From time to time we’ve written of the difficulties and risks associated with very early stage investing, sometimes with a tongue-in-cheek look back at the predictions of past generations of investors and futurists. A “IIIrd” installment like this may mark the beginning of a tradition – but in our line of work it’s good to guard against the hubris inherent in projecting conventional wisdom too far out into the future.
Develop flexible persistence - the sense for when to stay committed to your vision and when to pivot in the face of new realities.
You are at least partially wrong about your product. Launch early enough that you are embarrassed by your first product release, and find out how people are using it.
Aspire, but don’t drink your own Kool-Aid. …[A]lways look for good perspective on how you are doing. It is very easy for creative innovators to get caught up in their own story rather than learning where they should be headed.
The best product doesn’t always win; great distribution is even more important. How will you get your product in the hands of millions or hundreds of millions of people?
Hoffman then adds a little sauce to the dish, urging entrepreneurs to feel free to ignore rules set by other people. They’re “guidelines, not laws of nature” since entrepreneurs are, by nature, inventors who make new rules.
Writing in The Wall Street Journal, Major General Robert Scales draws a lesson in leadership from Donald Rumsfeld’s recently published memoir, “Known and Unknown.” Rumsfeld has been (among many other things) a successful Congressman, White House Chief of Staff, Defense Secretary (twice), and Fortune 500 CEO. Scales wonders how and why an accomplished leader such as this could fail to sense the strategy slipping and doubts growing.
Using an especially apt parallel for today – the sesquicentennial of the first shots fired in our Civil War - Maj. Gen. Scales sees a historic parallel in Lee’s failure at Gettysburg:
Fort Sumter, 1861
Lee’s generals knew that modern weapons and a determined enemy would turn the charge into a disaster. But who among them would step forward to question the supremely confident general known as the “marble man”? Lee would have been surprised to discover that his generals had doubts, because he considered himself open to their opinions. But his own stature and idea of himself created a barrier that only the trauma of failure could overcome. Thus perhaps in “Known and Unknown” Mr. Rumsfeld inadvertently reveals himself as the 21st century’s first marble man: supremely confident of his ability to manage a war of machines and sadly unapproachable to those below him willing to offer an alterative view of the shifting conflict. In truth his formidable and dominating personality, which had served him so well before, now served to impede those trying to steer a different course—the one that would prove successful in Iraq after Mr. Rumsfeld’s timely and inevitable departure.
It’s easy to imagine either man’s staff struggling to effectively press their contrarian advice. Any number of factors could cause one not to risk a career “Pickett’s Charge”: the leader’s force of personality, the high stakes involved, the constrictions of time, the subtle team dynamics of consensus building, or even an over-reliance on formal procedures. And what’s true for a strong general or cabinet secretary is true elsewhere – including CEOs and their boards of directors.
Many small private companies have no or underdeveloped boards. We encourage all our portfolio companies to build great boards and then use them constantly. Entrepreneurs are almost always surprised how much value a good board can bring to their companies. In our experience, boards work best when members’ informal modus operandi animate the formal framework of decision-making. Are their relationships strong enough to compensate for the all-too-human tendency to learn only after it’s too late?
Holman Jenkins, writing in The Wall Street Journal, succinctly and perfectly describes the brilliance and, sometimes, serendipity involved in breakthrough entrepreneurship. From Medical Progress, Please:
How does a device like MelaFind come into the world? It begins when a small defense contractor specializing in computer vision is approached by pharmaceutical giants seeking objective ways to evaluate unguents for hair growth, wrinkle reduction or wound healing. An adviser to the small company, a world-famous dermatologist, pipes up: “Wound healing is cool, but if you really want to do something for humanity, help us detect melanomas.”
America having great capital markets, it’s possible to raise $130 million for a speculative venture.
In addition to extolling the wizardry of American medicine and the strength of our capital markets, Mr. Jenkins recounts some of the challenges faced during FDA approval by the current “wave of devices bringing artificial intelligence to bear on medical diagnosis.” The details Mr. Jenkins reports are a clear example of what our friend Rhys Williams has argued before Congress: in addition to streamlining its approval process the FDA needs to switch from the “zero defect” to the ”calculated risk” model.