In February, we announced our investment in Gig Wage. After some entertaining back and forth, I encouraged Craig Lewis, the founder/CEO of Gig Wage, to write up a quick story of how things unfolded, as he remembered them, and I’d post it here. I love founder stories, and origin stories, and always learn something from reflecting on them. So, in Craig’s words …
Two tech guys from Dallas walk into a bar…
Before I met Brad in person, I had known about him because he’s pretty much startup-famous from his books and from co-founding Techstars, but I didn’t know much about Foundry Group. I hadn’t even read any of his books at the time, but I knew I was interested in meeting him.
Brad and I first met at an event two years ago at UTD (University of Texas at Dallas), where he would be speaking. We met at the bar, I had my favorite go-to drink, the “Black American” (my concoction, inspired by a White Russian), and Brad was having water since he doesn’t drink.
My first impression of Brad was that he’s freaking brilliant. You can tell when someone’s done a lot and is smart from their experience. I figured, ‘this guy’s seen it all from A to Z and has probably seen it from Z to A and then back again.’ And he could have easily been not cool, but he was totally humble and down-to-earth, and we just kind of vibed. When we spoke, it didn’t seem like an investor-entrepreneur thing, just two guys from Dallas talking tech.
Fast forward to about a year later, we had recently received an investment from Steve Case’s Rise of the Rest Revolution. Entrepreneurs who are part of his portfolio take part in a quarterly book club, where we all read a book and one entrepreneur is chosen to interview the author of the book. I happened to be able to interview Brad when we got an early look at the latest edition of his book Venture Deals. Between meeting Brad and interviewing him, he had set up a few introductions for me, which was cool of him, and when we got to the interview, it was casual, like we knew each other from around and had kind of been in touch before. We did a live webinar Q+A for all of the entrepreneurs in the book club. After getting through all my questions about his book, we ended up talking about entrepreneurship, technology, and venture capital.
That’s when I started to realize that he’s a prolific investor, and I started to understand the Foundry Group a little better, although it didn’t fully click for me until we went through Techstars and I met Jaclyn Hester. She was able to quickly get up to speed on the company we were building and my vision for Gig Wage. Funny enough, we still didn’t think we were going to do anything, but the managing director for Techstars (who I later ended up hiring) told me that Foundry Group is super legit. Eventually, we connected the dots and realized that my relationship with Brad was just organically building up to an investment from Foundry Group. As it was happening, these events just seemed like different moments, but looking back, it’s obvious that every piece of it mattered and eventually led us to where we are today.
When looking for an investment, it’s more about who wants to invest in us and what steps they take to invest in us than the other way around. We typically aren’t going around reaching out to see whose investments we can secure. What happened with Brad and the Foundry Group came down to them showing excitement for Gig Wage, not by me strategically or intentionally pursuing them by any means. I realized our goals aligned, and that’s pretty much how it happened.
Mental health has been an issue among tech entrepreneurs for a long time, but has been exacerbated by the stresses of the Covid crisis.
On March 31, I wrote a post called The Three Crises in which I suggested that the Covid crisis was the collision of three crises, each of which is a complex system. The health crisis (the disease) created the economic crisis (our economy was in strong shape before Covid), which would accelerate a mental health crisis. In the US, we have a fourth crisis amplified – the racial equity crisis – which has been going on since the inception of our country.
Since these are complex systems, they are interconnected and don’t have a deterministic outcome. There are endless unintended consequences from actions in one crisis that have long term and unexpected impacts on other of the crises.
Humans are not built to be isolated in their homes for months at a time. Founders, who are already under immense pressure from many directions, now have to contend with that dynamic for themselves in an uncertain business environment, connected only by video conferencing and email to their teams, investors, and customers. At the same time, there is no relief from the endless intensity of creating and leading a business.
It should be no surprise that the mental health part of the crisis is real and accelerating. Toss in the dissonance in our society. Some tech companies stock prices are at record highs, while established businesses are in a complete retreat or freefall. Many small businesses are on the verge of extinction – ponder all the local retail businesses and restaurants in your city. Local and state governments are under economic and functional stress. We have record unemployment and a macro communication environment (media, politics, news) that is divisive rather than unifying. We are in an election year in the US. Oh yeah, and the disease.
