Babbling VC

Decision Making

There is a problem in most organisations that teams want to generally be in agreement when making decisions. I think this is a mistake. I was pleasantly surprised when recently reading a Jeff Bezos investor letter where he specifically alluded to this issue. He spoke of “disagree and commit” when it came to decision making at Amazon. This is a wonderful approach. (Please stop now and do go read Jeff's letter. It is that good!)

Usually, what happens in companies is that folks get into a death match with one another knowing that they at the end of the day have to somehow come to a mutual decision. What this unfortunately leads to at best is a ton of time being wasted. 

Further it often leads to a certain type of behaviour where the person who can argue the loudest or longest wins. This doesn’t necessarily mean that their decision is right but they simply waged warfare best. Thereafter decision making often turns into a sloppy mess. Deals start being made amongst individuals before meetings even take place and other types of intrigue creep in. This all does nothing to further the goals of the business and can even very quickly lead to its downfall.

Ultimately it all comes down to politics. If you are expected to “fight it out”, those individuals who couldn’t be bothered with politics will initially become quiet and at worst, leave your company. Not everyone on the team is going to be an extrovert or aggressive in their style of decision making as part of a group. Oftentimes those with the most insight may also not be high enough in the hierarchy and prefer to keep their mouth shut verses being stomped on. 

On the other hand, if the culture strives to disagree yet commit, you get things done. Not everyone has to always agree. Sure there is a risk of wrong decisions being made but making decisions is in my opinion better than not making decisions. It also allows people to engage far more in discussions knowing that if others are not aligned, they can still get something done. Oftentimes, the best decisions often look like the riskiest or most farfetched. But I rather have all these options on the table and agree with them if they are good. If they aren’t so in my opinion but the arguments are sound, I’m happy to disagree and commit to trying them out anyway. Therefore, I am with Jeff on this one.

Hell Yeah!

So I’ve had this conversation a couple times in the past two or three days and felt that it merited a blog post. There are two times which come to mind today where you should always decide on something by being completely digital about it. Either you want to do it (“hell yeah”) or you don’t (“fuck no”)!  The general concept comes from Derek Sivers and it brilliantly works in many situations. 

In today’s case it is in regards to hiring and picking jobs. When hiring you should be picking candidates based on “hell yeah or fuck no” and nothing in between. If you are shaky on whether to hire someone........pass. It’s common knowledge that it’s better to pass on someone than to hire the wrong person. Yet it happens over and over again. Hiring managers feel like they need to compromise to fill their positions yet you simply can’t fudge on this one. 

Same goes for people taking jobs. If you aren’t “hell yeah or fuck no” about a job, move on. You won’t do your best work in that role and you simply won’t shine. I do understand if you are in need of a job right now to make ends meet. Then definitely take whatever you can to get to be back on your feet and thereafter become picky. Yet, if you have options, never compromise on this front. 

Not surprisingly, the folks who think like this when hiring or taking jobs tend to get it right in reverse. Everyone I know who is super picky about candidates is just as picky when picking their own roles. Further, those who are super picky about where they work tend to be just as picky about whom they hire. This is a self-fulfilling prophecy and takes everyone up a notch. Hence I am adamant about passing this on to anyone looking for work or hiring people. If one person starts with it, it tends to get passed on to whomever they work with. My goal is obviously to have people in jobs where they really want to be and at the same time, for managers to hire people whom they really want to have on their team. It’s such a no-brainer but it’s an easy win-win situation which you shouldn’t forget in your day-to-day decision making. 

Marketing: A Question of "When"

I'm always been a bit torn about marketing. I've been pretty adamant with startups in the past to not focus too much initially on marketing but asked them to be very aware of needing it down the road. 7 or 8 years ago there was a lot of back and forth on just how much marketing is necessary for startups and when. Brad Feld and Fred Wilson both wrote about it and started an interesting discourse (I just linked to a couple of their posts....Google if you want all of them). Fred kind of went on a tear against it but ultimately backtracked a bit to sharpen his statement, making clear he was talking about the companies they invest in and wasn't generalising. My take on all of this is that you won't be able to avoid marketing...it's simply a matter of when. 

