I regularly have the conversation with founders about what metrics they need to achieve to raise capital. Most commonly, they’re focused on revenue or some derivative of revenue. I remind early-stage founders that revenue isn’t always the best metric to demonstrate the potential of your solution.

Instead of asking about metrics, I like to reframe the question. How can a founder demonstrate the value they’re creating for users or customers? I like this better because revenue is a by-product (or should be) of value creation. If your solution is adding value to others’ lives, they’re likely to pay for that value (now or in the future). Thinking about value creation keeps you aligned with customers and doesn’t force you to turn on monetization prematurely. If value creation can be quantified in other ways (engagement, sign-ups, repeat transactions, etc.), smart investors will give you credit for the absent revenue.

If people have a problem (realized or not) and you solve it, you’re creating value for them. Healthy revenue is the result of value creation. Focus on creating value for people by solving a problem well, and things like fundraising become a lot easier.

I’ve been telling friends, family, and founders for years that Atlanta is special and near a tipping point. Side note: My pitch helped convince a close friend and family members to move here this year. It’s a major metropolitan city, but it’s built differently. It’s a place that people don’t want to just pass through to experience. They want to call it home because it offers the opportunity to pursue professional excellence in various industries and an amazing quality of life. Lots of big cities offer one of those benefits, but few offer both. Atlanta does, plus other good qualities, which makes it unique.

I’ve been a believer for many years that Atlanta is where the puck is headed. Most people don’t realize how great the city is. I’ve long believed that when word got out about the city’s greatness, it would go from being a metro city to what I call a tier-one major metro. That transition would put the city in a different stratosphere and able to compete as a destination with other tier-one major metros. I think of tier-one major metros as cities that are known outside the US as the undisputed capitals of their regions. Think New York City for the Northeast, Chicago for the Midwest, Los Angeles for the West. The Southeast has a few great cities, but not an undisputed capital, especially when you ask people outside the country.

The word is starting to get out now. Money magazine just ranked Atlanta as the best place to live in the U.S. My favorite lines from the article:

“No matter what kind of person you are, Atlanta is a place where you can feel at home. And, just as important, it’s also a place where you can find a job.”

Atlanta is a great (not perfect) city. It’s had a huge influence on culture in so many ways over so many years. I’m happy the city is getting the credit it deserves and thankful Money magazine took the time to really get to know what the city has to offer. I’m proud to live here. I look forward to helping the city move forward and can’t wait to see what’s in store!

Today marks the end of my one-hundred-thirty-second week of working from home (mostly). Here are my takeaways from week one hundred thirty-two:

• Still needs more work – Last week, an idea I pitched got a decent reception. This week, the reception was warm. I still need to refine the pitch and tighten it up to make it more succinct, but it’s moving in the right direction.
• Network – My conversations this week got me thinking more about networks and how to increase the value of a network to the people in it.
• Meetings – I traveled this week. It was great to get in-person time with people I haven’t seen in a while. In person, you can have conversations that are more productive than Zoom meetings, and you can strengthen relationships in ways you can’t over Zoom.

Week one hundred thirty-two was productive but tiring. Looking forward to next week.

I had a chat with a professor who has researched organization theory. We had a great conversation about social networks and their impact on venture capital and entrepreneurship. To demonstrate the power of networks, he does an exercise with his MBA students: He has them write out a professional goal, why it’s important, and what they need help with. They then present it to the rest of the class. The results always blow the students away. They’re able to make significant progress toward their goal by clearly articulating what they want to do, why they want to do it, and what they need help with. Once classmates heard what was needed, they happily helped.

The professor said that many MBA students see asking for help as a weakness. This exercise helps them understand that asking for help is a great use of one’s network. Of course, you can’t just take. The best relationships are bidirectional—you must add value and help when asked.

I love this professor’s exercise and totally agree. People want to support people and things they believe in, but they don’t always know how. By laying it out clearly, you fill that gap and make it easier for them to help. Instead of hearing “Oh, that’s nice; I hope it works out for you,” you may get the intro that changes your trajectory. Never be afraid to ask for help. The downside to not asking someone for help can be orders of magnitude greater than the downside of asking someone for help!

I’ve noticed that a number of venture capital firms prefer to hire people with a finance background. Those with investment banking and private equity work experience are thought to be great candidates. In my chats with emerging and established managers, several mentioned they’re seeking junior hires and emphasized a desire for candidates from finance.

I’ve never worked in finance, but I have friends who have. It’s notorious for long hours and hard work. Anyone who’s done time in this world is thought to have a great work ethic, which is likely true. One learns a host of skills in that environment that many think highly of (financial modeling, research, etc.).

