Today I had a productive whiteboarding session about a problem I’ve been thinking about. I’ve been chatting with a buddy about the problem regularly, but those phone calls and Zooms have their limits. Recognizing this, we decided it was time to whiteboard some things out. The exercise helped us crystalize our thoughts and pinpoint critical areas to focus on.

The whiteboard itself isn’t revolutionary. It’s just a place to capture and sort your thoughts. I enjoy whiteboarding sessions because participants are in problem-solving mode. This mental state is important. The collaboration and focus on ideation about a single problem are powerful.

Looking forward to next steps stemming from today’s session.

Happy Labor Day!

I hope everyone had a safe and healthy holiday!

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Entrepreneurs and others who have outsize success are often described as crazy. They do things that others wouldn’t (or couldn’t) do. They take nontraditional paths and embrace the risk of doing so. Admittedly, my family and close friends have called me crazy for some decisions I’ve made through the years. I agree that founders and others who push the envelope are different, but I’m not sure that crazy is the best way to describe them.

Many people see the future as a continuation of the past (possibly with slight modifications). With this accepted, safe perspective, they take similar paths and do similar things in their lives. Unsurprisingly, their outcomes aren’t out of the ordinary. Entrepreneurs see the world differently. They view the future as something that can be molded into what they want. They understand that creating that future requires blazing a new trail or taking one less traveled. Their actions go against the grain of what everyone else is doing and can seem odd; hence the “crazy” label.

Founders and others who have outsize success are as sane as anyone (usually!). The difference is their perspective. They see the world differently than everyone else and their conviction is strong—so strong that they’re comfortable backing it up with actions others aren’t likely to take or understand.

After they’ve had success and made an impact, people stop thinking of them as crazy and start thinking of them as geniuses. Nobody ever changed the world by doing what everybody else does.

I listened to someone share his observations about entrepreneurs. The gist of it was that intense entrepreneurs are the most successful entrepreneurs. By “intense” he meant outspoken and demanding—characteristics that push them and others to get things done.

I disagree. People of all personality types can be successful. People who are laid back or don’t say much can be just as ambitious and convicted as outspoken, demanding people. They just communicate it differently.

Building something great isn’t about pounding your fist on the table and yelling. It’s about giving your team clarity on what the mission is, holding everyone accountable, motivating them along the way, and celebrating wins together. If you do these things and have the right people, and they’ve bought into what you’re trying to accomplish, you can accomplish what seems impossible. Notice that these management skills don’t require intensity. You can do them all and still be as laid back as you want.

If you’re a founder or aspiring founder, remember that intensity isn’t an indication of your ambition, conviction, or likelihood of success. Be yourself. Lead in a way that fits who you are naturally.

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

• Low meeting bar – Some conversations led to some great, unexpected outcomes. My expectations of these meetings were low, and I wasn’t sure what would happen. This experience reminded me to leave room for serendipity in my meeting schedule.
• Conviction – Having strong feelings about something is important when you’re trying to do the impossible. They help you weather the inevitable emotional roller coaster. Absent that conviction, you’ll likely give up too soon. Being able to communicate your conviction in a way that’s authentic is also important.
• Holiday – I always enjoy holidays because of the opportunity to spend time with family and friends. Looking forward to the long weekend.

Week one hundred twenty-seven was steady. Looking forward to the holiday and next week.

Yesterday I shared a post on how cash flow likely influences fund managers’ decisions to increase their fund size. I ended with a question: Would emerging managers keep their funds small if cash flow wasn’t directly tied to fund size?

Today I had a chat with someone who has an operator and early-stage investing background. He shared his experience as an investor and the model his group used to avoid increasing fund size. They charged a standard 20% carry. And instead of a management fee that was a percentage of capital raised, they charged a flat fee to each limited partner. These fees helped cover operating expenses and allowed them to keep the fund size optimal for the investing stage they were targeting. Their model had other interesting nuances, but this was their basic approach to addressing the cash flow issue.

This approach has pros and cons . . . but they’ve been around for almost 20 years. Definitely something to learn more about and consider.

A friend read my posts about larger VC funds creating hurdles (here and here) and asked a great question. Why don’t emerging fund managers keep their funds small? I didn’t address this in my posts, so I’ll touch on it today.