This doesn't need to be a long, drawn out post on my point. It's enough in my opinion to say that if you are successful with your product, you will eventually need marketing. The more successful your product, the larger the budget you should plan. Initially, get as much marketing for as little spend as possible. This is where I totally agree with Brad and Fred. Once you are scaling the business though you won't be able to avoid spending heavily. Once the competition gets wind of you, and they hopefully will if your product is that good,  the fun begins. They will start tearing into you and your product. They will start making claims about what they can do and you can't. They will have larger stands at the conventions and more money addressing your customer. You need to start early enough to be able to keep up and make sure you get your message out there. This brings me back to the quote that "Perception drives Reality!" Ignore it at your own peril.

When it comes to European startups I've worked with or am working with, business plans that go out into year two or three of a scale up always underestimate the need for marketing budget. Especially when it comes to enterprise software, you will need to put your stamp on the map. The US companies will have oftentimes a factor of 10x or more when it comes to their budgets. How can you possibly compete if no one knows about you? Further, their product may not even be as good as yours but they will get to your customers first and lock-in is often far more difficult to break than simply getting in the door first. Make sure you budget properly for marketing and if raising capital, be prepared to defend the amount in your business case if VC's question why that number is so high. There are good arguments for it. 

 

Why English Isn't Enough

As I've had to answer this question so many times at this point, I thought I'd just save myself the time in the future and make a blogpost out of it. If you are going to apply to work for us at Liquid Labs, you have to speak German. No, it doesn't have to be perfect but it has to at least be conversational. No one expects you to sound local....I being the best example of sounding like Schwarzenegger, just in reverse. Yet you have to be able to sit in a meeting and speak with folks on the other side in the language they are comfortable in. 

Don't get me wrong....I realise that globalisation is going on and English is commonplace. If you're purely in development, the point has been reached where doing everything in English is fine. If you do anything on our team above and beyond software development, English wont just won't cut it. This is not about you. It's about everyone whom you deal with. Be it within the company or external with customers or partners, English may work. Yet, what we choose to do is make whomever we deal with feel comfortable. 

My experience with over 20 years in Germany now is that no matter how well someone speaks English, when it comes to the hard things, they prefer German when in the DACH (Germany, Austria, Switzerland) region. Many will openly ask to speak English so they can practice. That's fine, go ahead and enjoy. If they don't ask, I want to be speaking in German to them. It's a courtesy. It makes that person feel more comfortable and it gives them the choice of which language to use. If you are not able to speak in their native tongue, you take away their choice. Immediately you start off on your back foot. Why put yourself in this position? 

Dots, Lines....Marriage

To understand this post you are going to have to first go and read Max's post as well as Mark's initial post. Go ahead....I'll wait. The response below to Max was simply too long as a comment on his Facebook post and I prefer to share it with everyone. 

Max, first things first: I am not trying to argue in one direction or the other but technically you are not investing in "dots" if you truly are doing extensive references. Let me clarify using the analogy I have for years: fundraising in the VC space is like dating. Mark too kind of makes this reference. Getting the investment from a VC is ultimately the marriage and as many have said, a divorce is usually easier than separating from a VC.

But back to the point.....let's pretend dating were basically seeing someone at the bar, having a couple drinks, going home to hit the sack and then right after a quick breakfast heading out to get married. That to me is a "dot" event. When you do extensive reference calls on someone, you are adding a time component to the equation and are gathering information, albeit quickly. You are not meeting someone and investing the next day. Sure, you may not spend six months (or two years) getting to know them but you are doing your homework. I often advise younger guy friends when dating that they better check out their gf's mom before marrying her because that most likely is whom you'll have at home in 20 years....a quick reference check. Same goes the other way for women and their potential husbands. But no matter how extensively you get to know someone, there is that "phase" before they marry you where they put on their best face...be it a couple days or a couple years. Therefore, I'd argue that your extensive references give you far more information and I happen to be someone who also sees the huge benefit of talking to people about the person whom you plan to fund.