Fortunately, the stigma associated with mental health, especially among founders, is lessening. It’s still real, but more are talking about it. There are many more coaching options like Reboot to help founders, CEOs, and leaders through this. There are companies, like Meru Health (which we recently funded) that are working to make mental health services more broadly accessible and affordable. And, many leaders are speaking out regularly about their struggles with their mental health, making it much easier to start and navigate conversations about mental health.
In the future, I hope we are much more effective as a species around addressing and helping with mental health issues. The sooner we can eliminate the stigma around mental health, especially in entrepreneurship, the better.
I’ve long written about the stigma around entrepreneurship and depression / other “mental health-related issues.” I was delighted to see two articles in the last day about others addressing this.
First, Felicis Ventures is committing 1% on top of every check the firm writes in non-dilutive capital earmarked for “founder development” in coaching and mental health. I love the way Aydin Senkut has characterized what they are doing and why they are doing it.
“Felicis’ bet is that by making such resources available and publicly known, founders won’t feel too proud, or too much pressure to seem successful, to address personal and team issues. Tactical marketing help can only go so far, Senkut says, when founders aren’t telling their investors that they’re unable to sleep from anxiety, or not speaking to their cofounders.”
Next, Mahendra Ramsinghani has a long article in Techcrunch titled Investors are waking up to the emotional struggle of startup founders. In it, he references a bunch of stuff, including work that Jerry Colonna and the team at Reboot have been doing around this issue. He also points to the survey he is doing for his new book titled Depression: A Founders Companion.
This showed up in my inbox the other day from a friend of 20 years. He’s been involved in a number of companies that we’ve invested in over the years in different senior and/or co-founder roles, including CEO. It was short and sweet but captured the essence of something I often talk about with founders.
Heard you and Jerry on CPR this morning, nice job!
What struck me was your point about the gap between expectations in the role of CEO or startup founder, or investor – and the reality of depressive events/emotions that are often present – but no one gets to expose or relinquish.
I felt this first hand in my experience, both as co-founder and later as CEO. I used to *hate* seeing people around town or whatever because they’d ask “how’s the startup going?” and usually extra commentary like “oh startup rockstar, and you must be killing it, etc…” and my answer was always “no, it’s fucking unbelievable hard, and anxious, and trying, and most of the time shit is more fucked up than you could ever imagine”. You live with that veil and it always made it worse when people wanted to interact with you but position it as only successful sounding answers would work.
I learned to approach others the way I wanted to be approached:
1) I recognize everyone has a “bag of despair” they carry – you can’t see it, and anything can be in there, work, home, friends, family – serious shit is wrong somewhere for everyone at most points in time. So know it’s there, don’t assume and ask questions from ridiculously positive framing, but rather in a way that lets folks share honestly and is then actually helpful dialog to them (if they do want to take the opportunity to disclose challenges and discuss)
2) when someone asks “how’s it going” be honest – share the good and the bad, but don’t feel like you have to fulfill the stereotype and give them the sugar coated answer
Bill Gurley wrote an incredible post yesterday titled On the Road to Recap: Why the unicorn financing market just became dangerous … for all involved. It’s long but worth reading every word slowly. I saw it late last night as it bounced around in my Twitter feed and then read it carefully just before I went to bed so the words would be absorbed into my brain. I read it again this morning when I woke up and I expect I’ll read it at least one more time. I just saw Peter Kafka’s summary of at at Re/code (We read Bill Gurley’s big warning about Silicon Valley’s big money troubles so you don’t have to) and I don’t agree. Go read the original post in its entirety.
Fred Wilson’s daily post referred to the article in Don’t Kick The Can Down The Road. Fred focuses his post on a small section of Bill’s post, which is worth calling out to frame what I’m going to write about today.
