Most Startup ‘Pivots’ Aren’t Really Pivots, They’re Just What Startups Are Supposed To Do

Don’t Freak Out When Part Of Your Original Hypothesis Was Wrong

If you showed me a bunch of random early stage startups and asked me to select the ones disproportionately likely to be successful, I’d bet on the teams which are able to turn a hypothesis into a test and a test into learnings with the greatest compounding velocity. This is not to be understood as suggesting great startups are the byproduct of sequential A/B tests. No, quite the opposite. But they do know where and when an intuitive insight should be pressure tested by reality. Or they uniquely understand the problem to be solved but use the first year of the company to chart the most effective path through.

And you know what often comes out of these virtuous cycles? Changes. Because that’s what startups do, they change. Adding people. Reconstituting the org chart. Abandoning one customer channel for another. Constantly changing during the early years.

When we fund a company it usually has just three things: a problem to be solved, a customer segment who has that problem and a notion of the product to be built. Then the team takes the funding and ramps up the work. And almost always they come back after a month, or three, or six and say “I think we need to pivot because one of those three things [problem, customer, product] weren’t correct.”

I say, GREAT! And it’s not a pivot. If you’re changing only one of these three aspects it’s definitely not a pivot. If you’re maintaining the problem statement but changing the customer and the product, I still think it’s NOT A PIVOT. A pivot is when you are shifting completely. Moving to a completely different set of problems, customers and product, not merely processing the learnings from your most recent efforts.

So you might ask me, Hunter, even if we buy into your definition, aren’t you being a bit pedantic? I mean who cares at the end of the day how a ‘pivot’ is defined by our industry. And I’d say… TWO REASONS. IT MATTERS FOR TWO REASONS.

Calling normal startup iteration a ‘pivot’ creates a psychological barrier to change

Even though we all work hard to remove any notion of shame or failure from ‘pivoting’ it doesn’t help to over-apply it. I don’t want founders to think that making changes to a roadmap is ‘pivoting’ because true pivots require a different playbook. The small but meaningful alterations to ones’ strategy should be done without delay, deliberation.

Pivots shouldn’t be cavalier decisions but ones which are accompanied by a vote of continued confidence among major investors and cofounders together

True early stage pivots shouldn’t be done cavalierly or just because the startup has some money in the bank and the current plan isn’t working. I’ve seen companies handicap themselves by pivoting into a completely unrelated business that, as a result of the journey, is underfunded, overdiluted and without the right investors for the journey. Sometimes an orderly shutdown (or offer to return capital) and a restart are actually better for everyone involved. More often than not if the investors have faith in the team they’ll agree to play it out. And if they don’t? Well, I’m not sure it benefits the founders to pull along a group of unwilling investors just because the wire transfer has already been completed. I think of pivots as ‘refounding’ where the cofounders should step back and honestly assess their collective interest in a new idea. Sometimes one cofounder will choose to step back because it’s heading in a direction that they’re not as passionate about. That’s fine and the self-awareness should be celebrated, not punished.

So that’s my rant on ‘pivots’…..

If You’re Not Sure Whether Your Current Investors Would Give You More Money, The Answer Is Likely “No”

Startup CEOs Should Test Strength of Cap Table Every ~6 Months To Know Where They Stand

I really liked Jason Lemkin’s “Do You Have a Weak Investor Syndicate” blog post from earlier in the summer. Go read it and then come back here….

Ok, so there are two different types of ‘weakness’ that Lemkin mentions — one has to do with lack of credibility in your cap table (“Can’t Bring You Good Leads For The Next Round”) which I’ll generally lump into the bucket of ‘you have B-tier investors.’ I’m not going to address this issue here because I think it’s largely a binary attribute of an investor and not as often situational[1] — “punching above the weight of your cap table as a CEO” would be a good post, but separate from the point I want to stress.