Ultimately, so many factors will determine whether your marriage works or not (or your investment). But back to the entrepreneurial side of things: founders as well as VC's change. Businesses work or don't and there are so many events which effect the outcome....founders and teams will either evolve or they won't. Funds too change and partnerships evolve....your VC may not be whom you initially jumped in bed with after their partnership starts falling apart or the fundraising for an additional fund goes sideways. This is irrelevant of a dot or line decision. There is so much chance involved that picking to either invest in lines or dots is almost irrelevant and will often vary deal by deal. 

Yet, most importantly both you and Mark are right. I know a ton of people who have married after short flings as well as folks who spent years dating. Without having done extensive analysis and simply viewing the statistics, about half get it right, which ever way they want about making the ultimate decision. VC's have the benefit of adding a portfolio strategy to the fold and invest in ten or twenty companies out of one fund. This minimises risk and increases your chances of success and more likely influences things than dots verses lines. More importantly, wouldn't we all be better off if we too could marry ten to twenty partners and end up picking the one which worked out best? ;-) 

 

Finally! A Slovak Story

Most people at this point know that I am originally from Slovakia. Although I grew up in the US, I was born in Bratislava. Although "home" never really was the country of my birth, it somehow always remained who I was. You can only imagine my dismay at having so many times heard my friends and acquaintances from there actually very negatively speaking of the country. Everyone had or has their reasons, but I chose to see things from a different perspective. I basically chose almost from the point where I moved to Europe back in the 90's to figure out a way to "work" in Slovakia. 

It started out at SAP Ventures, where I for years looked for investments somewhere in Slovakia. It never really panned out although I looked at a ton of them. In summary, the easiest way to sum up my reasons for always saying no was mindset. Thereafter followed Neuhaus Partners where too I never successfully found anything to pull the trigger on. Again, the companies I found and people whom I did due diligence on somehow never checked all the right boxes. It was getting better but still wasn't at the point where I would have put money to work. Unfortunately, with the switch to Liquid Labs, I left the investing side of the table. Yet, I still continued spending time in Slovakia trying to give back in little ways here and there. I also tried to source people from the country for companies I was building or to point many people in a direction to find new jobs. It remained frustrating but continued getting better. I started seeing glimmers of hope here and there around 2011. My participation in the Slovak Startup Awards (thanks to Neulogy and Michaela Jacova) opened my eyes to a growing scene. I remained positive and finally saw funds on the ground making investments. Yet it took time. 

Fast forward to late 2016. I've finally found what I was looking for (ignore the bad U2 lyric reference!) Let's back up a bit though first. Over a year ago, I remembered first encountering two guys who were doing something with design. Since I don't come from this space (and am not a design guy anyway) I kind of blew off the business. I initially liked the two founders but honestly didn't pay much attention. I think we then bumped into each other once or twice....I really can't remember. Anyway, fast forward a bit and I am at a conference in Vienna. I get a message from one of these two guys asking if I'd have time while in town. I was flying out the next morning and really didn't have time.....it wasn't just some reason to try and blow them off. Yet they were persistent and basically were like "we can get in a car now and come over." That willingness to make it happen led to my saying sure...for no other reason than that I liked their motivation. What  I liked even more was that they wanted to ask questions. They didn't specifically ask me to give them money or make introductions. They simply said "we want your help!" Combine motivation, with a passion for what you do and the willingness to seek out advice and take it. That's how you move forward and get my attention. 

