Resolving Conflicts in a VC Partnership

I got the following question the other day.

“If you get a chance, I’d request you to write a blog post about various business decision related conflicts or misunderstanding that might occur in a partnership and how you folks at the Foundry Group resolve it. My partners and I grapple with such challenges quite often.”

Every VC firm is different so to answer a question like this, it’s important to remember that the answer is one specific to Foundry Group. Never forget that VCs Are Like D&D Characters.

When my partners and I started Foundry Group in 2007, we created a set of deeply held beliefs that we carry around with us every day. Some of them are about our strategy and some are about our behavior.

One of our deeply held beliefs is that “We will address and resolve all conflict between us directly, clearly, quickly, and openly.”

This is easy to say but very hard to do. It means that there will be no passive aggressive behavior on anyone’s part. We won’t carry around things that bother us. Instead, we’ll put them on the table to discuss. We have to have a strong basis of trust, which we’ve extended to the notion of “business love.”

It has to be ok to be upset, to disagree, to be sad, to be disappointed, and to be unhappy. These are normal emotions. Things don’t work, they can be confusing, frustrating, or downright miserable. A partnership has to be a safe place to be open about these emotions, especially when they are being generated by someone in the partnership.

The deeply held belief is nice, but unless there are tactics and consistent action to back it up, it ends up being meaningless. There are three things we do to make sure we execute on this deeply held belief.

Weekly Time and Space for Discussion: We have a set time on Monday’s – between 11am and 1pm – where the four of us meet every week. Unlike many firms that chew up an entire Monday of “partner meeting stuff”, we do it over lunch. As part of this we have a chance to touch base with each other once a week. This is like flossing your teeth – it gets rid of the easy stuff.

Regular Dinner / Offsite: We have a full day offsite at least quarterly and as often as monthly. We spend at least an hour on the question “How are each of us doing?” In this case, “doing” means “emotionally doing” and covers what is on our mind, how we are feeling, what is stressing us (professionally and personally), and how we are doing with each other. Sometimes the discussion is balanced between the four of us; other times it ends up being focused on one person. We always end these days with a long dinner together, which allows us to spend more time on our collective relationships.

Be Direct: I wrote about this in a post last year titled Brutal Honesty Delivered Kindly. In all of these discussions, we are direct. We are kind to each other and never gratuitous in our comments, but always speak the truth. And when someone is wrong, he owns it.

Fundamentally, it’s about communication. Without the deeply held belief, we don’t have a clear context for how the communication works. But the combination of the deeply held belief and regular practice over the past eight years, has resulted in a highly efficient, trusted form of conflict resolution. Sure, we screw up plenty, but it’s easy to recognize, acknowledge, and course correct when we do.

Announcements

I’ve decided to try something new on this blog. Rather than using up full posts for short announcements, I’ve added a new block for announcements at the top of the home page. It’s in orange, will generally be only a few lines, and include a link.

Announcement Block

Since these are just blog posts being formatted differently, they will show up in the RSS feed and the daily email. In addition, there is a page in the Archives for the announcements.

Archived Annoucements

If you have any feedback on this (good or bad), I’d love to hear it.

CEO Shadowing

Following is a guest post from Zack Rosen at Pantheon about his experience shadowing Jud Valeski, founder and then-CEO of Gnip for a day in 2012.

Behind the stories of most first-time venture-backed CEOs building startups and attacking markets at breakneck speed, there is usually a tight network of mentors and peers showing them the ropes of company building. That’s certainly been my experience at Pantheon—we likely would not exist if not for the crucial help of James Lindenbaum, Adam Gross, Steve Anderson, Ryan McIntyre, Brad Feld, and all of the advisors who have assisted us on our journey.

However, I’ve found there is a hard limit to how much you can learn about building a company from speaking with advisors. Before deciding on how to go about building your company, it is critical to build an understanding of other companies’ paths to success and learning from their mistakes along the way. I’ve found to really do that, often times you need to be there—out of your own office and physically present in theirs—to see with your own eyes how a company actually works.

That is the goal of CEO shadowing: to put you in the shoes of another CEO, let you observe, ask questions, and form a rich and detailed mental model of how another company operates. I’ve done it twice so far, and both times have learned more in a day of shadowing than I do in months of working sessions with mentors and peers.