Instead I want to focus on Jason’s discussion of bridges and pro rata, because it’s an area which is dynamic in every deal and often misunderstood by founders. Let me do some basic level-setting of how it typically works in a venture deal:

  1. A venture fund invests an amount of money into a round. I give you $1m for 10% ownership (to make the math simple). And I probably also have pro rata which simply means the right (but not obligation) to put more capital into your next round equal to my current ownership. If your next round is $10m, and I still own 10% of your company, I would maintain the ability to do $1m of your $10m round.
  2. As a venture fund I might have a strategy which says “for every dollar I invest into companies, I will hold one dollar in reserve for additional financings.” If I have a $100m fund, $50m into initial investments and $50m into follow on. Each fund has its own strategy about reserves, follow on and so forth. There’s no industry standard other than most large multistage firms will be interested in pro rata for their successful companies.
  3. Now here’s where it gets complicated: follow on decisions are highly dynamic. Reserves are fluid concepts based on what companies are coming up for funding when, how they’re doing at the time, the size/stage/terms of the round and so on. No founder should assume their pro rata from insiders is in the bag, let alone a bridge check, only because the cost of being wrong (to the company) is so high. 99.9% of venture funds do not have enough capital to do their full pro rata in every investment for every round subsequent to their initial commitment.

Jason suggests asking direct questions like:

And I agree, those are great questions. The one point I want to emphasize is don’t ask these just when you’re closing the initial round or actively fund raising the next. Instead my recommendation is to ask every ~6 months or so in-between financings. Have a real discussion 1:1 with your major investors about how they’re thinking about this investment.

If you’re on-track to the next financing, you can couch it as “hey, as I start to think about the next round — and knowing sometimes preemptive rounds can happen these days — I want to check in on how you’re thinking about us. If you had opportunity to buy up, would you want to? If I can make sure you have your full pro rata available would you take it? If we’ve got an oversupply of demand, is this the round your firm usually starts stepping back from pro rata?”

If you’re not yet on-track, then it’s a variety of “hey, per our operating plan, I think we can get to the next round milestones but, so I have this in pocket, how does your firm think about inside rounds, especially if we want to raise a little more from current investors to get even further before going to market.”

Healthy founder <> VC relationships should always have open discussions about capital. One way I like to do it to be clear when I’m putting my “Homebrew” hat on versus just advising the company what’s best for them. I’ll give you an example of a conversation I had with a current portfolio company just this week.

It’s a seed stage company that has demand from insiders and new investors to do a ‘top-off’ in order to delay going out for a Series A. Since things are going well, our collective belief is that a few more milestones will be rewarded by the market, so let’s push further. I gave them an offer to do super pro rata at a post money of X (where X is above the seed round post money we previously led) while also offering to do ‘just’ our pro rata if they price above X (since there’s momentum from others to do the round ~10–20% higher than X). When we were talking it through I emphasized that the difference in check size I’d write had nothing to do with difference in confidence in the company or commitment to them as people (we already own close to 15% of the company as their largest outside investor). And I told them, they should probably do the higher price round even if it meant a ‘worse’ deal for us! Why? Because it’s better for the company overall IMO. I rather see the difference in dilution be used to continue hiring amazing team members going forward than add a few more basis points to my ownership. Long term greedy!!!! Now I’m just waiting for confirmation on what they want to do 🙂

Every situation is specific to the company, the investor and the moment in time. I’m sure there are examples where I needed to play ‘hardball’ or provide less flexibility in optionality, but I think it just goes to show that the best outcomes come from real discussions.

Lastly, Jason has a single very practical suggestion on what to do if your cap table is tapped out. I’m not going to repeat it here because you should give him the click 🙂

Thanks Jason for writing one of the posts I know I’ll be sharing with founders!

[1] Some situational examples do occur though: when a firm (or more specifically a GP at a firm) is rising or falling in stature; when a firm is investing in an industry outside of its wheelhouse and lacks relationships with appropriate downstream investors for the company.