Pavol and Michal brought me up to speed about what they do and I liked what I heard.....they offer an in-browser 3D modelling engine attached to a community driven platform (not just some "design stuff"). Their energy most importantly was refreshing although they had a bunch to learn. Nevertheless, from meeting to meeting I feel like these guys are improving by leaps and bounds. I basically offered to them that I would make some introductions. I very specifically said I would only introduce them to the VC's whom I thought "fit" and who could be good investors for them. I also made clear that I am doing this because I truly believe in the founders and their business. I was able to convince Ciaran that this was the case and he too acted quickly. We set up a call a couple days later and Pavol and Michal were shortly thereafter in Berlin followed by Ciaran coming to Bratislava. I was on the sidelines speaking to both sides but I was always rooting for Pavol and Michal and was super happy to see Blueyard end up investing in Vectary a couple months later. 

So, in a short twenty years, there's finally a business I am involved with in Bratislava. I will continue "working" as an advisor to Pavol and Michal and know that they will go far. Most importantly though, I feel like there will be more to come from this tiny EU country. So much has happened over the years in Slovakia. Funds are on the ground...international  investors are looking at deals...a couple exits (although small) have happened.....BUT most importantly there are founders who are doing what needs to be done....hats off to you Pavol and Michal for keeping me excited! These founders will beget additional founders and I am positive that we will eventually see a significant, venture-backed exit out of Slovakia. I am confident that Vectary will go on to do great things and build an international business yet they won't remain alone and this is what my last twenty years coming to this country have been about. 

Less is Almost Always More

I've struggled forever to keep my mouth shut. If there is one thing I have tried to work on over the years it's saying less than more. I've been reminded again and again that you often achieve far more value by listening than talking. More so than not, I have left a meeting scolding myself for opening my mouth far too often and not letting the other party speak. I have become far better at this but it is something I try to focus on nevertheless. 

The reason this has popped up again in my mind is that I have observed so many meetings and email exchanges in the past couple of years with folks interacting with their superiors in companies or business situations. By "superiors" I mean broadly that one party has something the other wants....VC/Founder, Board Member/Manager, Customer/Vendor and so forth. It's almost painful at times reading emails from one to the other. Get to the point when you want something. Be polite but direct. Do NOT beat around the bush. Just yesterday I saw an email that was almost a page long basically winding it's way around simply saying something had to be approved. The long-winded mail was a bunch of niceties and "I hope's" peppered in-between "It would be great's", "Sorry for's", etc. You all know what I mean and you've all seen or written these emails or had such interactions. 

Get to the point! Your superiors, customers, VC's and whatnot usually don't have much time. Further, they've had all the niceties thrown at them. Just say what you want. There is always a fear of being too direct and potentially screwing something up. Trust me...you will never get in trouble asking for what you want. If the other party is offended that you didn't include enough niceties then you may need to rethink the relationship. 

Further, when interacting directly, do not fear the silence. Oftentimes it's best to say what you want and wait. Don't say a word after getting to your point. Let the other party think. Let them see that it is their turn to say something. If you've clearly stated what your point was, they have no choice but to speak. If they ask questions, this is good. If they don't react immediately, they are waiting to see if you have something to add. If you know what you want and have stated this clearly, again.....WAIT. So many people are uncomfortable with silence (or succinct emails). Don't be one of them and stop beating around the bush. Let the other side come to you. 

Leica Q

I recently picked up a camera as some of you may have seen from my social network posts. I have some thoughts about this which I wanted to share. I picked up this camera for most likely some uncommon reasons. I am not a good photographer. I love taking pics but I am far from good. I had a Fuji x100 which I loved initially but used very little towards the tail-end of its time with me. My sister inherited that one. (I hope she finally starts posting some pics!)

So why another camera and at that, one of the most expensive ones in its class? Well, if it weren't expensive, I wouldn't be as inclined to use it. Call me crazy but this is how my mind often ticks. I have to get my money's worth and will therefore always have it with me and use it. More importantly though I realized I was walking around staring into my phone. This had to stop. I am so often in beautiful surroundings lost in my phone. With the camera, I am constantly looking for light and am forced to keep my head up. Finally, I am forced to learn...how to use the camera, how to compose pics, how to process these pics and so forth.

