Author Archives: Ben Casnocha

Most VC Firms Are Fragile Partnerships, Not Institutions

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A tweetstorm I published last week…

Marketing people at venture firms are always trying to figure out if they should be promoting the firm brand or the personal brands of the individual GP partners. Are there venture firm brands that are “bigger” than the individual GPs’ personal brands?

Brands that are arguably bigger than any one person include Sequoia, Greylock, Accel, Kleiner, etc. Multi-generational performance over 40+ years. But will newer VC firm brands ever outshine the underlying individual personal GP brands in a shorter period of time?

It’s rare because the VC business model is so individualistic: individual GPs, masters of the universe, eating what they kill, serving on boards solo, etc. VC firm “partnerships” are often collections of individuals more than a team (despite what they say).

This dynamic has been compounded by a modern media environment that amplifies *individual voices*. Corporate Twitter accounts suck. Authentic, personal, human voices rule. I doubt there’s a venture firm corporate Twitter account with more followers than any popular GP.

To be sure, VCs themselves tend to know all the firm brands and the associated inside baseball. But founders I speak to often know the names of human GPs first, and firm names second (if at all). “I want to pitch @rabois” more than “I want to pitch Founders Fund”

If you’re creating a new VC firm today, should you just do away with the notion of building a firm brand altogether? Look at what @toddg777 and @rahulvohra named their new venture firm: The Todd and Rahul Angel Fund Should more venture firm names simply be the names of the GPs?

The firm-wide brands that endure and outshine personal GP brands have to, in substance, operate as an institution greater than the sum of the parts (i.e. not driven by individual star GPs). Example “institutions” would be @ycombinator, @villageglobal, @join_ef, @JoinAtomic.

For LPs who want to invest in venture, in a concentrated set of relationships over a long period of time, this means they’re often investing in either a) fragile large firms, or b) stable small firms run by the founding GPs.

Large firms are fragile because GPs take their value with them when they leave. Startup founders follow human GPs. The firm brand is weak. There’s no *organization* for the LP to invest in for years and years that has a moat independent of specific GPs.

Small firms run by the founding GPs are stable because the founders won’t move/leave (usually). So the personal brand capital accrues entirely and permanently to the firm. But some larger LPs struggle with this option because it’s hard to deploy large dollar amounts into small funds.

It’s for this reason that I’m bullish (and admittedly biased) in favor of the new firms formed as “institutions” not only because of how they can add value to founders, but also for how they can serve as more reliable long term stewards of LP capital.

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“Founder Bets”

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Some seed stage angels and VCs — including we at Village Global — will make “founder bets” where the investment thesis is mostly or entirely about the talents of the founders, irrespective of the founders’ specific idea, business model, market, etc.

The purest form of founder bet is on a talented team with no idea at all. Simply a founder(s) who know the next chapter of their life is going to be an entrepreneurial journey of some sort — idea TBD. We call these Day 0 Founder Bets. Usually these take the form of being the first $100k-$500k into the company.

Founder bets make sense to some VCs because team matters most. Team is the overwhelming driver of startup success. Now, it’s true that a great team can’t beat a bad market, as Marc Andreessen once noted in his canonical post on product-market-fit. This leads Marc to put market above product and team when evaluating the trifecta (product/market/team) of forces that explain startup success.

But a great team — if it’s early enough in the life of the company — can pivot to a new market. As we all know, many of the great businesses of all time ended up pivoting away from their day 1 idea. So at angel stage/pre-seed/early seed, team trumps all in my opinion, especially a team that knows how to pivot if necessary.

Given the possibility of pivot, the boldest form of founder bet is when when you invest in a founder with an idea you actively dislike. You nonetheless bet on the founder to either prove you wrong (and VCs are wrong plenty!) or you bet they’ll pivot to a new idea over time.

