Leadership, Risk, & Investing
All Things Venture #057
I say this all the time, but I am fortunate and lucky to be an investor. I am in a position where my day to day job, is to seek out entrepreneurs who have a massive vision for how the world should or could be, and partner with them to bring it to life. And when I say partner with them, I (and all other investors) at best, get to play Robin to someone’s Batman. Make no mistake. Investors play second fiddle. The rockstars, the Mick Jaggers, the Freddie Mercurys, the BEYONCEs of startups, are the founders themselves. So I try my best to simply support founders, amplify founders, and then get out of the way. Don’t get me wrong though, I bust my ass everyday. I’m out here hustling like Rick Ross in 2006 trying to prove myself in the arena of early stage investing. I think that I can be a world class investor, and I’m willing to push myself to personal limits to see if I can. Why? Because for the second time in my life, I have an opportunity to play a game. A competitive game. A game that gets me up in the morning, and keeps me up at night (till 1:32 AM re-reading the final copy of this newsletter). A game where putting in the hours in the gym, matters. A game where the prepared mind wins, and a game that frankly I just enjoy playing - a lot.
I titled this article Leadership, Risk, & Investing because as I get to learn the ropes of venture capital, I have a front row seat to all three. I was inspired to write this article tonight because of a clip I saw of Nick Saban speaking about leadership. For context, before I share the quote, Nick Saban is talking about one of his former players Henry Ruggs. He was a standout at Alabama who went on to play in the NFL on the Raiders, and sadly, tragically he made the poor decision to drink and drive which ended in an accident where he killed an innocent person. He’s now in prison. Here’s what Saban recently commented on:
“People are more apprehensive about being leaders than ever before… If there was a player [Henry Ruggs] in Las Vegas, who was drinking at three o’clock in the morning with his buddies, and his girlfriend, and someone would have taken his keys away...it probably would have pissed him off. It probably would have made him mad. He probably wouldn’t have thought much of you for doing that. But would he be better off now? Or is he better off where he was, going 156 miles per hour running his ass into somebody and killing them? And he’s in jail. And he doesn’t have a career anymore. And he’s a good kid. And he never had one problem on our team at Alabama. So what kind of friend were you? What kind of leader were you when you allowed the guy to do it? But nobody wants to do that, because they’re afraid of what somebody’s gonna think of them,”
While this is a more extreme version of what happens when leadership isn’t present, I think the advice Saban is trying to give still holds true - Leadership is about being comfortable with the uncomfortable. Leadership is about, in critical moments, facing the facts and trusting your gut and swallowing a hard, bitter pill. Leadership is about a willingness to sacrifice your pride, your ego, your short term desires for long term ambitions and goals. Put another way, leadership is hard as fuck. And it’s in short supply. If leadership was a person standing in the sun at noon in the middle of the Sahara Desert, then that person’s shadow is risk. Leaders do not become leaders without risk. Risk is an omnipresent, intractable, unshakable force for leaders. Leaders risk their personal comfort, their relationships, their reputations in order to lead and they simultaneously strive toward building the world as it should, while defining the world as it is today. Meaning that, effective leaders suspend disbelief for themselves and others and assume risk in order to do so.
For example, as an investor you want to be contrarian and right. In the most extreme sense, you want to have a viewpoint or perspective of the world that no one else agrees with, that others view as diametrically opposed to what is a good investment. You want to have a hypothetical conversation that goes like this:
VC #1: Hey! Have you taken a look at Zoom? They’re a super cool new video communication platform built for companies
VC #2: Okay so it’s like a video meeting?
VC #1: Yeah exactly, the idea is that at some point in the future work will be more remote or distributed and video communication will be essential infrastructure for any business
VC #2: I don’t buy it. I’m in the office everyday, and just ask my colleagues if I have a question in person or over Skype. Don’t think there’s any near term catalysts that would force the kind of adoption we need to see to drive 100X returns
I would bet money that some version of this conversation happened back in 2011 when Zoom was raising it’s Seed round, and continued to occur until the beginning of the pandemic, when the world that Eric Yuan and team could see 10 years earlier was fully validated, as we all switched to a remote first world. On that 10 year journey, investors at the Seed, Series A, B, C, and beyond had to assume some form of risk, and bet on some form of leadership to be comfortable with deploying millions of dollars into a SaaS application with established competitors (Webex), free alternatives (Google Meet), that may (as Zoom puts it in their S-1) “face unexpected deployment challenges with large organizations.”
The way I see everything tie together is like this - Leadership drives a higher appetite to assume the right types of risks, the right types of risks create the conditions for the best possible investments, the best possible investments reinforce an individual’s platform to be a highly effective leader. And while this may be a hot take, I believe that anyone who resells money for a living, is in a position of leadership whether you want to admit it or not. When you do this job well, your reward for creating more productive companies, that create more job openings for various forms of labor, that create life changing wealth for early employees - is more money to do it all over again. A $3M dollar seed check can be the literal tip of an iceberg of an investment that cascades down to change lives, families, and communities and I don’t think that’s a hyperbolic statement to make. What I do think though, is that a core component of being an excellent investor is understanding the dynamic relationship between leadership, investing, and risk.
Leadership is hard, it’s lonely, and it can be alienating and deafening.
Investing is competitive, intellectually challenging, and filled with noise.
Risk is scary, punitive, and persistent in it’s ability to change
But the rewards of corralling all three, of being comfortable with the uncomfortable are that you get to live true to your values (through your leadership), you can suspend the disbelief that others may have about themselves, and in more ways than one you can bend the arc of the universe in incredibly positive ways (and ways you see fit).
Leadership may be in short supply, but the price of admission is only a function of the risks you’re willing to take, that help make the world as it should or could be.
One final note. I’d be remiss if I didn’t at least comment on the conflict/situation occurring in Ukraine. I am not an incredibly informed nor am I in any way qualified to provide accurate information about what is developing. What I will share though, is my perspective, which is this at some point in the development of this conflict leadership was ignored, broken, or suppressed. An escalation to war in my opinion is the most extreme expression of where leadership fails or comes into direct contact with opposite form of leadership (typically self-serving) that sees the opposing leadership’s view of the world as wrong/immoral/backward and theirs as right/just/progressive. Democracy matters. And we sure as hell know that democracy is fragile, which gives us each all the more reason to be a leader when and where we can. Where you have an informed opinion, and can move the needle. Speak up, speak out, and live true to your values.