Future of Work Software That Focuses on EQ Not Just IQ

Why The Move to Remote Has Accelerated The Need for New Tools

The first generation of SaaS was about single player workflows and data. The second generation added collaboration (aka multiplayer). And the third generation added ML/AI to reorganize/optimize those workflows based upon the intelligence of the computer, not the habits of the user. Not every industry and not every profession has moved through these generations in sync. Early adopter verticals — such as software development and tech sales — is mostly in Gen 3. Some of the largest markets including construction, health care, finance and agriculture are moving into Gen 1 and 2, with specific toes dipped carefully into 3. And my framework here also applies mostly to the US, with other part of the world ahead and behind the pacing I’ve suggested above.

Homebrew has invested into all three generations of SaaS mentioned here, and continues to do so with the previous 12 months including undisclosed seed rounds into promising teams working on agriculture fintech, health care backoffice automation and salesperson performance. But I also wanted to suggest there’s a coming Gen 4 of SaaS leaning heavily into EQ instead of IQ because I truly believe the Future of Work involves understanding emotions not just data.

When friends ask me to reflect on the impact of 2020–21 on startups one of the observations I shared is how dramatically the urgency increased around conversations that were more about culture, behavior and values than just strategy, financing and product. Especially during the second half of last year the convergence of the COVID pandemic, US political race and societal outrage over George Floyd’s murder, resulted in CEOs confronting a host of situations that weren’t on their roadmap.

In some cases these leaders wanted to be proactive in the moment. Other times it was their teams, customers or reporters probing for their POV. And regardless they wanted to be thoughtful, deliberate and consistent in how they, and their companies, engaged. So my conversations with these CEOs wasn’t about pushing my particular opinion on these matters or rushing them into a conclusion, but rather helping them focus what they were hoping to accomplish with their internal and external positions. I’m proud at the range of outcomes since they were honest and authentic, not performative.

Throughout these months one thing became very clear with all the leaders and managers I spoke with — they didn’t have the software tools to engage and understand their teams, their customers and other constituents at a deep emotional level. They had plenty of communication utilities which made conversations virtual but they didn’t have modern tools built with EQ in mind. So you had “Zoom Fatigue” and burnout and HRIS platforms designed for compliance not engagement. Thankfully I knew there were better options in development. How? Because we’d invested in them 🙂

Over the past 12–18 months another theme had started to coalesce in the Homebrew portfolio — Future of Work tools that were built with a combination of IQ *and* EQ. Gatheround in the teambuilding, education and collaboration space; Humu, smartly bridging the gap between strategy and action for your teams; Ethena for modern compliance training and behavior change; and Assembly in the lowcode HRIS market. Ahead of the extraordinary circumstances of the past year and a half, these founders had intuitively sensed and previously experienced the limitations of Generation 1, 2 and 3 tools. And while I don’t think they all agree with this market positioning, to me they represent the next wave we’re going to see in Future of Work tools, designed with tangible and intangible sense of how people are left feeling by the software they use, not just how productive they were. It’s still very early in this cycle but hybrid and remote work is pulling us forward with new types of communication, virtual HQs, and socialization needs. And software that remembers humans are the endpoints.

‘Inside Rounds’ Used to Be Bad. Sequoia & WhatsApp Changed Venture Forever

Why Their Multibillion Dollar Outcome Flipped The Script

Pre-2014: Insider Rounds Are The Funding of Last Resort

Post-2014: Why Are Insiders Letting This One Get Out?

When WhatsApp took $19 billion and joined Facebook, the industry headlines moved quickly from the buyout itself to Sequoia’s masterful funding strategy of the startup. After publicly leading a Series A, the firm put another $50m+ into the startup in two subsequent insider rounds, neither of which were disclosed publicly prior to the acquisition. Collectively a lot of other VCs closed their laptops after reading the news, put on their Patagonia vests and took a brisk walk down Sand Hill Road while wondering how to deal with this new reality.