You know what’s even trickier? Betting on a founder whose idea you don’t believe in when the founder is unbelievably passionate about it. It’s the founder who says “I’ve been obsessed with this problem for the past two years. I can’t stop thinking about it.” Normally passion’s a good thing and the more personal the passion, the better. It leads to more customer empathy, more overall persistence, and all the rest. But if it’s overriding personal passion that’s feeding a bad v1 of the idea (in the humble opinion of the VC), it may make it less likely the founder will pivot later. By contrast, some founders arrive at their initial business idea through an analytic process that’s not quite as personal. They’re not scratching their own itch; they just believe they’ve identified a market opportunity through rigorous research and customer interviews. (There are actually many great companies founded this way.) In the situations where the founder’s day 1 idea is more “analytically” conceived, it’s easier for me to make a founder bet on a founder whose idea I disagree with — because I can more likely see the possibility of pivot.

To be sure, not all seed VCs make founder bets. I know several great seed VCs who’ve told great founders, “I love you, I want to back you, but I won’t back this idea. Change your idea to X, and I’ll fund you.”

Here’s Anamitra Banerji from Afore:

And pure founder bets are almost never done at Series A and beyond. The later the stage of the investment opportunity, venture firms evaluate team heavily but also give due attention to product, revenue metrics, broader market dynamics, etc. Here’s Semil Shah:

There are many ways to make money in venture. To understand why some seed funds make founder bets and others do not, portfolio construction and overall firm strategy explain a lot. If you’re a seed fund that’s making 5–10 investments in a year, you’re more likely to have the time and inclination to carefully diligence the investment beyond just team strength. If you’re investing in 500 companies a year, a la Y Combinator, you’re more likely to say “Fuck it, fund it” if the founder possess enough raw talent. There’s simply no time to do it any other way.

At Village Global, we’re happy to make founder bets (including day zero bets when the founder hasn’t yet formed a complete idea), especially through our Network Catalyst accelerator program. Applications for the Summer ’20 vintage are now open. Amazing founders apply — we want to bet on you.

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Book Review: Just Mercy by Bryan Stevenson

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Just Mercy is a memoir from lawyer Bryan Stevenson about his work fighting against the death penalty and mass incarceration in Alabama. A couple months ago the book got turned into a Hollywood film featuring Michael B Jordan (which I haven’t watched). There’s also an HBO documentary about Stevenson (which I did just watch), and the TED talk that brought Stevenson’s work to the mainstream for many in the tech community a few years ago.

I found his memoir incredibly inspirational. And of course sad and infuriating at the same time. Stevenson details numerous instances of injustice; some of which are never rectified prior to the alleged criminals’ execution. Some injustices are innocent men dying (or about to die, were it not for Stevenson’s intervention) for crimes they did not commit. Others are guilty men who were subject to excessive punishment (e.g. the death penalty) or suffered from a failure of due process that is inhumane.

Separate from the stories of specific stories of justice denied, Stevenson argues for proper historical understanding of the current state of affairs in the American justice system. He starts with the settlers’ genocide of Native Americans –> slavery –> lynching –> the mass incarceration of today. It’s all connected. The inequities in today’s justice system find their roots in racial discrimination of the deepest sort dating back centuries. I was rather persuaded by his argument that truth & reconciliation needs to occur in America about the Civil War and slavery and Jim Crow in the same way that other countries have reconked with grand scale injustices, e.g. South Africa, Rwanda, Germany, etc. As Stevenson says, you have to first deal with the truth, then address reconciliation.

Of my Kindle highlights, here’s one paragraph: “We have shot, hanged, gassed, electrocuted, and lethally injected hundreds of people to carry out legally sanctioned executions. Thousands more await their execution on death row. Some states have no minimum age for prosecuting children as adults; we’ve sent a quarter million kids to adult jails and prisons to serve long prison terms, some under the age of twelve. For years, we’ve been the only country in the world that condemns children to life imprisonment without parole; nearly three thousand juveniles have been sentenced to die in prison.”