Fund managers are usually compensated in two ways:

• Management fees – The percentage of the capital raised that's used to run the fund. For example, if you raise a $10 million fund with a 2% management fee, you have $200,000 annually for salaries, rent, etc. Specifics around management fees (i.e., duration) can vary by fund. But this is how fund managers keep the lights on and give themselves runway (i.e., salary) to find and support companies.
• Carried interest (carry) – The share of profits paid to the fund manager as incentive compensation. For example, if a fund realizes a $10 million profit (i.e., money above the original capital investors’ commitment) and has 20% carry, the fund manager would receive $2 million in carry. Carry is unpredictable. It’s usually paid as the fund receives capital from company liquidations over the life of the fund (usually 10 years).

If managers successfully raise a fund, management fees are predictable, while carry isn’t guaranteed and payment of it is unpredictable. I’d imagine most managers opt to increase their fund sizes to increase the predictable cash flow from management fees, even though it could lower fund performance.

I wonder if emerging managers would keep their funds small if cash flow wasn’t directly tied to the size of the fund?

I had a great chat today with someone with a new venture capital fund. In six months, its founders went from inception to raising a $30 million fund. I was curious how they accomplished this in such a short time. I’ve talked with a number of emerging funds managers, and it usually takes eighteen months or more to raise a fund. And first funds are often less than $30 million. I learned that their journey hadn’t started six months ago with the fund idea. Rather, it started a few years ago with a community.

The founders started by creating a nonprofit organization focused on highlighting the contributions of people in their community. They wanted to create a place where ambitious people could connect with others like them and highlight each other’s successes. Their grassroots efforts led to a network of highly successful people in various industries, corporate partners, early entrepreneurs, and a host of other supporters. After a few years, they realized there were high-potential early founders in their community whom they wanted to support.

They created initiatives to support these founders, but they knew funding was key. Instead of sending the early founders to traditional venture capital firms, they decided to raise their own fund. The idea was for capital to meet founders where they already were . . . in their community. Founders don’t have to learn to penetrate the traditional VC network because people in the community who understand the founders write the checks.

I like how these founders built a mission-focused community that also attracted talented founders. I think this is a great example of doing early-stage investing differently. Capital is finding its way to founders outside the purview of traditional venture capital networks. Interestingly, their work caught the attention of established VC firms, which ended up investing in their fund.

A friend mentioned Stolen Focus: Why You Can't Pay Attention—and How to Think Deeply Again and suggested I read it. Focus is something lots of founders struggle with, given the constant context shifting and never-ending to-do list. I decided to learn more about the author before committing to reading the book. I listened to a podcast that had the author, Johann Hari, as a guest. Here are some takeaways:

• Daydreaming – This isn’t a bad thing. It’s a valuable form of thinking. We process the past, think about the future, and make connections.  
• Sleep – Lack of sleep has a bigger impact than most realize. You need eight hours’ sleep to be able to focus fully. When you’re tired, entire parts of your brain have gone to sleep.
• Flow state – When you’re doing something important to you and get into a deep state of focus, you’re in a flow state. It’s the deepest form of attention and can cause you to lose track of time. Shortening your list of goals to just one that’s meaningful to you and pushing yourself to the edge of your abilities increases your chances of getting into a flow state.
• Food – What we eat plays a bigger role in our ability to focus than we realize. For example, eating foods high in sugar for breakfast gives you a short-term boost but causes a crash (brain fog) later in the day.

These points resonated with me, and I agree with them—especially the value of daydreaming. I view daydreaming as a form of reflection. As a founder, I underestimated the power of reflection and how it leads to valuable insights that improve decision-making. I’m not a daydreamer, but I’ve been writing a daily post for more than two years. This established a habit of reflection that’s been invaluable. Compounding reflection has helped improve my decision-making—one reason I continue to post daily.

I don’t agree with everything Johann said, but I enjoyed the interview. I’m interested in hearing more of what he learned in years of researching focus, so I’ll add his book to my saved items list.

Today I had a great chat with three university students. The trio are passionate about an emerging space, and they recognized that other students are too. They rallied other students and founded a club for people interested in this space. This club is now a few hundred students strong. This momentum has forced faculty and administration to take notice. The club is officially recognized by the university, and the administration is looking at ways to develop curriculum to better prepare students to enter this emerging space.

These three students have their fingers squarely on the pulse of an emerging market. They see the potential in it even though the masses haven’t yet recognized the momentum behind this movement.

I loved talking with these students. They’re hustling to make things happen and forcing the powers that be to acknowledge their momentum. These students are likely on to something, and I can’t wait to see the next chapter of their journey. They might not recognize it, but I suspect this trio are entrepreneurs in the making.