“Many Unicorn founders and CEOs have never experienced a difficult fundraising environment — they have only known success. Also, they have a strong belief that any sign of weakness (such as a down round) will have a catastrophic impact on their culture, hiring process, and ability to retain employees. Their own ego is also a factor – will a down round signal weakness? It might be hard to imagine the level of fear and anxiety that can creep into a formerly confident mind in a transitional moment like this.”
Fred and I have had some version of this conversation many times over the past twenty years as we both strongly believe the punch line.
Entrepreneurs and CEOs should make the hard call today and take the poison and move on
But why? Why is this so hard for us a humans, entrepreneurs, investors, and everyone else involved? Early in Bill’s post, he has a section titled Emotional Biases and it’s part of the magic of understanding why humans fall into the same trap over and over again around this issue. The “Many Unicorn founders …” quote is the first of four emotional biases that Bill calls out. If that was it, the system could easily correct for this as investors could help calibrate the situation, use their experience and wisdom to help the founders / CEOs through a tough transitional moment, and help the companies get stronger in the longer term.
Of course, it’s not that simple. Bill’s second point in the Emotional Biases section is pure fucking gold and is the essence of the problem.
“The typical 2016 VC investor is also subject to emotional bias. They are likely sitting on amazing paper-based gains that have already been recorded as a success by their own investors — the LPs. Anything that hints of a down round brings questions about the success metrics that have already been “booked.” Furthermore, an abundance of such write-downs could impede their ability to raise their next fund. So an anxious investor might have multiple incentives to protect appearances — to do anything they can to prevent a down round.”
Early in my first business, a mentor of mine said “It’s not money until you can buy beer with it.” I’ve carried that around with me since I was in my early 20s. Even when I personally had over $100 million of paper value in an company I had co-founded and had gone public (Interliant), I didn’t spend a dime of, or pretend like I had a nickel of, that money. In 2001 and 2002 I learned a brutal set of lessons, including experiencing that $100 million of paper money going to $0 when Interliant went bankrupt. And, as a VC, I experienced a VC fund that was quickly worth over 2x on paper that ultimately resulted in being a money losing fund. I didn’t buy any beer or spend all the money on random shit I didn’t need and fundamentally couldn’t afford.
This specific bias is rampant in the VC world right now. As Bill points out, many funds are sitting on huge paper gains which translate into large TVPI, MOC, gross IRR, or whatever the current trendy way to measure things are. However, the DPI is the interesting number from a real perspective. If you don’t know DPI, it’s “distributed to paid in capital and answers the question “If I gave you a dollar, how much money did you actually give me back?” This is ultimately the number that matters. Structuring things to protect intermediate paper value, rather than focusing on building for long term liquid value, is almost always a mistake.
Let’s go to number three of the emotional biases in Bill’s list:
“Anyone that has already “banked” their return — Whether you are a founder, executive, seed investor, VC, or late stage investor, there is a chance that you have taken the last round valuation and multiplied it by your ownership position and told yourself that you are worth this amount. It is simple human nature that if you have done this mental exercise and convinced yourself of a foregone conclusion, you will have difficulty rationalizing a down round investment.”
This is linked to the previous bias, but is more personal and extends well beyond the investor. It’s the profound challenge between short term and long term thinking. If you are a founder, an employee in a startup, or an investor in a startup, you have to be playing a long term game. Period. Long term is not a year. It’s not two years. It could be a decade. It could be twenty years. While there are opportunities to take money off the table at different points in time, it’s still not money until you can buy beer with it, so the interim calculation based on a private valuation when your stock is illiquid just shifts you into short term thinking and often into a defensive mode where you are trying to protect what you think you have, which you don’t actually have yet.
And then there’s the race for the exit, in which Bill describes the downward cycle well.
A race for the exits — As fear of downward price movement takes hold, some players in the ecosystem will attempt a brisk and desperate grab at immediate liquidity, placing their own interests at the front of the line. This happens in every market transition, and can create quite a bit of tension between the different constituents in each company. We have already seen examples of founders and management obtaining liquidity in front of investors. And there are also modern examples of investors beating the founders and employees out the door. Obviously, simultaneous liquidity is the most appropriate choice, however, fear of price deterioration as well as lengthened liquidity timing can cause parties on both side to take a “me first” perspective.
