1/15: Of all the questions I’m being asked on recent diligence calls about our companies, the most common is “What are the skills/gaps of the Founder(s)?” Given COVID, this has become an important topic so I thought it would be worth sharing how I think about the issue. Unpacked:
2/15: In every conversation I try to level-set the outsider and speak in “truisms” before diving into specifics. The first truism is that the skill set needed to run a high growth, disruptive start-up is multi-dimensional and that it’s about tradeoffs vs. insisting on completism.
3/15: We’d love if our Founders were world class on dimensions that include: Action orientation, ability to make decisions with limited/changing data, magnet for talent, ability to frame a business vision, and fundraising skills. These are just a few of the many important skills.
4/15: Add to this a desire for industry specific skills, technical chops, an eye for product, a track record of previous successes and deep financial acumen and you’ve defined the null set. Makes sourcing candidates easy because there aren’t any.
5/15: The second truism is that many Founders are highly functioning broken people. Spikes on some dimensions typically come with serious gaps elsewhere. It takes a special someone to become a Founder and rarely are they “perfectly balanced” people.
6/15: I try to humorously weave in that I’ve had a career that’s generally considered “successful” but that I’m an incredibly broken individual who somehow made it work. In case you’re curious, I wrote about how I’m FUBAR broken here: fintechjunkie.com/2018/07/29/bro…
7/15: The third truism is that the last thing we should do as investors is insist on some form of “try harder” from Founders regarding their flaws. Instead, we should focus on figuring out a Founder’s Superpower and surrounding them with people who can fill in their gaps.
8/15: If a Founder is brilliant on certain dimensions but falls short on others, the first thing that we as investors/advisors need to determine is whether or not the Founder has the ability to fix his/her shortcomings.
9/15: I’m of the belief that it’s OK for the answer to be no. It might be possible to help them improve a little, but there are times when there’s a true inability to change. And in these cases, the worst thing to do is to insist on change that won’t manifest no matter the effort
10/15: There’s no reason to declare the Founder incompetent and pass on investing in a business based on gaps that could be filled in by hiring complementary people. This could create a collective win where the complete picture is assembled using more than one puzzle piece.
11/15: I also try to make a point that as investors, it’s critical to realize that when we evaluate a Founder our bias is to try to rate them relative to the best Founder we’ve worked with in the past. This is natural but dangerous and does very little good.
12/15: My goal as an investor/advisor is to help a Founder become the best version of him/herself that they can be. But doing this requires putting in the time and effort needed to build a strong relationship grounded in trust.
13/15: It requires being empathic. And above all it requires believing that the effort will be worth it. The more a Founder is self-aware, the more they listen to feedback and the more they care about how their behaviors affect others the easier it is to believe.
14/15: As an aside but a truth. Me looking in the mirror early in my career: “Anyone know where I can get this thing fixed?”. My managers weren’t as empathetic as they could have been. I knew I was broken but I also knew I could add tons of value.
15/15: So, in these crazy times with very little face-to-face contact, it’s more important than ever to reference Founders. But it also means that we need to internalize that perfection isn’t the standard. If it is, someone should have sent me to the glue factory a long time ago.

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More from @fintechjunkie

16 Oct
1/42: What the heck is going on with the #fintech ecosystem’s obsession with Neo-Banks? Do they actually make sense in the US? Traditional Bankers say “absolutely not”. I say “they can”. Unpacked:
2/42: Because there’s so much confusion about the topic, it’s worth starting with a definitional statement about what a Neo-Bank is. One definition: A Neo-Bank is a COMPANY that offers a LIMITED SUITE OF BANKING PRODUCTS with NO OWNERSHIP OF BRANCH LOCATIONS.
3/42: COMPANY does not mean Bank. There are many forms and fashions of Neo-Banks but not many of them are actually Banks. It’s possible with today’s technological solutions for a non-Bank to offer Banking products.
Read 42 tweets
11 Oct
1/28: The most commonly debated and IMHO the least grounded topic in early stage VC is “how do you determine what a company is worth?” Recent early stage #fintech and #venturecapital valuations seem to defy gravity but are they justified?
2/28: Answering this question requires breaking down the problem into a framework that’s easier to analyze. One framework: A business is “worth” a combination of the intrinsic value of what it can produce and the option value of what it might be able to produce in the future.
3/28: When a company has cracked the code on turning a dollar of investment into a multiple of the dollar in the future it can be categorized as a money making machine.
Read 28 tweets
3 Oct
1/25: I’ve been told that some of the simple concepts I routinely share with Founders get adopted by their firms as “truths” (which is flattering). I was asked to outline a few of them in Tweet form. Unpacked:
2/25: One of my favorites is a concept called “0.8 to the 5th”. It’s an acknowledgment that contingent probabilities suck. If a business plan has many “ands” joining process steps to create outcomes then its stuck in the world of contingent probabilities.
3/25: Most businesses are complex with strings of three, four, and sometimes five or more dependencies linked together. The best Operator in the world only has in the ballpark of an 80% chance of hitting an aggressive goal if it’s one of many complex priorities on his/her plate.
Read 26 tweets
28 Sep
1/31: The biggest question coming out of my recent tweet thread about the evaluation of startups is: “How important is the startup’s distribution strategy in your diligence work?” The answer is: “Damn important because the business needs customers to exist!” Unpacked:
2/31: This may sound backwards to some investors but my diligence process around a company’s marketing strategy starts with the unit economics of their product/offering. The greater the contribution margin (in absolute dollars) the more options a company has to scale.
3/31: If a product can only throw off a few dollars of contribution margin a year then the channels the company should be testing will be very different than if the product can throw off a few hundred or a few thousand dollars of contribution margin.
Read 31 tweets
23 Sep
1/21: Every early stage startup pitch looks the same at a foundational level. This means that the analysis of every early stage startup also looks similar (especially true in #venturecapital and #fintech). Unpacked:
2/21: Every pitch has four main high-level asserted statements: A problem statement, a solution statement, a financial statement and a team statement.
3/21: The problem statement is the Founder’s way of helping his/her audience internalize a problem they’ve discovered in their target market and an articulation of why it’s a gigantic and profoundly painful problem to a defined group of customers.
Read 22 tweets
20 Sep
I grew up here Image
And here Image
And here Image
Read 4 tweets

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