With 18 ventures backed in the past 12 months, one would think that the rate-limiting factor for backing new startups is financial capital. In actuality, this is not the case.
A big idea, executed on a category-defining domain name, led by a stage-appropriate CEO, makes for a compelling early stage investment opportunity for which capital is usually available. The true rate-limiting factor for backing more startups is finding the leadership talent. And by leadership, first and foremost, I am talking about the CEO.
So, what do I look for in a startup CEO?
Passionate, confident, tenacious, and goal-oriented. These are all highly contagious attributes. You can only fake these things for a while. They love their work, and are driven to succeed, not just on a single venture, but have larger ambitions. They believe that they were put them on this earth with a purpose — even if they don’t quite yet know what that purpose happens to be.
Genuine. A large part of genuine leadership comes from having character. Character comes from proving to yourself that you know who you are, what you are good at, what you enjoy, and what matters to you. The most effective leaders I have met are guided by a set of core values and principles. They know the difference between right and wrong, fair and unfair, and can navigate the gray areas in-between.
Adaptable. We want to work with people who know why “failure is not an option.” When results are not in-line with expectations, a great CEO will figure out what is not working and adapt. This is often not just a function of “working harder.” It is often a function of listening to stakeholders — customers, investors, advisers, and employees — and then adapting in response to the data.
Intelligent. CEOs need sufficient raw intellect so they can learn what they don’t know. Ideally, the CEO has domain expertise and can quickly formulate a vision for the company that has the potential of carving out a profitable niche that taps into a multi-billion dollar addressable market. To the extent that a CEO lacks domain expertise, the CEO needs to be able to recruit into his or her blind spots in order to be able to focus on areas of personal strength, while learning on the job.
Ecosystem thinker: Monster Venture Partners is practicing a style of investing that I call “Ecosystem Investing.” It is different than Keiretsu investing in that the companies we back share a common architecture which extends across the core portfolio. The full scale of this common architecture is not yet fully apparent to the casual observer but the synergies are real and the consumer will be the primary beneficiary of a seamless web experience. Sooner or later, the CEOs we back embrace, and often extend, this common architecture.
Demonstrates Integrity: This is price of entry for any leader. An amazing thing happens if you focus on working with people that have high integrity. Everything becomes frictionless. Information is shared openly. Interests are aligned. Partnerships are built to last rather than for expediency. Working with a CEO without integrity is like making a deal with the devil — it rarely works out in the end.
Tolerant, open-minded and prepared to deviate from convention. The crowd is not always right. The minority of today may be an early adopter, trendsetter or taste-maker. The kind of CEO we like to hire suspends judgment and instead forms a “working hypothesis.” Jean Ibrahim, an early boss and mentor at Proctor & Gamble, taught me the principles of great consumer research. When analyzing consumer data, Jean would often tell me, “First search for truth … and then use the data to explain truth.” Words to live by from Brother Ibrahim.
Global-minded: Most of the opportunities we are interested in pursuing have a global component — whether it means global sourcing of inputs, or global distribution of products and services. A CEO may not have had global operating experience, but needs to be open to the idea and prepared to recalibrate how they develop products, how they hire, and how they go to market.
Wired for productivity. Technology is a huge productivity booster. Blackberry, Facebook, Skype, LinkedIn, Intelligent voicemail are tools for getting more done in less time. Most of our CEOs know what is in their inbox and process the important ones by the end of the day.
Able to attract and retain talent. I have long believed that A-players hire A-players whereas B-players hire C-players. The first 20 people you hire are largely determinant of whether you win or lose. So, if you pick a B-player CEO, they will stack the team with mediocrity and you will lose. This is why most incubators fail. They spread the talent thin and too often settle for mediocre leadership. The results are entirely predictable if a course correction is not made early enough.
Have a supportive home life. It helps to have a supportive partner and family. I read recently that a man’s most important job in life is to marry a good woman. Hallelujah. If you are married and want to see if you have a good spouse, do a startup. When the chips are down, you’ll get a pretty good sense. On the flip side, I strongly encourage married CEOs to make time for regular dates and getaways. In-line with that directive, our CEOs also know that I’m happy to pinch hit for them while they’re off-the-grid, which is a primary reason why I often take the role of Chairman.
Ask for help. Key contracts, key hires, and other key decisions are all good times to ask for advice. Most times, the advice comes in form of a suggestion, a document, an introduction, an anecdote or a (wee-hour) email. There are times when I’m sure about something, at which point, I will tend to be emphatic on the direction I think a CEO should take. This is not the norm. Ultimately, the CEO is empowered to make his or her own decision. However, the CEO who ignores emphatic advice, should explain the logic, share the data, or be right!
If you know of a great CEO, who is here to change the world, send them our way. We welcome the opportunity to match great leadership talent with great opportunities to reinvent entire industries.
CNN Money released recently its list of the “100 best places to live and launch” in the U.S. Topping out the list is MVP’s hometown, Bellevue, Washington, about which CNN’s Mina Kimes writes:
Bellevue is a city in transition: no longer a bedroom community, but not yet a crowded, expensive metropolitan hub. Bellevue has grown with unusual grace in recent years. Huge corporations exist symbiotically with startups, a booming downtown abuts healthy residential neighborhoods, and the rising skyline is tempered by an abundance of parks, as well as lakeside and mountain views. Flash retailers such as Neiman Marcus draw regional shoppers, but Bellevue’s excellent healthcare and schools are key attractions for relocating families.
While local businesses must pay the statewide Business and Occupations tax on their gross receipts, there’s no corporate income tax. Businesses with less than $135,000 in taxable revenues (the highest threshold in the area) don’t have to pay the B&O tax. Easy airport access and a highly skilled workforce make Bellevue an attractive option for startups looking to break big.
We couldn’t agree more, Mina.
Last week was an eventful one for Monster Venture Partners. First, as many of you may already be aware, Jeff Schrock joined MVP as a venture partner. He comes to us from RealNetworks where he was a senior member of the corporate development team. Jeff brings with him a process-oriented approach to buisness and a large professional network — notably in Seattle.
Jeff joins MVP at a time when a number of portfolio companies are gaining significant operating momentum and are beginning to need an expanded set of advisory competencies. At the same time, the volume of opportunities to engage with entrepreneurs has increased for both prospective portfolio companies and startups that MVP will back in the future, and for existing portfolio companies.
One of the major initiatives that Jeff is currently heading-up is the FastTrack program — a partnership with leading vendors to provide enhanced trade terms for high potential companies. Initial response from both entrepreneurs and vendors has been highly enthusiastic. Jeff will be announcing details in the near future, together with Brenda O’Quin, our talented executive assistant at MVP HQ in Bellevue.
Another significant development last week was the appointment of Patrick Pun to the position of Executive Vice President for MVP in Asia, based in Shanghai. He spent the past week Seattle for on-boarding to learn about the portfolio companies, and to align priorities for the coming months. Patrick was previously General Manager of Global Market Insite (GMI), the company that I founded and ran prior to founding MVP. Patrick’s record of achievement is impressive and we’re delighted to have him on the team.
He is a startup veteran with the right set of skills to both identify additional opportunities as well as spearhead the development and/or sale of some of the highest quality domains. In some cases, Patrick will play executive roles in the portfolio companies. For example, Patrick will be EVP Asia for IDN Options which MVP recently backed. IDN Options manages the world’s largest portfolio of premium Chinese domain names.
Patrick will be working closely with a number of the portfolio companies who are generally in need of a partner in China and the rest of Asia, but are not yet ready to invest in a dedicated Asia team. I view these as a good example of where and how MVP adds value far beyond the traditional VC.
