What VCs can learn from the management style of the Sith
Everyone loves to joke how venture capital is the “Dark Side,” and most of the VCs I know are good-natured about simply accepting the comparison. It’s probably better than “vulture capital,” which was how we were ridiculed when I first started in the business in the early 90s.
At my prior firm, my DFJ Frontier co-founder David Cremin coined the term “Darth Venture” in the early 2000s in one of his all-too-frequent clever moments, so I suppose we bear some responsibility for propagating the rhetoric that VCs are like the Sith, the champions of the Dark Side.
While I personally identify with (young) Obi-Wan Kenobi, sometimes you just need to lean into the dominant discourse in your industry and accept how others view you. With that mindset, I thought it would be interesting to explore whether there is anything constructive that venture capitalists can glean from the Dark Side.
For avoidance of doubt, the following analysis is not meant to condone the objectives of the Sith, which are galactic chaos, indiscriminate death, and dominance over others’ self-determination. Abuse of power = bad. Rather, this is an argument that the ends don’t disqualify the means. And while Darth Vader may be the most popular character from the franchise, it is really Darth Sidious — Darth Vader’s boss — who personifies managerial skill. While Sidious, also known as Chancellor Palpatine, is written to be the most despicable character in the Star Wars universe (we can debate the Hutt), if one looks past the “evil despot” stereotypes, he demonstrates some surprisingly admirable traits and capabilities.
I would argue that there are three best practices in Palpatine’s leadership style that every VC and entrepreneur should emulate:
- Visionary, long range thinking,
- Flawless execution of complex tasks, and
- Superior models for training the next generation
Let’s explore each.
Visonary, Long Range Thinking
Palpatine, more than any other character in Star Wars, embodies strategic thinking and directs his activities toward ambitious, long-range planning. Isn’t this the exact stated approach of most investors? Think big and change the world. As a startup must, Palpatine takes a years-long approach to achieving his designs, making measurable progress, albeit in small steps. Beginning in Episode I: The Phantom Menace with a trade dispute, Palpatine manages to set off a domino effect of changes resulting in a restructuring of the Galactic Senate, ultimately leading to his appointment as Chancellor, and then Emperor. Yes, the plays are straight out of the WWII Nazi leadership handbook, but if you ignore the remarkably unsavory goals, the sheer long-term vision and three-dimensional chess moves are impressive. Ultimately, by taking a long-term approach, Palpatine was able to disrupt his entire ecosystem, just as most VCs and entrepreneurs hope to do.
Nothing exemplifies operational excellence like Order 66. 66, of course, is the campaign conducted in Episode III: Revenge of the Sith, in which the Jedi are systematically eliminated, all at once, by distributed forces throughout the galactic core. It is the ultimate stealth reveal, and by the time it is complete, the Jedi are completely neutralized. From a purely tactical perspective, it is an organizational masterpiece. One can easily imagine the late nights and weekends that were required to conceive and execute such a launch event (do the Sith even have a vacation policy?). For any entrepreneur or VC coaching her, this ability to manage a campaign with such a large number of moving parts has to be considered the gold standard. Did I mention that I am in no way in favor of plans that include killing?
But the best analogy for venture capitalists from the management style of the Sith is surely their recruiting and training model, known as the “Rule of Two” in Star Wars mythology. At any one time, there are only two Sith: a master and an apprentice. And while our industry often describes venture as an apprenticeship business, I wish we were more devoted to this ideal. The reality is that there is really no place you can go to “venture capital school” (there is the excellent and extremely selective Kauffman Fellowship, which is effectively an internship model and available to very few; and there are a small handful of us who teach venture capital in graduate schools, including my class at the Marshall School at the University of Southern California).
The Sith really distinguish themselves from the Jedi with their model of devoted employee development. Darth Vader receives individualized, hands-on attention and guidance from Darth Sidious, and it is clear that no other pupil is competing for his attention (I’m looking at you, Count Dooku’s severed head). The approach includes frequent face-to-face communication, by telepresence when necessary, and incorporates the notion that the student will one day become the master. That’s right, in the Rule of Two, the master must teach his apprentice everything he knows, until the understudy is so strong that he is able to assassinate his master. Far too often, our approach in venture capital is to take our apprentices, throw them into the deep end of the pool, and simply hope they can swim. Developing the next generation of skilled venture investors is one of the roles we take most seriously at Touchdown. I would also like to state explicitly, however, that none of our associates at Touchdown Ventures are encouraged to attempt to assassinate me, and that I am still in the prime of my venture career and have not yet taught you everything I know.
There are other learnings, to be sure. The Sith are unbelievably skilled at business development partnerships, outsourcing, and delegation to outside ecosystem stakeholders. The Trade Federation and Galactic Empire are not really part of the Sith infrastructure; these are essentially business development deals. And by partnering wisely, two Sith can act fairly independently and topple an entire way of life. Isaac Asimov would be proud. Sort of.
In the event I have somehow been too subtle, I cannot underscore enough that I am not in favor of death and destruction. But if we are going to be honest, the Sith are unbelievably competent adversaries for the Jedi, which is probably part of what makes the Star Wars saga so enduring and mythic. And they clearly can teach us something about how to get things done.
If you can think of other evidence of managerial skill demonstrated by the Sith, please “shoot first” in the comments section below!
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Scott Lenet is President of Touchdown Ventures, a Registered Investment Adviser that provides “Venture Capital as a Service” to help corporations launch and manage their investment programs. Touchdown’s Los Angeles-based Associate Selina Troesch (aka, Asajj Ventress) contributed to this article, a version of which was originally published on Tech Crunch.
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