Sunday morning. Football’s on. I have a cup of coffee I brewed (Im getting good at it!) and am catching up on ESPN.com.
Yesterday, or maybe the night before, I read a post about 500startups and their approach to investing. I tweeted that it was both what I loved and disliked about the 500startups process. Dave was quick to ask me to explain further, imploring me to outline what I thought was wrong so they could work on it. (I sent him an email this morning for those keeping track).
On Tuesday, I am heading to Half Moon Bay for DFJ‘s annual CEO Summit. Its a good time, and DFJ and 500startups are as different as two funds could get.
All of this has got me thinking about what a perfect venture firm looked like. If I were to have $100mm in my pocket, and I was to build a firm from the ground up, what would it look like?
Im not sure if I am ready to completely outline that — still thinking about it, and in truth it would be stealing from Foundry Group, Union Square Ventures, First Round, Spark Capital, 500startups, Tim Draper, Chris Sacca and others — but this morning, I read this post on how Jim Harbaugh is putting Alex Smith in the best position to win.
The premise is that by simplifying the playbook, and removing “sight adjustments,” that Alex Smith has gone from a shitty QB to a decent one.
A “sight adjustment” by a receiver refers to the concept that, if a defense blitzes, the quarterback and receiver must both — on the fly and after the snap — recognize it and adjust routes accordingly.
How does that relate to venture capital?
VCs pride themselves on the ability to pattern match and through that bring additional wisdom to the startup process. In many ways, the VC acts as the coach, and the CEO as the QB. If the VC is helping develop the playbook by injecting their knowledge from other deals they have done or have knowledge of, there is an inherent risk that they are helping to create a startup that is built to succeed based on their experience, not on the skills of the CEO.
Most first-time entrepreneurs — like young NFL QBs — dont have the faith in themselves to say to their investors “I got this. Here is what I do best, and this is how we are going to build this company.” Instead, they look to carry out the playbook as dictated by their VCS — “we didnt fund you to have you save it — hire fast — move the company — whatever” and if their skill set doesnt match the “perfect” startup playbook, they are removed or diminished.
The genius of what Jim Harbaugh has done is that he has removed the “complex ballet of synchronized adjustments” and replaced it by “just look[ing] for a different receiver.” Its not simplification, its the reduction of complexity. A company that I am advising, CAGE, said it perfectly in a blog post:
Too often, companies strip out features for the sake of being simple. But that’s not simple, it’s frustrating. So we spent some time carefully finding a balance between useful new features and the simplicity that has made CAGE so easy to adopt. You could say we’ve been on a mission to make every detail perfect and to limit the number of details to perfect (thank you, Jack).
The best VCs are the ones that work to put the CEO in the best position possible to succeed, not because the CEO is the best to work the playbook they devised, but because the playbook is devised to allow the CEO to succeed.
If I were to start a fund today, it would be with the philosophy of removing the need of the CEO to make sight adjustments, and providing a supportive environment to allow the perfection of the simple.
Of course, coaches often say they are “simplifying the playbook,” but Harbaugh has been able to do it coherently and in a way that actually aids his quarterback’s ability to succeed rather than simply removes options.
- Why Jim Harbaugh Is Insane to Suggest Alex Smith Is an Elite QB (bleacherreport.com)
- Cautious optimism: Startups will come out ahead (venturebeat.com)
- So You Think You’re a Shot Caller? (learntoduck.com)
- I’ve Got an Idea for a Startup: NOW WHAT? by Amit Klein (chaitanyapramod.wordpress.com)