Stevenson as a human is something to behold. The passion, the relentless, the desire to serve a purpose larger than self. Bryan has never married or had children. There are no close personal friends who receive routine mention in the memoir. He doesn’t appear to have any hobbies outside of work and playing the piano. He is consumed by his mission and it’s a very admirable mission at that. We owe people like Stevenson a debt of gratitude for sacrificing so much for the greater good. I frequently ask myself, when I read memoirs or biographies about men and women of this disposition (Lyndon Johnson comes to mind), whether I could ever see myself so subsuming my own desires and personal needs in service of any sort of mission, be it a noble one such as Stevenson’s or a purely selfish one. I usually conclude I cannot. The single mindedness and complete subjugation of the individual to the mission — the dissolution of the ego, if you will, but not in the Buddhist sense of that phrase — is something I don’t see in my past, present, or future. But who knows. There’s a purity to life purpose that’s appealing. There’s no question as to how to spend your time when you wake up in the morning. You go and do the work, day after day after day.

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What I’ve Been Reading

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Books.

1. Anna Karenina by Leo Tolstoy. I spent the holidays reading this epic Russian tome, my first Russian novel. It was a good book to read while on Christmas break — being able to sink into it for a few hours each day allowed me to stay grounded in the plot and keep track of all the characters over the course of the 800+ pages. I had the expectation that I’d get lost; I don’t tend to do well when the character count exceeds a handful. But now, with a couple months of distance from the experience, I still have a vivid sense of Levin and Kitty and Vronsky and Anna, which shows the depth of the

2. Maybe You Should Talk to Someone by Lori Gottlieb. A compelling memoir of a therapist reflecting on the act of being a therapist and going to therapy herself. Lots of excellents nuggets into how therapy works and doesn’t work. A few highlights:

Therapists use three sources of information when working with patients: What the patients say, what they do, and how we feel while we’re sitting with them…

“We’ve talked before about how there’s a difference between a criticism and a complaint, how the former contains judgment while the latter contains a request. But a complaint can also be an unvoiced compliment…

Anger is the go-to feeling for most people because it’s outward-directed—angrily blaming others can feel deliciously sanctimonious. But often it’s only the tip of the iceberg, and if you look beneath the surface, you’ll glimpse submerged feelings you either weren’t aware of or didn’t want to show: fear, helplessness, envy, loneliness, insecurity…

As Andrew Solomon wrote in The Noonday Demon: “The opposite of depression isn’t happiness, but vitality.”…

Sex comes up with almost every patient I see, the same way that love does. Earlier on, I’d asked John about his sex life with Margo, given the difficulties in their relationship. It’s a common belief that people’s sex lives reflect their relationships, that a good relationship equals a good sex life and vice versa. But that’s only true sometimes. Just as often, there are people who have extremely problematic relationships and fantastic sex, and there are people who are deeply in love but who don’t click with the same intensity in the bedroom.

3. Autumn by Karl Knausgaard. I love Knausgaard — search my blog for my other reviews. This one didn’t stick for me. I did like this paragraph though:

But if it were possible to see everyone who has retired to their beds in a great city at night, in London, New York or Tokyo, for example, if we imagined that the buildings were made of glass and that all the rooms were lit, the sight would be deeply unsettling. Everywhere there would be people lying motionless in their cocoons, in room after room for miles on end, and not just at street level, along roads and crossroads, but even up in the air, separated by plateaus, some of them twenty metres above ground, some fifty, some a hundred. We would be able to see millions of immobile people who have withdrawn from others in order to lie in a coma throughout the night.

4. Fleishman is in Trouble by Taffy Brodesser-Akner. A modern, funny, incisive novel that’s being widely read, apparently, by those in the in circles of Brooklyn lit, etc etc. I enjoyed it a great deal. I didn’t find it, in the end, as feminist a book as I was expecting.

He explained to Toby that presence in a yoga class, no matter your ability, was a shortcut to showing a woman how evolved you were, how you were strong, how you were not set on maintaining the patriarchy that she so loathed and feared….

