Learnings and Realizations from 2014

It’s been a while since I’ve written about daily VC life issues on the blog. One of my new years resolutions is to get more active on here. To inspire myself to do so, I’ve installed a new theme that’s mobile friendly and easier to play around with!

I’ve met lots of students over the past 12 months, interested in VC, who’ve noted they’ve gotten a lot out of the blog. It’s rewarding and encouraging to keep writing. I will continue to publish industry whitepapers and analysis on TechCrunch, Venturebeat and re/code, but will post Junior VC related info and informal daily thoughts here.

As I look back on 2014, I figured I’d outline some of my biggest learnings and realizations from the past year.

1.  Turns out that I didn’t know what I didn’t know – As 2013 came to close and marked 2 years in the venture industry, I felt confident that I finally “knew what I didn’t know.” I was wrong. The scariest thing about this year was finding myself in more and more situations where I simply didn’t know what to do. And although it’s fun to always be exploring in a profession, it’s scary when you don’t have a roadmap.

2.  Behind the Scenes > Public Decisions – Much of the Twitterati and VC blogs focus on investment theses, emerging technologies, industry whitepapers, etc. And that’s clearly an important part of the job. But I have to admit…I don’t think it’s the most important part of the job.

About a year ago I started wondering to myself why VCs are (theoretically!) so well compensated when the checklist for making decisions (founding team, traction, references) are fairly straightforward. Again, I feel obnoxious underplaying the investment process but the truth is that I feel that there are many smart people who could be great investors (I felt this way about poker players too!).

Where I think great VCs differentiate from mediocre VCs is in process, communication, empathy and management. What I realized in the poker world is that fundamental skills were ultimately secondary to bankroll management, game selection, and emotional balance. I made multiples more money than players that were 10x better than me, because they took unhealthy levels of risk or were emotionally volatile. I think the same concept applies in VC: you can have the world’s greatest theses, but piss everyone off, run deals from start to finish terribly and never become great.

Tl;dr: I believe that the behind the scenes intangibles create more value than the public theses.

3.    Have Convinction – This was certainly the year where being contrary became cool, culminating in StartupLJackson’s “The Counterintuitive Thing About Counterintuitive Things.” It got so over the top that I started to wonder if the counterintuitive market had matured to the point where being cliché and simple was the new counterintuitive thing?

In all seriousness, this is a tough business to be confident and different. It is so easy to follow others – whether that be other venture firms, other advisors, etc. Following is the easy bet; no out-of-town associate ever got fired for following Andreeson-Horowitz.

The good news is that I learned what I need to feel in order to have conviction. There was one moment this year – one entrepreneur, one company – where I simply knew I was right. Sometimes you meet an entrepreneur and can just sense that they will literally brute force their own success. I was 100% sure this person would do good things. My partnership didn’t like the model and I dropped it after 15 minutes of pushback. It’s hard to gauge success but all indications point to this one being a homerun.

Whether or not that deal ultimately turns out a winner, I learned my own sense of conviction: that feeling of energy, enthusiasm and confidence that will enable me to pound the table and fight for an investment in the future.

4.    Take Personal Risk – I am really passionate about diving deep into businesses and connecting with the leaders who aren’t CEOs or COOs. The most important people in an organization can often be lead engineers, VP Sales, VP of Care, etc who simply fly under the radar.

I realized that I wanted to connect with more of these people because I thought about their jobs all the time. While it started selfishly, I figured that other people also wanted to geek out about similar topics, meet like-minded people, and hang out. I thought being at a venture firm (and thereby relatively unbiased) provided a unique platform for putting people together a room and taking responsibility for the evening.

And so I started an event series called the Building series. Most people I spoke to about it were dubious. I’ve even been paying the $700/event overhead costs out of pocket because sponsors were skeptical. I could’ve really tarnished my own reputation if people had hated the events. But I’m fortunate that they’ve been a real success. In addition to some phenomenal speakers from Uber, GrubHub, Handy, Trunkclub, and SpotHero, we’ve had attendees ranging from local executives of billion dollar SF companies, to execs from local growth stage companies, to unfunded super early stage companies.

