can’t imagine ever doing it again….yet a few short years later, there you are.
So here are a couple of the really powerful realisations I have had.
The ring is heavy…
On one of the many restless nights when I was staring at the ceiling wondering how I was going to figure out problem x, or why the fuck I agreed to solution y, I was struck by how different it was to be the non-operational Co-Founder, Chair and major investor of Data Republic, rather than the actual CEO. Why had I not spent as many nights awake when I was on the other side of the table?
Then an analogy dawned on me…and, if you are not a Lord of The Rings fan, you may as well skip to the next point.
Having VCs who are ‘on the journey’ with you is a little bit like the Fellowship of the Ring. Yes, you are all part of the fellowship on your way to Mordor, but the truth is only one of you is Frodo wearing the fucking ring. Sure, Mr Gandalf-VC is very wise, knows how hard it is to bear the responsibility and is there to provide guidance and defence against some competitive orcs, but it’s only Frodo the CEO who knows the relentless, 24/7 weight of bearing the ring. It’s your responsibility and yours alone. You may be lucky enough to have a few loyal Sams along for the journey but they can’t fully take the burden from you.
It weighs you down, it saps joy, it robs you of your rest and sleep, and all you really want to do is slip it on and disappear forever. It calls to you that way…’just walk away’…but you know in your bones if you do that — if you abandon the quest — then all hope is lost, not just for you but those you care about. So you endure. You must endure.
I have incredible support from our investors at Data Republic, so this isn’t a message directed at them. It is directed at me, for when I was playing wise Gandalf on the other side. Sure, I was helping to guide the fellowship but I was certainly not bearing the ring. No matter how you look at it, it is not the same journey.
Relentless demands on time
I remember feeling that VC was the hardest I had ever worked. Never-ending deal flow to assess, growing portfolio companies to manage, increasing demands of a corporate LP. While my diary was empty 2 weeks out, the next 3 days were always an impossible juggle. I could email until 11pm and then again from 4am. There was always something to respond to.
It honestly feels like a cake walk compared to my daily life as CEO. We have a wonderfully small and autonomous team at Reinventure and the founders we support are incredibly capable. So what feels like an enormous demand on time is more about being available to provide support at critical moments to people who otherwise largely have it in hand. That is to say, I would respond to stimulus.
By comparison, as a CEO, I have never felt more stretched by time. I’ve never felt more like I’m not available enough to my team and the company, like I’m not present enough, like I don’t spend enough time with customers, don’t spend enough time with potential investors, don’t spend enough time prioritising recruitment. There is always the feeling that if I can just proactively do more, then more will happen. It’s not the busyness of being stimulus-driven, but the guilt that comes from not doing enough before the stimulus is present.
As a VC, apart from scheduled board meetings (usually set well in advance) you are generally more in control of the timetable. Pitch meetings work to your availability, cycles are long enough, calendars can flex and there is always a possibility to prioritise the truly urgent.
As a CEO, if you defer that key employee catch-up they have been asking for by an extra week because you have to travel, or leave the offer for a new CTO by a week — it’s too late. No one else is interested in your schedule. You have to find a way to make time work.
Most of the issues are people issues
Yes, we’ve all read this twitter wisdom. We remember this from when we were founders, way back before we became a VC. Yet, despite collectively knowing it’s true, as VCs we still spend the majority of our board meetings talking about strategies, competitors and numbers. Now, these things are not what keeps me awake at night — people do.
This goes all the way from the one team member you have a feeling is bringing everyone else down, but you can’t put your finger on who or where, to the super-talented team members who just create a little friction with other people that you need to manage, to team members who are fatigued and need a special pep talk (only you can’t figure out just where they need the boost) to people who aren’t delivering but you can’t tell if it’s their performance or the market.
Tied with the ring observation from earlier, the responsibility you feel towards every individual in the company is real. That goes from the moment you hire them (and the commitments and promises you make) to the moment when they tell you they need things to change or they are ready for more. Your responsibility to people is constant, absolute and unwavering, from the folks that aren’t the right fit on the team to the shining stars who are out-growing you.