I do this all for me. I am happy when people enjoy my pics but they are for me...to remain engaged, to continue learning, to be reminded to look around as well as see what is happening around me and so forth. There's also a digital trail of where I have been and what I have done. I like the idea of looking back in ten or twenty years and reliving a moment via a pic....yet not only because of the pic but because I was engaged when taking that pic. This is all missed in-between things when just heads-down in email, Twitter or whatnot.

And yes I know my iPhone has a great camera. I don't want the distraction of included apps and I do have to say the Leica photos are still so much better in quality. Unexpectedly, in the short time I've had the camera, I've also been pleasantly surprised by the amount of conversations I have had about it. From meeting folks who recognize the brand to the random waiter or commuter next to me saying "that's a cool camera!" A conversation almost always ensues. It's been a long time since my iPhone led to that. 

Why You Really Need to Reconsider Corporates

It’s been some time that I’ve again been with a corporate. Those who know me told me often that they bet I’d be here for two or three years and then gone. That was over four years ago. To be honest, I too thought max three years and I’m moving on. Surprisingly, lots of things went right and I’m quite certain that this opportunity exists with many more companies as well. I am not proposing that you go start the same endeavour that my co-founder and I did. What I am getting at is that corporates have changed and continue to adapt.

If you look at what has been happening over the past fifteen to twenty years, you will clearly see that a lot of innovative companies have reached “corporate” size….see Amazon, Google, Facebook and so forth. Further, you’ll see that many companies looked like they would crap out and ended up turning it around…for example Apple or currently Microsoft. What has this done for the segment? I believe it’s injected a sense of hope to corporate executives and in general to employees of large companies. The sense that these large tankers are going to be passed left and right by small speed boats is being questioned. We continually see the biggest of players doing really innovative things and behaving at times like startups. Employees are being listened to and are pushing risky, new things through. Executives are getting out of the way and letting their teams take ownership and responsibility for results. Most importantly, you see large corporates continuing to grow via innovation and not monopolies or politics. 

Why should you care? Well I believe that too often the focus is put on startups. These are highly risky endeavours and I’ve seen more and more young people going into doomed businesses. Multiply that by the fact that salaries often suck and equity packages are minuscule if not non-existent, and you’d be insane at times to join one. Everyone says you should because there’s no better place to learn. I don’t totally disagree but have been recommending to some folks that they should consider a corporate. Let’s be honest….the risk is far more manageable. Further, your resources are far greater at a large company and you can have a decent salary. With a bit of savvy, you can maneuverer yourself into a position where you can get shit done and be seen. If you have the right personality and drive, you are able to make a name for yourself quickly. You can push things, be aggressive and mistakes are generally tolerated. And again, your chances of being fired are actually lower in a corporate than they are at a startup. Further, at a startup, your competition is a bunch of hungry, aggressive types. At corporates, you are usually the outlier. 

Corporates are not right for you if you are the true founder type. If you are happy taking all the risk, putting your own money to work and leading the charge, god forbid you go to a corporation. You’ll be miserable. Additionally, you hardly ever have an equity component at a large company. You won’t get rich fast or at all. You may be able to score a large variable component to your salary but it will never really allow you to earn more than senior management. Finally, you do have to play the politics a bit and you have to learn fast. If you have no “feel” for getting people on your side and aren’t generally an aggressive, personable go-getter you will just end up an employee. Not that there is anything wrong with that but if you want to succeed and make things happen in a large corporation, you have to diverge from the norm and embrace uncertainty. 

