How being a startup CEO compares to being a VC
Earlier this year, I left an awesome job.
Why? To bring a vision to life that our team cares about deeply. Our vision is to shrink the network gap that translates to the opportunity gap. 4Degrees does that by helping professionals cultivate their most important asset — their relationships. To tackle it, we’re applying advanced analytical tools and the practices of the world’s best relationship builders.
We’ve recently graduated from Techstars Chicago, just went live with our first few pilot firms, and are looking for talented engineers to join us!
A few months after going from early-stage investor to startup CEO, my friends at M25 asked if I could share my observations on making the shift.
Caveat: I worked as a VC (Associate and then Senior Associate) for ~3 years, and have been a founder for the past 4 months. This is far from the universal truth!
What’s similar:
- You can rarely take statements at face value
As a VC, I often received the best version of the truth. One reason behind this was obvious — I was part of a team being encouraged to invest! Another is that entrepreneurs fundamentally believe in what they’re building. They wouldn’t put in the long hours, and deal with the anxiety that comes with building something new otherwise. That belief often translates into good versions of the truth. In my role, deploying capital responsibly meant I had an obligation to get beneath the surface and have a real conversation.
As an entrepreneur, I’ve seen the same dynamic with potential investors, sales prospects, or hires. Part of the impetus that makes the truth less clear is genuine — many people want to be kind and helpful! Part of it is also driven by incentives — the need to maintain a good reputation within dense communities, and potentially preserve the opportunity to participate down the road (investing, joining the team, etc.). As a result, most interactions need interpretation — things aren’t always as they appear on the surface.
In both roles, the unvarnished truth is a gift.
2. You need relentless optimism, bounded by reality
As an investor, there were reasons for us to pass on every single deal. For early stage companies, we didn’t have to look hard to find meaningful, potentially company killing risks lurking nearby. But success wasn’t defined by focusing on all the risks. It came from finding opportunities with tremendous upside should the team overcome those risks. Our mandate was to clearly assess reality, but find compelling reasons to believe that it was worth investing anyway.
As an entrepreneur, rejection and failure are omnipresent. For nearly any startup, most potential candidates won’t become team members, and most top-of-the-funnel leads won’t become customers. More existentially, most early-stage companies will fail. We not only need to stare that reality in the face — but be excited to charge headfirst into it. And while being wholeheartedly convinced that our company is an outlier, we must be receptive to the feedback embedded in rejection and use it to inform the best path forward.
3. You must manage your psychology
Early-stage investing has a much longer feedback cycle than most other professions. While there were some interim signals that our investment thesis was playing out as expected (growth, subsequent investment markups), they were imperfectly correlated to the outcome that keeps firms in business — returns. In the absence of consistent feedback from exits (often 7–10 years after founding), we had to avoid optimizing on the data that was more readily available — investments in “hot” categories, press coverage, and other VC flavored vanity metrics.
As an entrepreneur, rejection is a part of the job description if I’m being ambitious enough. Even the best get rejected by investors, customers, talent, etc. many times a day. The ability to absorb it, learn from it, and keep our team motivated is critical to making progress. I’m lucky to have a great team, and network comprised of friends, fellow founders and advisors to help!
4. Mental models have an outsized impact
Early-stage investing is both information rich and information scarce. We were investing in new and emerging spaces where little data existed, and behind a team we met potentially less than a month prior. At the same time, the volume of companies, conversations, and relevant reading generally overwhelms the available time.
Mental models help make sense of both the scarcity and richness. For example, rather than walking through all the nuances, the phrase “Airbnb, but for pets” gives a newcomer a quick sense for how DogVacay works and allows them to categorize it properly. But neither VCs or entrepreneurs benefit from rigidly applying them.
For VCs, trying to force fit a model to the unyielding world could lead to turning down Facebook because MySpace existed, Google because it wasn’t the first search engine, or Workday because the human capital management space was crowded. Making those investments (before their breakout traction, at least), required seeing the redrawn boundaries of a space, a re-imagining of the salient competitive dimensions, and a willingness to discard the dominant lens of viewing the world.
Entrepreneurs often sense opportunity in defying these pre-existing models. And yet they shape how your narrative is received by nearly all outside parties — they are incredibly hard to escape.
What’s different:
1. My perception of time
As an investor, I thought about time in relation to efficiency. My goal was to spend my time on the potential investments our team found compelling, help entrepreneurs, and build the firm’s capabilities. It was a resource allocation question first and foremost.
As an entrepreneur, I think about time as related to our existence. Look no further than the common conversation about runway — the amount of time an early-stage company has before it can no longer meet its obligations. Time exists on a different level in Maslow’s hierarchy for me than it did before.
A related and important aside — wasting a founder’s time is equivalent to taking life from a company. While I understood this as a VC, I really understand this as a founder, and it has completely reshaped my opinions of others in some cases.
2. Decision-making tempo
As an investor, our typical decision-making cadence was weekly (around partnership meetings). Don’t get me wrong — there was plenty of work to do between meetings, and we’d react to fast moving fundraising processes on occasion. That said, there was a clear default rhythm that lent structure to our work.
As an entrepreneur — with the exception of large, company-defining decisions — our operating cadence is closer to daily (if not shorter). This is related to the prior point about the value of time — in a world where our runway is measured in months, each hour takes on a different level of urgency.
3. Day to day volatility
My mental state as a VC had limited variance. I got excited when I spoke to compelling teams and as our companies performed well. I’d also become concerned when people and companies I liked ran into issues — but my default state was even-keeled. The role is naturally buffered from the wildest swings — even the most involved investors aren’t in the trenches, operating the business like the founders (and that’s as it should be). Moreover, the notable occurrences that represented meaningful peaks and valleys generally weren’t everyday events.
Company building, on the other hand, is aptly described as a roller coaster. The volatility that statement implies is natural — we work incredibly hard to build something that should, and must, exist. As such, most events that affect our company matter to us, and there are many of those events on a daily basis.
What I’m doing now:
If you’d like to hear more about the future of professional relationship management, read more here, follow us on Twitter here, or reach out directly to me — ablorde@4degrees.ai.
About the Author
Ablorde is the co-founder & CEO of 4Degrees (Techstars Chicago ‘17). Prior to co-founding 4Degrees, he was a Senior Associate at Pritzker Group Venture Capital, where he was involved in the team’s investments in G2 Crowd, Catalytic, Hightower (acq. by VTS), Augury, and many others. He is an avid reader, weightlifter, and Chipotle eater.
Twitter: @Ablordesays
About Midwest Startups
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Twitter: @MidwestStartups
