Time and Money As a Function of People

People: The Uncertainty Factor

Last week, Fred Wilson wrote a post about time and money, and how to value each of them against one another within the context of investing. In it, he broke down a series of considerations which each impact the time-money balance. Rereading through it again, though, it occurs to me that a lot of Fred’s considerations also point to another, perhaps more subtle factor: people.

The people factor weighs heavily on the time-money dynamic, and arguably has the potential to significantly alter one’s perceived outcome. Inasmuch as the time-money assessment is predicated on the concept of effort—that is, how much effort one must put in to a venture in order to effectively procure a sufficient return for one’s investment (both time and money herein)—that effort is nonetheless dictated (or at least impacted) by the people around whom it centers.

Much of Fred’s argument—broken down amongst four examples—revolves around the notion of uncertainty as it applies to people. Uncertainty in this case (or these cases) stems from the fact that people are inherently different, and what holds true for one may not necessarily hold true across the board.

This is why so many investors articulate “the founder/team” as one of the most important factors—if not the most important factor—in their decision to invest. As Hunter Walk notes in his response piece to Fred’s post: “…we don’t invest in people we don’t want to spend time with, even if it could be a profitable investment.” Herein, the investors clearly value their time simply as a function of the personal connection they feel with the founder(s).

The Value of Evaluating Relationships

Yet as Fred notes, the reverse is true too: founders are just as much playing a “game of people” as investors are—the return on an investor’s value to a founder most times goes far beyond the money. The investor is similarly in the position of proving to the founder(s) that s/he is able to balance his or her portfolio while still delivering the necessary value to the startup company.

Evaluating people and relationships helps to assuage the challenges on both sides of this equation. When people learn to know what they’re looking for in a partner (be it a founder in an investor or vice versa)—and to articulate that to themselves, their team, and prospective collaborators—they are able to dramatically increase the value factor in the overall equation. This directly affects the time-money portion of the equation. An investor’s time is better utilized because the founder(s) can communicate their needs and vision, and thus deploy the investor’s money in a more focused manner (all while keeping open lines of communication as to how and why certain strategies might have been taken). The dollar value of the investor’s money thus increases, which increases (again) the value of their time input.

All of these factors work similarly axiomatically for founders looking to extract the most value from their potential investors.

Who You “Click” With

The evaluation of people—being able to discern who you “click” with and the type of personality which best fits your portfolio (or startup) strategy—is key in evaluating one’s time commitment to a project. The time-factor, which Fred articulates should be priced into early-stage investing math, can in fact be thought of as the people-factor. In the early stages especially, the clear dollar value of a company may not be readily apparent and some other—perhaps less tangible—metric may be necessary to consult. This is the people-assessment—this is the scenario in which investors are rife to say, “there was just some ‘It’ factor about her resilience” or “her charisma just sold me on the idea.”

This is not a shot-in-the-dark decision; it’s often a carefully calculated decision that is based less on spreadsheet numbers and more on personality—the potential we’re all theoretically (hopefully) capable of. This is a honed skill—gut feelings about people are as real as any metric and have the potential to return value on time and money investment as much as anything else in the decision process.

Time and money are very concrete things, but like so much else in life, their value can be drastically affected when they are thought of as a function of people.

***

Find me on Twitter @adammarx13 and let’s talk music, tech, and business!

The New Founder-Seed Reality: Cash, Vision, and Structure

light-bulb-current-light-glow-40889.jpg

One of the pieces which made the rounds last weekend was Fred Wilson’s assessment of early stage startup funding. More precisely, the decline in seed funding over the last few quarters, down from the peak in 2015. This was followed by a post from Jason Calacanis, which expanded on Fred’s initial thesis and took a deep dive into how he applies those dynamics to his own angel investing strategies. I’m not going to rehash these posts. However, I will muse for a little bit on what I was picking up reading between some of the lines. 

Over the last few years, and in the last year especially, I’ve begun to think deeply on how augmenting one’s approach to networking and pitching can open up doors which otherwise remain shut. In this case, the doors in question are those into an investor’s or angel’s office. Part of what has been so difficult for founders in the recent climate is that with all the money that’s been sloshing around, it’s been all that much harder to differentiate oneself. So while the seed slowdown might fill some with dismay, it’s an opportunity.

As Fred and Jason point out that this is an opportunity for new investors to get into the game and fill the gap left by investors moving further up the river, I’m going to argue that a similar opportunity exists for founders, if not as clearly exhibited. In an industry where everyone knows everyone, sometimes standing out can be much harder when there are certain expectations (prerequisites?) flying around.

Let’s be honest; people pattern-match because it’s human nature. But this nature can create blind spots—these blind spots in turn create new opportunities. Nothing exists in a vacuum, and I think the things which Fred and Jason are pointing out here—expectations of and desire for revenue, cash efficiency, a maturing business structure—run in tandem with the opening of a door to be able to now differentiate yourself in ways which previously seemed more difficult. As Hunter Walk notes, you do this by being CRAZY. Part of it is having CRAZY numbers; if you don’t have these (yet), you better have CRAZY vision.

Vision is ultimately what makes any company; without vision, you have no mission, and you have no real reason to execute. People don’t execute like hell on something they’re ambivalent about—they execute like hell on visions they see clearly and problems they’re obsessed with solving. I think the posts from Fred, Jason, and Hunter work so well in tandem because they begin to identify potential parameters for what the new seed environment might look like:

  1. Vision
  2. Cash efficiency
  3. Maturing business structure

Without each previous component, the following ones would be lacking. The new environment we see developing before us will be leaner, grittier, and ultimately more hostile towards companies which can’t lock down cash efficiency and a structure which matures with their growth.

But my gut tells me that the kind of founders which angels and seed investors are really looking for—the hungry ones who have great, obsessive visions—are exactly the founders who thrive in this type of environment. It’s precisely in these types of gritty, lean environments that the CRAZIEST visions tend to germinate. I think this new landscape will be interesting to watch for those truly CRAZY visions and how the new crop of founders differentiate themselves to communicate them.  


Music for this piece:

  • Savage Garden – Savage Garden
  • Master of Puppets – Metallica
  • Head for the Door – The Exies