A banking background provides a strong skill set and will set people up to succeed in some stages of venture capital, but I don’t think that applies to the early stage. Evaluating companies at the idea stage or before product–market fit requires skills that a finance background likely doesn’t equip you with.

Early-stage investing tilts strongly toward evaluating people and markets to find the nonobvious. Identifying founders’ strengths and weaknesses and what’s possible if they’re surrounded by the right resources and support is key. It’s difficult—more art than science. Many people have a hard time ignoring the unpolished exterior of a founder they can’t relate to and seeing their potential. Evaluating nascent markets can be equally difficult. Recognizing the severity of a pain before others understand it and the market size if the founders can create an ideal solution can require one to suspend disbelief and ignore current reality.

Skills acquired working in finance are great, but I don’t think they make you an ideal early-stage investor.

I’ve spent time with lots of emerging venture capital fund managers recently. These managers are like the founders they invest in. Many of the same qualities required for a start-up’s success are needed for a fund to succeed. Today I met a fund’s founding team that had an interesting dynamic. They reminded of me of the hipster–hacker–hustler concept for creating an ideal team:

• Hipster – The hipster focuses on the product being desirable to customers. They think about things like user experience and product design. They tend to be in tune with what’s trendy and cool. They have a unique customer-driven perspective.
• Hacker – The hacker is a builder. Building new stuff excites them, and they can focus intensely on it. They’re driven by data and logic. They see the world as black and white and may not have much charisma.
• Hustler – The hustler makes sure things get done. They relate well with people and are persuasive. They can hold people accountable to results, sell to customers, and rally people behind their vision.

The team I met today had all three: a hipster, a hacker, and a hustler. The complementary nature of this team shows. They’ve built a fund with a unique perspective and way of doing things in a relatively short time. I think this team will do well in the long term, and I’m excited to follow their journey and the journeys of the founders they support.

I had an enlightening conversation yesterday. I was sitting with four people I hadn’t met before, and we all struck up a conversation. We started off talking about where we’d grown up. That morphed into each of us sharing insights from our professions. We all walked away having learned something new and with new contacts. I personally learned something I plan to implement as soon as I have the opportunity.

This conversation reminded me of two things. One, serendipity is powerful. Two, your chances of serendipitous interactions like this one happening are influenced by the networks you’re a part of. If you aren’t in the right networks, “lucky” interactions like these probably won’t occur.

The last few weeks, I’ve been focused on solving a complex problem. It’s been iterative and hasn’t always moved as quickly as I’d like. I normally work on it on weekends too. But this weekend, I didn’t. Instead, I attended an event with extended family and friends. I gave myself permission to not think about the problem for a few days, and I’m glad I did.

It was great to be fully present to celebrate with people I care about. It was also nice to reset mentally. Today, when I began to work on the problem a bit more, I had renewed energy and some fresh ideas.

This weekend was a reminder that sometimes it’s best to put something away for a few days and then come back to it with a fresh mind and renewed energy.

During the last few years, we’ve seen a significant increase in the number of venture capital funds started. I’m happy that more people are deploying capital to founders. I think this is great for founders. But I’m concerned about how efficiently the capital is being matched to high-potential founders—especially those outside venture capital networks.

I’ve investigated and found that many (not all) funds have similar strategies. Sourcing, evaluating, and supporting founders look similar, with small tweaks. A lot of these funds were raised in 2020 and 2021. Those were great years because the start-up market was booming. These new funds benefited from the rising tide. They didn’t find and evaluate nonobvious founders with high potential. Many used VC network consensus to find and evaluate the companies they invested in. More capital was available, and lots of their investments enjoyed markups because of the abundance of capital—not because of traction earned by solving a problem well.

If the current market downturn continues, companies that aren’t focused on solving a problem well enough to reach product–market fit will struggle to raise additional capital. Their runway will shorten. Early-stage funds with unoriginal strategies that invested in these types of consensus start-ups will face hurdles too. If their portfolios aren’t performing well, they’ll have a harder time convincing others to give them more money to deploy in more consensus deals.

I’m curious to see how this pans out. I believe the non-consensus early-stage investors with original strategies will excel.

‍

Today marks the end of my one-hundred-thirty-first week of working from home (mostly). Here are my takeaways from week one hundred thirty-one:

• Needs more work – Last week I got blank stares from those closest to me when I pitched an idea. This week, I refined it—specifically, how I framed the problem. I didn’t get blank stares, so that’s better. More engagement and understanding. But it still needs more work.
• Contrarian – When you’re doing something different than the norm, most people won’t agree with you. Be ready to hear the pushback and defend your position. Be confident, but also be open to listening, because you could still be wrong.
• Big words – Using big words people don’t know to communicate complex things seldom works in your favor.

Week one hundred thirty-one was humbling. Looking forward to next week.