It is surprising to me now how few times I really listened to board updates of performance challenges and operating issues as a VC board member, where the response from board members wasn’t mostly, “why don’t we talk through your org chart to see what additional help you need.”
The art of holding two competing thoughts in your head
A startup is like Schrodinger’s cat. At any point in time, your company has both the potential to be wildly successful and a complete train wreck. You need to be able to hold both potential outcomes in your head at the same time. This goes to everything.
· My metrics may not support my desire to raise the next round BUT I know we are on the cusp of something great and others will see that.
· The market is maturing to bring me a wave of demand BUT in case it’s not, I know what my plan B is to buy more time.
· My burn rate is uncomfortably high, BUT I can’t lower it or I will definitely not be successful, so I will back myself to drive revenue growth.
· This potential candidate could be the best hire ever BUT if they don’t work out then I will just re-organise this way instead.
It’s like living the business version of a Rick and Morty episode, where parallel universes are stacked one on top of the other, except you don’t have the luxury of a portal gun. You just know there are infinite possible outcomes and you are expected to have thought through them all.
The humility of having to say to yourself “I don’t know”
There is an arrogance to VC that is an inherently conditioned part of the profession. The job demands certainty. You are required to look at hundreds of potential investment opportunities a year and choose only a couple to invest in. As human beings, we come up with all sorts of wonderful ways to create confidence that we (and we alone) can spot the signal in that noise. From our own heuristics, to investment theses, to filters etc. For a VC, a freshly minted investment is always a certain “yes” at the time it is made, and a pass is always a certain “no”. We even have certain views on government policies, other VC investments, markets… you name it. It’s why VCs always make such good panel fodder — so certain of everything!
Yet as CEO, I don’t recall many important decisions I have had to make where I wasn’t dogged with the feeling, “I don’t actually really know the answer to this and my decision is just my best guess with the information I have”. From which of two good candidates to hire, to which potential technology architecture to pursue, to which roadmap features to prioritise, to whether I should increase burn to invest in customer success. Not once have I felt certainty in quite the same way I did as a VC. But that isn’t a conversation easily had with people in the team, nor with my investors or board members. I try to bring the key issues I am grappling with to the table in these moments, but the advice is only ever of limited application, as they aren’t living it. At best, it reduces the uncertainty, but seldom eliminates it.
It’s ok to be able to say to yourself, “I don’t actually know the answer to this”. Because no one else is better qualified, and you are wearing the damn ring, Frodo, so keep walking.
The importance of words
I used to think that as a VC my words had weight. Get invited to talk, get quoted in the press, (Cue sarcasm from my 11 year old son “Oooh, you are a VC, you are so smart, let’s all listen to what you have to say”). In truth though, no-one listens to a VC. Not the way team members in a startup listen to the CEO. Your words matter. Every. Single. One.
I have had to become more deliberate with my in-person communication, my emails and my company updates. A stray word, an off-hand comment can be interpreted in so many ways. Startups crave context and clarity. If you don’t have your strategy, plan, narrative and context completely nailed, you are leaving space for interpretation. The metabolism of a startup is such that if you don’t feed it context, nutritious context, frequently and in decent portions, then you might find the organisation will feed upon itself.
It’s not all Mt Doom — or at least it won’t be for forever
I write this post as catharsis for myself. I write it as a message in a bottle for when I go back to VC (eventually) so that I will remember what it is like and what really matters when supporting a founder. I write it to acknowledge Paul McCarney, my co-founder and previous CEO of Data Republic, who put up his hand last December and passed the ring onto me. It takes enormous courage and self-awareness to know when that time comes.
I hope that the analogy of being a new parent is wrong, that I can hang on to this understanding in perpetuity, and not return to the VC-conditioned experience.
Above all else, I hope that if you read this and it resonates with you, that you know you are not alone.
Danny Gilligan is cofounder and Managing Partner of Reinventure Group. He is also cofounder of portfolio company Data Republic, and stepped into the CEO role in January 2019.