She was now an inner ear problem, something affecting his balance…

I’d read those stupid blogs about Disney, and they all warned me that the character lunch at the Crystal Palace would fill up fast, so I should book at eleven A.M., but they did not warn me about the existential dread of being there. It was like I could finally see what I’d become, made clear through my presence among yet another entire set of women who looked just like me. I couldn’t bear being this suburban mom who was alternating between screaming at her kids and being the heartfelt, privileged witness to their joy. But the people around us—the haranguing mothers and the sexless fathers—I kept trying to find ways that I was better than these people, but all I kept landing on was the fact that the common denominator was me.

5. Talking to Strangers by Malcolm Gladwell. Lots of interesting observations from one of the strongest non-fiction storytellers at work today, even if the big picture thesis eluded me, a bit. Still recommended.

And of every occupational category, poets have far and away the highest suicide rates—as much as five times higher than the general population…

In one national survey, three quarters of Americans predicted that when a barrier is finally put up on the Golden Gate Bridge, most of those who wanted to take their life on the bridge would simply take their life some other way. But that’s absolutely wrong. Suicide is coupled.

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Light Suppression vs. Strong Suppression

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Two and a half years ago, I went through a lightly traumatic, near death experience. When I recall the event in my own mind, or if someone who knows about it raises the memory with me, I usually begin to shed a few tears (my eyes well up within 10-15 seconds) and my heart rate increases. A couple months ago, I had dinner with a couple people who were there at the time of the incident, and they brought it up (“Do you remember that time…”). Light tears gathered almost instantaneously in my eyes. And, later that night, I tossed and turned and thought about the incident for several hours while trying to fall asleep.

To be clear, it’s not something I think about every day or even every week. I’ve only had one real “flashback.” And even when I do experience stress about it, it’s not debilitating. I usually cry lightly for 30-45 seconds, and then move on. Sometimes I don’t cry at all; I simply agitate mentally about it, quietly. For example, a few days ago, I was reading a book and came across the phrase “near death experience” (in a context that had nothing to do with the incident I went through). I stopped reading and I found myself, in my mind’s eye, going back to the incident 2.5 years ago and I spent 5 minutes thinking about it. So, I lost focus for a bit, but then let it go and was able to continue reading. Not a huge deal, all things considered.

I’ve considered seeking professional counseling or approaches like CBT to process my experience. But I think that’s overkill for what I’m experiencing.

So instead, I’m trying an old fashioned method: suppression. I’m simply trying not to dwell on it too much. I’m consciously aware of what’s happening, which makes this suppression instead of repression (which would refer to unconsciously suppressing feelings).

A doctor friend who thinks about these things pointed out to me the difference between “strong suppression” and “light suppression.”

Strong suppression would be establishing a rule with myself that I’m not going to think about the incident again. I’d also tell the 4-5 people who were present at the incident or know about it: “Hey, don’t ever bring up that incident again.”

Light suppression would involve not proactively thinking about, not bringing it up with others, and generally trying to change the topic if the topic came up. But it would not be establishing a hard and fast rule. If I randomly thought about the topic, or someone else raised it, that’s fine — I would simply change the topic swiftly and not sweat it. I wouldn’t relive it, or analyze it, or dwell on it, or talk about it. If it happens to come into my mind, I let it be and let it pass on by and then get back to whatever I was working on / thinking about.

The challenge with a strong suppression strategy is it creates stress around compliance and enforcement. If I tell someone “Hey, never talk to me about that again” I now have to monitor compliance with that rule. The monitoring process itself is stressful in addition to the stress that arises when the incident becomes top of mind.

It occurred to me that there’s a generalizable lesson here, perhaps, about strong vs. light rules in other domains of life. The stronger held the rule, the more stress you’re putting on yourself to monitor and enforce compliance with that rule. For example, with habits, if you create a strong rule of needing to do something every single day (e.g. meditation), the stress of monitoring your own compliance with that rule can be more cost than it’s worth. It’s also the case that once you break a strongly held rule — or catch yourself not being compliant — it can be harder to re-capture the motivation to begin again from 0.

So I’m going with light suppression here. I’m not going to write about or think proactively about this incident again. When it arises in my mind, I’ll let the thought pass on by. And I’ll change the topic if someone else raises it with me.

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