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Founder Mojo — the Good, the Bad, the Ugly

I was on Bloomberg today, discussing the recent (great) Facebook results and the (not so great) Twitter ones. I have a bunch of issues with these two companies being compared as they are very different. I have even more issues with the extreme boom/gloom reaction the Street and the City generally have to public market reporting that I suspect comes from companies being judged on timelines based primarily on banking bonus cycles. But the most interesting bit of the conversation for me was when we talked a bit about the effect of a Founder being the in the driving seat.

My fellow panellist Eleni Marouli from IHS backed Mark Zuckerberg strongly saying that he’d earned the right to ask for patience. She pointed to his record of running the company in a flexible way that has seen, for example, mobile revenues go from 0% to 75% in about three years.

Not great for live TV, but I couldn’t agree more. Technology moves so fast that even companies with an insane volume of momentum (Facebook has 1.5 billion monthly users!) have to remain agile and reactive. Sometimes that means foregoing short term profits and sometimes it means admitting missteps before quickly correcting them.

Founder Mojo — the Good

And this need for agility, is why we at Balderton place a lot of focus on the Founders we work with. Successful Founders start companies from a very personal place. At the heart there’s a passion for a new idea, in every step there’s an obsession that drives every day. This passion and obsession means great Founders do more than run a company — they live and breathe it and its market. They are viscerally in tune with what they think comes next. And, especially once they have the confidence of a few early wins behind them, they develop a conviction in those opinions that allows them to lead with confidence and purpose. I call this state of mind Founder Mojo and I think it is really important.

It isn’t impossible, of course, but I think it really is very hard for the MBA brigade to capture and recreate Founder Mojo. Professional managers do do a great job of optimizing what you already have, but they rarely have the vision and the guts to take the big leaps that allow you to survive a major disruption. For Facebook, mobile was that disruption at IPO and Zuckerberg has now emphatically turned that into a huge opportunity and he’s learned from that — he saw image-centric social conversation (Instagram), direct chat messaging (Whatsapp) and, more controversially VR (Oculus Rift) coming and made his moves quickly and decisively. How many professional managers would have the credibility or sheer gall to buy Instagram for $1BN or Whatsapp for over $20BN?

This is the Good about Founder Mojo, but there’s more.

Founder Mojo — The Bad

The primary Bad with Founders is that the focus that makes them so good at some things makes them really bad at a bunch of other things. Speaking as an ex-Founder CEO myself there were plenty of things that I was terrible at (I’m not going to embarrass myself with details here yet — for a future post!) and so for every thing we did right, we did lots wrong too.

The clear, simple solution to this is to try and find a Founder who recognizes their short-comings and works hard to plug the gaps with others who excel in those areas. Reading about how keenly Zuckerberg pursued Sheryl Sandberg in Lean In shows this …. he knew she had something he didn’t have and he was willing to do whatever it took to get her on team. A few years on, I’d say he’s been proven right — she’s clearly awesome at what she does and has been an incredible partner for him. There are plenty of other examples — Tim Cook, Eddie Cue, Jonny Ive and others filled the gaps around Steve Jobs; Steve Ballmer and Nathan Mhyrvold around Bill Gates and of course the Google Triumverate of Brin, Page and Schmidt.

We work hard on this with our companies at Balderton. We don’t turn up and tell Founders what to do, but when they are ready, they work with Gilles and our talent team to extend their capability by adding the key hires that fill the gaps they have and help them grow while maintaining the focus and culture that’s been the secret of their success to date.

Founder Mojo — The Ugly

The other problem one sometimes encounters with obsessive, focused CEOs is a personality type that can make them very hard to work with. Some are narcissistic, others adept manipulators. Again, not a topic that I want to cover in huge detail today (it’s a series of posts in its own right), but the Harvard Business Review captured this well a decade ago and what Michael Maccoby said then still holds true today in some of the highest profile successes in tech. Again, the key is self-realization and the building of a team that balances the potential negatives of these character traits.

It takes all sorts to build a successful company and, just as hard, keep a successful company successful. Employees, experts and yes, even MBAs, all play an important role in that but if I have to pick one thing I want, it’s a strong Founder who’s still got her Mojo and is as obsessed today as she was the day it all began.

Why you shouldn’t care about NDAs (and why we don’t sign them).

I connected with an entrepreneur a few weeks ago who I had heard was working on something exciting and, after engagement, she told me she’d get back to me with a summary in a few weeks.  I waited and, earlier today, got an email from a small advisory bank saying that they represented the entrepreneur and, if I wanted to learn about the company, I had to sign an NDA.

Unfortunately, like all leading VCs, we simply don’t like signing NDAs at Balderton, so I had to say I couldn’t proceed. This whole situation made me frustrated enough that I thought it was worth a post!