My first time CEO Shadowing: Jud at Gnip in 2012

The first CEO I shadowed was Jud, who then ran Gnip which has since been acquired by Twitter. Foundry Group is a mutual investor of ours, and Jud and I met at an event in Boulder that they organized for portfolio CEOs.

In Boulder I ran around asking a number of CEOs and Foundry Partners for company management advice—how to run one-on-ones, structure executive meetings, manage my board, etc. Three times in row an answer to my question was prefaced by:

“You should really ask Jud this question because they just did this at Gnip and did a fabulous job.”

We were a 20-person company at the time, and Gnip had hit its stride and was growing very quickly. They were 50, soon to be 100—about a year and a half ahead of us in terms of scale. Gnip was known for being a very well-run company.

I cornered Jud at the event and soaked up as much data from him as I could. Then I went home, and realized how much more I really needed to learn from him and Gnip. The only way I thought I could really get answers to my questions was to go to Gnip and observe how Jud and his team ran the company.

So I sent this email:

“Can I fly to Boulder and shadow you for a day, and be a fly on the wall in yours and your team’s meetings?”

This was his response a couple of hours later:

Fun! You bet! Only question is timing. Thoughts?”

Jud invited me to attend his management meetings and let me interview anyone on his entire team at will. In one day on-site I was a part of his exec kick-off meeting, attended a company product strategy meeting, and interviewed two executives, two engineers, and individuals from their sales and marketing team. I took notes, asked questions, and tried to fit in. I approached it like a journalist whose goal it was to write a profile on how Gnip, the company, worked.

I found the Gnip team to be incredibly focused and busy—while still gracious, helpful, and happy to talk at the same time.

What I learned

At the time I shadowed Jud, Pantheon had a very early executive team and not much in terms of process or structure. We operated on tribal knowledge and had the benefit that everyone implicitly knew what the others were doing. We knew we needed to build our team and create more structure, but how were we going to do that without screwing up what was working so naturally?

What I learned at Gnip was:

1) It was absolutely possible to build a 100-person company that operated as efficiently, or even more efficiently, than our 20-person company.

2) Process and structure could be additive to company culture, because it forces you to get specific about implicit assumptions that are so important to a company’s future (values, strategy, management philosophy, etc.)

3) There is good management and bad management, and you need effective leadership and stiff penalties when you fail to lead. It was up to us to build the company right. Gnip was built right, and it worked.

On top of that, I learned many, many small tactical things—from how to structure the agenda of an executive meeting, to how to arrange teams and desks, to optimizing how the people worked together.

But the tactics were built on the big learnings, which were important for this reason: seeing how Gnip worked gave me confidence to trust my gut in building my company. To be clear, Pantheon is built very differently from Gnip. Many of the things that worked for them won’t work for us—we picked our own path. But there are so many internal obstacles to building structure in a startup as it undergoes massive change, and to know that it could work because I saw it work enabled to me to keep my head down and keep working towards my goal without getting blown off course.

Visiting Gnip in 2012 was like visiting the hopeful, successful, parallel future to Pantheon. It was like getting to travel to a foreign, and more advanced planet, and then getting to return and apply what I learned.

Want to do this? Here are my suggestions for how to get the most out of CEO shadowing:

  • Find a CEO at a company that is approximately 1-2 years ahead of yours (if you are $1M ARR, then $5-10M; if you are $10M, then $30-$60M). Ideally this is a CEO you admire, and one you already have a relationship with.
  • Confidentiality is incredibly important. You should probably sign an NDA.
  • Book a full day in the office with the CEO. I highly recommend visiting the day the CEO does the most “management” in a workweek—when executive meetings, planning, strategy, etc are scheduled.
  • Get yourself invited to everything. Everywhere the CEO goes, you go. This requires the CEO to warn their company ahead of time and get the OK of their execs and team members.
  • Spend half of your time observing in meetings, and half in one-on-ones with their team.
  • Meet one-on-one with execs, managers, and individual contributors, ideally from numerous different teams.
  • Ahead of time, prepare a list of questions with the CEO that you can ask of their team members, or research topics you can report back on that CEO wants to know (while respecting anonymity). Example questions:
    • “What do the values of this company?”
    • “What are the company priorities? Your team’s priorities? Your priorities?”
    • “What did this company get right that has enabled it to succeed?”
  • Take copious notes during all meetings and interactions. Anonymize feedback and send a full report of what you learned back to the CEO (this can be partial repayment for letting you shadow them).
  • Keep asking questions and observing until you feel like you could give a valuable five-minute presentation on “how the company works” to your team and the CEO you are shadowing.