Most importantly, I’m starting to make friends through the effort. I love making new friends. New people to bounce ideas off…ask for feedback on an entrepreneur I just met. I can’t wait for the next event and they keep me going when things are slow.

5.    Stay Proactive – One of the struggles of the Chicago Ventures team is that the GPs are well connected and big personalities. Everyone knows them and they have wide networks.

This poses a problem for me working up the ladder. I saw that I ended up spending so much time being reactive to their dealflow and relationships that it hindered my ability to develop my own value. At the same time, the quality of inbound companies and relationships was so high that it was hard to argue I should be prioritizing my time on lesser opportunities simply because they were my own. In my opinion, this is one of the great catch-22s of the venture business: you need to build your own value chain and brand – but being a true team player is often the most value additive thing for the firm. That said, if I’m not creating my own unique value then I’m a commoditized grunt and they could hire anyone.

Like everything in life, it’s a balance. But I realized that in order to feel fulfilled I had to create my own fate: start producing my own content, start my own event series, build my own relationships, find companies and spaces that I alone was passionate in.

The only way to be great in this business is to be proactive. At the same time, there’s a danger of trying to push the pedal too hard and do too much. Again, it’s a balance. But if you’re reactive, then you’re a commodity.

 6.    I Need to be Independent Yet Need Mentors  – I think that a venture firm is one of the perfect places for me because I’ve never really done well working for other people. I’ve had two formal bosses (before CV) over the course of my life: Tina Wells at Buzz Marketing Group and Taylor Caby at CardRunners Gaming. In both of those roles, I was given nearly limitless freedom, budgets, and independence. At CardRunners, Taylor used to even jokingly call me “CEO.” 

Both Tina and Taylor were phenomenal managers because they both recognized that my personality was one that craved autonomy, decision making, and growth – while also demanding regular mentorship and positive feedback. I had a weird balance of both wanting to be my own boss, yet still requiring some positive reinforcement to keep on attacking.

I like to think I was highly successful in both roles because I understood the industries, understood the problems and just went out and creatively executed until someone told me to stop (or stop spending).

The venture world operates similarly in that it’s highly unstructured with little direction. Although I’d typically excel in this environment, I struggled at first because I didn’t really know where to start. I’d go to events and meet people but didn’t know what to do with that information or with those relationships. I would put my thoughts to paper but wasn’t quite sure who would read them or if anyone would care. I would write investment memos but wasn’t sure what analysis was helpful. I’ve figured most of that out.

All that said, I still have two weaknesses heading into 2015: (a) This is an apprenticeship business and I haven’t had the opportunity to closely apprentice an expert. I have mentors, and I’ve figured a lot of it by trial and error – but it’s the difference between having Tiger Woods’ swing and Jim Furyk’s. Both win majors, but Tiger’s is fundamentally beautiful. I don’t want to just be a winner – I want to be great. (b) The downside to having my personality is that I feel resentful and anxious when I’m not in charge of my own fate. VC is a business where so many things are out of your control –from company successes to downstream financing to fund management. It’s an industry which negates my inclination to have control at all times. Even in poker, while any given hand had an element of chance, I knew what sample size I needed to hit to outrun short term volatility. Sample sizes in all aspects of venture are so small – from financings to theses to career decisions. It is scary and I’ve got to get a better grip on it.

I’ve put a lot out there and hopefully someone’s gotten through it. I’ve decided to be more open and honest this year. Please treat that openness with respect.

Ezra

About the author

Ezra Galston
Ezra Galston

Consumer focused hustling @Chicago Ventures, Young Entrepreneur @Foundation Capital, Class 18 @Kauffman Fellow, and Chicago Booth MBA. Former professional poker player, with 4 years experience doing marketing/biz dev in the online gaming industry. Launched a "poker hedge fund" in 2011, a record label in College, and produced a festival screened short film in 2006.

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