NDAs: Gone from the US, let’s banish them from Europe too

In the almost 12 months since I’ve been back in Europe I’ve been amazed at how many companies have suggested I sign an NDA.  To be fair, most have relented when I’ve explained we simply don’t do it, but in the Bay Area it was an incredibly rare request.  It reminds me that, for all the flat-world theory, sometimes people don’t learn from other ecosystems so, let me link to a bunch of good posts written in the US about why VCs don’t sign NDAs.

If you want the summary quickly, here are six really good reasons to understand why VCs don’t sign NDAs:

  1. The Logistical Nightmare: If you sign an NDA, you need to check it (and have your lawyer check it).  It’s never quite right so you need to negotiate it (and have your lawyer and the VC’s lawyer involved). That means money, time and friction. Once you’ve signed it, you have to keep track of the document and abide by various clauses for a decent period into the future (again, more lawyers etc).   By the end of this, you’ve spent real money that could have been invested in the company.  And spent time that could have been invested in the company.  Stupid.
  2. The Inspiration vs Perspiration argument: I know it feels as though your idea is super-unique but, unfortunately, it’s rarely entirely so.  In reality, execution is often the decider of success – not the initial idea.  Also, by their very nature, ideas are inter-related and broad … many companies we’ve already met, will meet, and might already have invested in, will have ideas similar to whatever you’re thinking about. If another company has a similar idea to yours, and you discover that they have met the same VC at some point, trust me: the VC probably didn’t tell them your secrets – you almost certainly simply had the same idea at the same time.
  3. They don’t ever seem to actually get used:  In about 17 years of being an engineer, entrepreneur and investor, the only times I remember NDAs actually being used was during large scale M&A and strategic partnerships between competitive companies. In these cases, the direct stealing of customers/etc is a real issue and NDAs can have a role. But, in other situations, the reality of the matter is that NDAs often never see the light of day. So you’ve spent all that time and money on something you’re likely never going to use anyway.
  4. Reputation is worth way, way more than legal defence: At the end of the day, venture investing is a very human business that involves networks, relationships and, above all, trust.  If someone actually lets you down in a confidentiality situation, they lose all of those. That hurts the VC firm’s and individual investor’s brand and standing much more than any legal recourse you might have. Dirt spreads and because VCs rely on these networks, they avoid these traps … or at least the good ones do!
  5. It doesn’t say flattering things about you: While things are never black and white, I honestly find that most people who ask for NDAs are asking for them because of (poor) advice.  I think this is probably the case in the example I gave at the start.  Unfortunately, if you’re listening to and acting on poor advice, that’s going to raise questions about your judgement.  I try hard not to let this get in the way (especially when, in many cases, I find the entrepreneur steps in and relents anyway), but it isn’t a great way to start a relationship in a business that, again, is all about trust.
  6. If you do need one, save it for the end: There are some things that may sensibly be needed to be covered by an NDA.  Examples would include absolutely central technical innovation or sensitive sales or customer data.  These, however, are generally not required for the first few meetings with a VC – you should be able to convey the value and importance of all of these before you actually reveal the details (if not, your pitch might need a bit of work!) and are more sensibly entered into once you have definite interest and are entering diligence – perhaps even after a term sheet.

I don’t want to come across like Statler and Waldorf in the Muppets – shouting advice from the sidelines. I can say with some confidence, that taking heed of the six points above will improve your chances of getting invested. And, ask yourself this question: would you rather have a relationship with an investor that is built on trust and mutual, professional respect; or one built on complex legalities, friction and frustratingly protracted conversations? 

“We’ve hired 13 but I know I’ll lose 4” — the importance of firing fast.

Hunter Walk just wrote a good piece on the often discussed topic of firing fast.

His post really resonated with me because I was at a Board Meeting yesterday when the CEO was talking about their imminent launch into a new market. She’d just negotiated a lease on a building and, in describing her sales team, said “I’ve hired 13, but I know I’ll lose 4 by the end of the summer — I’m just not sure which ones yet.”

This could sound cruel but it really is not. The reality is that turnover is high in start-ups. Both the company and the employee often come together quickly and test each other out in the first few months of work. It’s ok to say that it’s not the right fit, it’s ok to walk away and, as long as you do it the right way, there’s no reason why it can’t be a positive experience for everyone involved. As Hunter says, firing faster usually benefits both the employee as well as the company. Procrastinating wastes time on all sides, builds resentment and is utterly poisonous to the rest of the team.

What I particularly like about Hunter’s piece is that he walks through common reasons people don’t move faster on these decisions. If you’re in this position, it’s worth reading his reasons — if any of them sound familiar, ask yourself if you’re falling into the trap.

The CEO at yesterday’s Board Meeting may end up firing no people or six, but being open to the reality that she will likely lose a decent number of them (through her decision or theirs) is realistic and smart.