This weekend I’m co-hosting the Reboot.io VC Bootcamp at my house in Boulder. It starts tonight and goes through mid-day Sunday. It’s an experiment with Jerry Colonna and about 15 other VCs to see if the Reboot.io bootcamp construct works with VCs, where the tag line for the experience is:
Practical Skills + Radical Self-Inquiry + Shared Experiences = Enhanced Leadership + Greater Resiliency
It’s either going to be valuable to this group or not. We’ll know more on Monday. The only way to learn is to try.
As part of the pre-work for the weekend, I went back and re-listened to several of the Reboot.io podcasts that Jerry recommended in advance (for you Soundcloud people I made a Reboot.io VC Program collection.)
So, my brain was already trending toward the headspace around radical self-inquiry in the context of venture capital. Yesterday, Fred Wilson wrote what is the best VC-related post of 2016 so far titled Losing Money. In addition to exemplifying the notion of radical self-inquiry, it is filled with gems about how to think about struggling companies and what to do with them in the context of a VC portfolio.
Go read Fred’s post Losing Money right now. I’ll be here when you get back.
When I woke up this morning, I noticed a tweet from Rand Fishkin aimed at me and Fred.
@bfeld Q: Do you regret every investment that fails? Or do you ever think “I’d place that same bet again”? @fredwilson
— Rand Fishkin (@randfish) April 7, 2016
Fred answered “it is one of my weaknesses that I let a bad experience sour me on a market for life.” And, I’ve seen some of Fred’s own behavior around this, as he won’t touch anything hardware-related at all because of some miserable hardware-related failures during the Internet Bubble (or is it “internet bubble” now that the AP Style Guide says not to capitalize internet.)
But I had a different response to Rand’s question “Do you regret every investment that fails?”
I’d like to think that I no longer regret any investment. As Fred discusses in his post, many VC investments fail. I’ve yet to meet a VC who says “This is a totally shitty company and a lousy opportunity so I’m going to invest in it anyway.” When a VC makes an investment, she is incredibly enthusiastic about the opportunity. If you know that failure is part of the process, then there is enormous emotional dissonance that gets generated if you regret the investment in hindsight, as you are going to have a lot of regret over the years as a VC, which I think creates a very negative feedback loop in terms of how you think about new investments.
Instead of “regret”, I think it’s much more important to embrace failure as part of the overall experience and focus on learning from every investment that fails. And, a failed investment often has many lessons – some new and some old. Some of these lessons are temporal and while others are foundational. In Fred’s post, he opens with:
“I remember back in the mid 90s, I used to say with some pride that I had not lost money on any of my VC investments. Then one day, someone told me “then you are not taking enough risk.” I ended that streak of not losing money on VC investments in the late 90s in a series of epic flameouts. I lost somewhere between $25mm and $30mm on one single investment. I am not proud of those mistakes. They were stupid. I am ashamed of them to be honest. But I learned a lot from them. Not only was my “winning streak” a case of not taking enough risk, it was also a case of not enough learning. The go-go Internet era of the late 90s fixed both of those things for me. I took more risk and learned a ton.“
The bold section is what I’m trying to say. And, when I say “embrace failure”, I’m not suggesting that one be proud of failing, but I also don’t think there’s any shame in failing. There’s only shame in not learning.
The second part of Rand’s question “Or do you ever think ‘I’d place that same bet again'” is more complicated for me and my view diverges from Fred’s quick response of “it is one of my weaknesses that I let a bad experience sour me on a market for life.” For starters, I don’t think of my investments as bets, so I have an immediate knee-jerk reaction to characterizing investments as bets. That always creates fog for me in answering something, so I have to let the fog clear. Then, given that we invest in a set of themes over a very long period of time, a failed invested is a fundamental component of our ongoing learning in a theme. So I thought hard about what about a failed investment would cause me not to invest in some aspect of the investment again.
The answer appeared before me as “bad people.” My favorite entrepreneurs to back are ones who have had success and failure, so I’m very comfortable making multiple investments over time with people I trust and enjoy working with, even if we’ve had failures along the way. But if the people are fundamentally dishonest, immoral, unwilling to listen and learn, or behave in what I consider to be inappropriate ways, I don’t want to work with them again.
So the essence of regret for me comes from when I make a mistake around people. This is not only the founders but also co-investors. And, after 20+ years of doing this, I’m much better (but not perfect) in figuring out in advance who I shouldn’t work with.
I’ve accepted that in the end we all die. So, as part of my own radical self-inquiry, I’ve tried to isolate and limit my own regret to situations where I spent a lot of time and learn (or teach) nothing. Fortunately, this rarely has anything to do with the investments that I make.
The Kauffman Fellows Academy is offering another session of the Venture Deals course on the NovoEd platform. This time it is free and runs from April 24, 2016 – June 13, 2016.
We’ve done this course several times in the past with classes of around 100 people and have gotten great feedback. Last year, we started talking to the Kauffman Fellows Academy and NovoEd about doing it for free to reach a wider audience, and in the context of #GiveFirst offer it for free, as the primary motivation for Jason and I had nothing to do with money. The original few sessions has recouped the cost to NovoEd of producing the course so they, and the team at Kauffman Fellows Academy were willing to give free a try.
Sign up is trivial (one click using your Facebook, Google, or O365 id).
The course is based on the second edition of the book Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist. Jason and I are working on the third edition which we be out later this year so this is a chance for anyone interested to engage with us now, ask us questions that we’ve missed in the second edition, or address nuances and larger trends that have changed since the second edition came out in December 2012.
Take a look at the overview for the Venture Deals Course for Spring 2016 and sign up and join us if you are interested.
Every entrepreneur out there should grab a copy of The Third Wave: An Entrepreneur’s Vision of the Future by Steve Case and read it.
If you don’t know Steve, you’ve probably heard of him. He’s had a remarkably entrepreneurial journey starting with co-founding AOL in the 1980s. While AOL has now been absorbed into Verizon (after having been bought, spun out, and bought again) at its peak around 2000 nearly half of all Internet users in the US accessed the internet via AOL and everyone over the age of 40 knows how to say “You have mail.”
I’ve gotten to know Steve over the past six years through the Startup America Partnership (where he was Chairman) and then UP Global (where he was also Chairman). I’ve learned a lot from him both from reflecting on the past and talking about the future.
I was excited when he told me he was finally writing a book. I loved the title, as I’m a big Alvin Toffler fan as I describe in my post from nine months ago titled What Is The “Third Wave” Of This Generation? I didn’t have an answer for this question got an email a few days later from Steve.
“Hi Brad. I saw your tweet and blog. I too was inspired by Toffler’s Third Wave. I’m now working on a book (my first!) with some of my recollections of the past, but mostly my perspectives on the future. And, in part to honor Toffler, I’m calling it The Third Wave. I’m finalizing the manuscript now. It builds off the article I wrote for the Washington Post a few months ago. Happy to send the current draft to you to critique, if you have time to read it in the next week. (I have told Simon & Schuster they’d get a final manuscript at the end of the month.) Let me know if you’d like to see it. Thanks.”
A week later I’d read it and got some specific suggestions back to Steve with the punch line:
“Overall I think the book is excellent. I love the thesis about The Third Wave as applied to entrepreneurship.”
This is an important book that I think will stimulate a lot of thinking about the future for any entrepreneur. It also helps understand the potential futures better by reflecting on the past through Steve’s own journey, especially around AOL.
If you are an entrepreneur, make time to read The Third Wave: An Entrepreneur’s Vision of the Future. Steve – thanks for taking the time to write it.