This is one of the most confounding issues that accelerates things. Rather than making long term decisions, individuals optimize for short term dynamics. When a bunch of people start optimizing independently of each other, you get a situation that is often not sustainable, is chaotic and confusing, and inadvertently increases the slope of the curve. In the same way that irrational enthusiasm causes prices to rise faster than value, irrational pessimism causes prices to decline much faster than value, which increases the pessimism, and undermines that notion that building companies is a long term process.
Those are my thoughts on less than a third of Bill’s post. The rest of the post stimulated even more thoughts that are worth reflecting deeply on, whether you are a founder, employee, or investor. Unlike the endless flurry of short term prognostications that resulted from the public market decline and subsequent rise in Q1, the separation of thinking between a short term view (e.g. Q1) and a long term view (the next decade) can generate profoundly different behavior and corresponding success.
One of my all time favorite blog posts is Ben Horowitz’s The Struggle. If you are a founder and you haven’t read it, open it up in another tab for after your finish this post.
On Friday, a CEO I know sent me the following message.
“Brad – I crafted the entry pasted below this morning for my eyes only (and for my own therapeutic purposes), but in thinking about it today, I realized that you’re probably one of the only people I know who might be able to relate or who has interacted with others with similar sentiments. I’m in a good place mentally and it simply feels good to share this with someone else.”
I read it and immediately asked if I could post it anonymously. It’s in the same category for me as The Struggle, but with a different tone. Fortunately, the CEO said yes so I can share it with you. It follows.
Sometimes I wake up and look in the mirror and don’t recognize myself.
Sometimes I haven’t slept properly in days or weeks and I look in the mirror and most certainly don’t recognize myself.
Sometimes I get frustrated that going to bed is like suiting up for battle. I know that many sleepless and restless hours lay ahead before it’s okay to go back to work.
Sometimes I see how physically drained and weak I’ve become. Long gone are the days of being a muscular collegiate baseball player with MLB scouts at my heels or a lean and mean Ironman triathlete and marathon runner. My mental desire to achieve athletic greatness is at an all-time high, but my physical prowess leaves a lot to be desired.
Sometimes I wonder about underlying health issues that aren’t noticeable in the mirror and might not rear their ugly head until years into the future.
And sometimes, I see the disappointing medical test results and wonder if I’m on a path towards failure. Sometimes I don’t even know where to get started to get back on track.
Sometimes I look around and realize that many childhood friends have steady corporate jobs, children and other pursuits. They work to live rather than live to work and they are able to parse work stresses from the rest of their lives.
Sometimes I’m jealous, but mostly I’m lonely and longing for friendship with those who understand how emotionally and physically draining running a business can be. Can’t someone else understand why I can’t commit to an 8pm dinner on a Tuesday night when I’m absolutely drained?
Sometimes I ask myself if the juice is really worth the squeeze.
And sometimes, I admonish myself for such thoughts. My life is not that hard relative to those who have more physically demanding jobs.
Most of the time, however, I love my life and my job has been a source of great energy and inspiration. I know we’re onto something big and the journey has allowed me to surround myself with amazing colleagues and supporters. I only wish that I could find the perfect harmony between health, happiness and my career.
Has the word entrepreneur become too trendy as to have lost its meaning? I’m hearing it and the word entrepreneurship being used in so many conversations incorrectly.
Here’s a simple example. On a daily basis, I have an email exchange with someone who says they are an entrepreneur. I respond “What company did you start?” They respond, “Oh, I didn’t start a company, I was the fifth employee of Company X.”
Another example is the email that I get from someone in a large company who says “I want to create more entrepreneurship within BigCo.”
Now, these are well-intentioned people so I’m not critical of them. But I’m critical of the use of the word entrepreneur in these contexts.
I like Wikipedia’s definition.