Asking to shadow a CEO of a company is a big ask. It’s out of the norm, and it takes time from their team. You can repay some of that by offering to share useful observation or doing outside research as part of your time there, but at the end of the day this may be the ultimate “pay it forward” generous act the startup community is willing to take on for fellow CEOs.

Investors: I believe this could be one of the most valuable things you could help facilitate for your portfolio company CEOs. If anyone else has shadowed a CEO, I’d love to hear how you approached it and how well it worked for you.

Book: Sum: Forty Tales from the Afterlives

I first discovered David Eagleman in a 2011 New Yorker article titled The Possibilian that Amy had torn off and put in my “to read” pile. It was a fascinating long article on his research, life, and ideas about time and death especially around the question, “Why does time slow down when we fear for our lives?”

In the section about studying drummers (yup – it’s a wide ranging article), Brian Eno is introduced. I’ve been intrigued with Eno ever since college when I listened to his Ambient albums over and over.

“Eno first met Eagleman two years ago, after a publisher he knew sent him a book of Eagleman’s short stories, called “Sum.” Modelled on the cerebral fiction of Borges and Calvino, “Sum” is a natural outgrowth of Eagleman’s scientific concerns—another spin of the lazy Susan that has circled back to the subject of time. Each of its forty chapters is a kind of thought experiment, describing a different version of the afterlife. Eagleman establishes a set of initial conditions, then lets the implications unfold logically.”

Yup – that got me. I downloaded Sum and read it. A spin of the lazy Susan is a great metaphor for it as each short story is a few pages long, totally random relative to the story before and after, and each about a different view of the afterlife.

While a few of them are “meh”, most are intriguing, surprising, depressing, unsettling, or powerful. It’s one of those books that stimulated me in a totally different way than normal. It wasn’t philosophy, but it wasn’t fiction, but it wasn’t science, nor was it science fiction. While defying categorization, it stimulated a lot of thought.

And, if you’d like a nice five minutes with Eagleman and Colbert, it’s a fun one. “There’s someone in my head but it’s not me” followed by “Are you high?” Nothing like a Pink Floyd reference by a neuroscientist.

If I’m A CEO And Have An Anxiety Attack, What Should I Do?

I recently received a long email from a CEO, who I don’t know, about an anxiety attack he had. At the end, was a pertinent question that I don’t think I’ve ever addressed before.

“What is my responsibility to openly communicate this important matter to the Board? And how do I balance what I feel is a need for material disclosure with a desire for privacy around my personal health information?”

I wrote the following in response.


First of all, thanks for being brave enough to write.

Next, and most importantly, make sure you are getting professional help. If you don’t have a psychiatrist or a psychologist, I strongly encourage it. In moments of crisis, I’ve found this kind of a relationship to be critical. I’ve figured out so many things about myself in this kind of a setting, especially when I’m having a personal crisis.

Re: what to do in terms of disclosure, start with (a) what you want the outcome to be and (b) what you know about the people involved. If you have a trusted personal relationship with one of your investors, consider talking openly about it. But recognize that once you start talking about it, you will likely be viewed differently by that investor, especially if they aren’t comfortable with anxiety themselves.

If you don’t yet know what you want the outcome to be, find a non-investor who is a trusted advisor to talk to. One of the biggest challenges is exactly what you identify – balancing your work on your own mental health with your responsibilty to the company, your partners, and your investors. If you feel like this is manageable, even when you struggle under real anxiety, that’s one path. If you are afraid it’s not manageable, that’s another.

Facing your biggest fears about this (e.g. “they kick me out of the company”, “they don’t have any respect for me”, “they aren’t supportive”, “they don’t believe I can do it”) is important as by simply asking yourself the question you’ll often get guided toward what you should do.

My wife also has been an incredible supporter and help for me. I don’t know if you’ve read our book Startup Life but we have a section on this and how we’ve dealt with it. But don’t put all the burden on her – it’s a huge burden for a spouse, especially when combined with the pressure of family and work.

As a short term tactic, if you haven’t tried meditation, I suggest it. I discovered it last year and found Headspace.com to be super helpful. It has two 30 day segments (up to 20 minutes / day) on anxiety and stress.

Finally, breathe. Sleep, Rest, Take care of yourself. It’ll give you a base to work on everything else.