You’ll also have to find a corporate who has to change….fast. Your chances are best if you go somewhere where it’s become clear that they are failing. Or you find a segment where the startups are really starting to put the hurt on the large players by out-innovating them. Whatever you do, make sure you go somewhere where things have to change fast….probably a very boring segment. It won’t be sexy but it will be receptive to someone who is passionate about helping bring about change. I would recommend you look at the far edges of FinTech. The insurance industry right now is ripe for disruption. Education and government are ripe for the taking. Even politics need to be shaken up. There’s plenty out there if you look.

Them Evil Corporates

There is forever a problem to be found, regardless where you may look. Inevitably, corporates are really good at this. There are a ton of people within large organisations whose job it is to find problems. They aren’t necessarily there to solve them yet they are incentivised to look. As much as this sounds like an issue, it’s one of the odd godsends of working with a corporate. I can guarantee you that at a startup, where just getting shit done remains top priority, a lot of necessary things are often left out for the good of the above-mentioned goal. This often leads to problems down the road. Hence, as a startup, if you are smart you use this to your advantage. 

I can imagine that a large group of founders is moaning right now that I am crazy. Corporates are despised, especially in the startup world. Yet, trust me, every last startup is always happy to land that big elephant initially. They suffer learning how to work together with them but the smart ones take advantage immediately. Some even partner with them early and benefit immensely from the relationship. It is possible and the following are a couple tips for how to leverage the relationship with a corporate, be it as your customer or partner. 

First and foremost, figure out their legal department. Lawyers are expensive. Corporates have many lawyers. If you work with them, even if they are technically against you in contract negotiations or whatnot, they will review everything. Hence, get everything possible into the contracts you work on with them and let them proof it. Call often and ask questions. You aren’t paying per hour for what they do and usually, they are savvy enough to get the really bad stuff out of the way. and work with you. Yes, they are slow and often not as interested in helping you as you’d wish but trust me…I’d often rather have slow and thorough than fast and expensive. 

Almost a close second behind legal is accounting and tax. These organisations within a corporate can help you avoid a ton of issues. Have them proof everything related to the structure you are creating. Have them think ahead and iron out any issues which may pop up down the road. Heck, even ask them about personal tax issues. They can give you a ton of free advice which you’d pay through the nose for elsewhere. 

Marketing and PR departments can also be a godsend. Their monthly budgets may be your year’s funding. They have years of relationships built with the right people. They know where things can and can’t get done. Make them your friends. Further, they are happy to have new things to talk about and can often see you as a benefit to their day to day. Position yourself properly and they may feature you all over the place. I know of cases where startups were on stage with a CEO at the corporate’s user event and thereafter couldn’t get their phones to stop ringing.

IT is a tough one. Their teams are so bogged down in their core business that they often are quite hostile to adding anything to their plates. Nevertheless, they may be necessary to make the relationship or partnership work. If you are dealing with IT, find the people bored with their usually mundane work. They’ll be super happy to get to work on something new and often may be looking for a new gig outside of the corporate. I am not saying you should recruit and piss of your partner, but if some of the people working with you switch sides down the road, it benefits both parties. IT also tends to have fairly large budgets and can help you get a lot of your code tested under real world conditions. If possible, let them help you make your product better. 

Finally, M&A could be your exit. Even if you aren’t considering selling the business to a corporate, building a relationship to their M&A department puts you on their radar and may lead to an option down the road. This may not be your ultimate goal but why limit your chances of finding what works best for the company at the right time. As a vendor or partner, you will have far more access to an M&A department than you ever would have coming blindly from the outside in. Never underestimate the benefits of the proper relationships. 

One of the most important take-aways is that at corporates, people dream of being at startups. Yes, often startup employees dream about the security of a corporate but this tends to be a one-way mindset. Therefore, you can use your status as a startup to excite people inside and get them on your party boat. They will have something exciting to work on (or more exciting than their usual tasks) and you can seriously benefit from this. Position yourself to be a sexy project that people want to be involved in and you can help yourself often to a buffet of services you’d otherwise not have access to or would pay dearly for.