“Entrepreneurship is the process of starting a business, a startup company or other organization. The entrepreneur develops a business plan, acquires the human and other required resources, and is fully responsible for its success or failure.”
Merriam Webster’s is also solid.
“a person who starts a business and is willing to risk loss in order to make money”
This morning I read an article in the New York Times titled With Start-Ups, Greeks Make Recovery Their Own Business. Other than the fact that the New York Times hasn’t yet figured out that It’s Startup, Not Start-up or Start Up it was a good article that got me thinking about this rant.
In 2010, the Startup America Partnership finally got the US government to separate the notion of small businesses with high growth businesses. The word startup was firmly introduced into our lexicon as shorthand for high growth business and now is a comfortable one. While we are still stuck with one government organization – the Small Business Administration – that tries to help both small businesses and startups, the language around this continues to evolve.
For example, I think we are finally starting to differentiate between local businesses (your local restaurant, coffee shop, bookstore, gas station, movie theater, clothing store, art store, or anything else that sells to your local community) from a startup business (a company that might be small, but is selling to anyone anywhere in the world). The language isn’t quite right, as local businesses can evolve into startups (The Kitchen, run by Kimball Musk, is a good example). But we are getting there.
And then there are a several words trying to characterize different stages of startups. A scaleup is a startup that is scaling quickly. A gazelle, a word that has been around for a while and is becoming popular again, is a startup that has achieved critical mass and is a rapidly growing company, kind of like a scaleup, but falling comfortably into the animal taxonomy that seems to include unicorns and dragons.
And that takes us back to the word entrepreneur. Theoretically, the entrepreneur is a person who creates any one of these companies (local business, high growth business, startup, scaleup, gazelle, unicorn, but not a peppercorn.) And entrepreneurship is the act of creating and operating the business. Note the and clause – you need to be the creator and the operator to be an entrepreneur, not just the operator.
As I type this, I realize I’ve buried the lead. I’ve always loved the word founder to describe the person the word entrepreneur refers to. When I started Feld Technologies, I referred to myself and my partner Dave as the founders of Feld Technologies. This was well before anyone used the word entrepreneur (the 1980s) and for many years I used the word founder. Somehow my brain shifted to entrepreneur and entrepreneurship and that’s taken over for me. But it’s now uncomfortable, awkward, and tiresome.
I think I’m going back to founder. It’ll be interesting to see how hard it is to rewire my brain. We’ll see if it lasts. While it’s not clear to me that it matters, given my pedantic obsession with eliminating the hyphen in words like startup and email, it’ll be fun – at least for me – to see where it goes.
I’ve been thinking about the concept of “the duo” a lot recently.
Many of the companies I’m involved in have either two co-founders or two partners who partner up early in the life of the business. Examples of founding partners including Andrei and Peter (Kato.im), Keith and Jeff (BigDoor), James and Eric (Fitbit), and Matthew and Cashman (Yesware). Of course there are many other famous founding duos like Steve and Steve (Apple), Jerry and Dave (Yahoo!), Larry and Sergey (Google), and Bill and Paul (Microsoft). My first company (Feld Technologies) had a duo (me and Dave) and the company that bought Feld Technologies did also – Jerry and Len (AmeriData).
Now, these duos are not the leadership team. But there is a special magic relationship between the duo. I like to think about it like the final fight scene from Mr. and Mrs. Smith where Brad and Angelina are back to back, spinning around in circles, doing damage to the enemy.
This is not just “I’ve got your back, you’ve got my back.” It’s “we are in this together. All in. For keeps.”
It’s just like my relationship with Amy. We are both all in. It’s so powerful – in good times and in bad times.
I just did a long 90 minute video interview stretch with Boulder Digital Arts that generated a number of specific videos on entrepreneurship. While they are selling them, a few are free. One of the free ones is on Founder’s Syndrome and Origin Stories. Given the last few posts I wrote on CEOs, and some upcoming ones, I thought you might be interested in this one.
If you liked that, take a look at some of the others. They include:
While they are inexpensive, if you use the discount code “Feld2014” you can get an additional 15% off.