What was the big change? A firm had led two successive ventures rounds into a portfolio company. And they were Offensive rounds, not Defensive ones!

Up until this point the idea that your previous round’s investors did the funding on your next round was pretty verboten and when it did happen, it was capital of last resort. Like, the startup couldn’t get a new investor to lead around at terms that everyone liked so insiders decided to do the round themselves — writing the termsheet and supplying some to all of the capital. This was typically a signal of company weakness, not strength. And the investors didn’t like to do it because besides the risk of doubling down on a company instead of spreading the risk to other new investors, it meant repricing the company that you had previously invested in. An insider mark was considered to be a less reliable estimate of actual value than a new investor offering to price the round (so LPs looked sideways at it, etc).

To be clear I’m not saying Sequoia/WhatsApp was the very first time inside rounds occurred that ended up benefitting the investors and the company so the VCs reading this can save their DMs to me about how they actually led an insider round prior to 2014. Nor am I suggesting that Sequoia was the first firm to lead multiple rounds for the same startup. But I am saying it was the biggest and baddest example of the game changing. There’s a reason that for a while after the deal, trying to do an inside round was called “pulling a WhatsApp.”

Now in 2021 we have a very different landscape. The larger multistage funds don’t hesitate to lead back-to-back rounds (or in recent cases like a16z/Clubhouse, back-to-back-to-back). And it’s not just a change in norms and increased fund sizes which has supported this transformation, it’s also the Opportunity/Growth fund phenomena.

Now so many multistage firms also have some sort of growth/late stage vehicle it’s also possible to split an investment over time between those funds. Basically you’re doing the Series A and or B out of the core fund and then the C or D out of the growth fund (more of less, round nomenclature across different situations is less consistent than ever). So the risk/reward profile of the earlier investment is in a fund aimed at those bets, and the theoretically less risky, but also lower returning (on a multiple basis) later stage investment is in its appropriate vehicle. This also often means that although you have the same firm leading multiple rounds it’s a different GP — the early GP prices the first round and the growth GP prices the second one. While it’s still under the same umbrella, you can imagine that these two individuals at least serve as a check and balance on each other. If the growth fund GP is simply marking up the deals of her colleague, to her disadvantage in the growth fund’s returns, she’d be working against herself.

There’s a lot of differences between VC 2021 and VC 2001, and the nature of inside rounds is one significant change that I rarely see discussed structurally. But it’s important!

Tech Reporters, You’re Being Played By Using “Oversubscribed” To Describe Successful Funding Rounds

Why I Cringe Every Time I Read This Word

I recognize this is an overreaction. But humans have their quirks and one of mine is I cannot stand when the tech biz press uses “oversubscribed” to characterize a startup’s funding round or a venture fund’s raise. Before I share why, let me just explain what it means and is intended to convey in a financial context.

When a founder or a VC claims their round was oversubscribed they’re signaling to you that they had way more investors competing to give them money than they wanted to raise. It has nothing to do with the size or terms of the actual raise, just the presence of greater supply than demand.

Ok so why is it foolish for tech reporters to repeat this somewhat cliche talking point?

  • It Leads To A Prisoner’s Dilemma/Race to the Bottom of Hyperbole: Well if every other company is saying they were oversubscribed then we should say it too. No, even better, let’s be specific and say something like “we were 5x oversubscribed for this round.” Yeah, that’ll show em. Until 10x oversubscribed is claimed by the next startup. And so on, and so on.
  • Counterintuitively, It’s True of Most Reported Rounds: If a startup or a fund can reach its targeted amount, it can be ‘oversubscribed’ with the next dollar of interest. In fact, at that point it gets easier to raise the incremental capital, not harder, because you’ve solved the social signaling issue by attracting all the previous investors. In a single raise, getting your first investor is harder than getting your 101st. This is especially true when the quality of previous investors is high. There hasn’t been a seed round Homebrew participated in that wasn’t ‘oversubscribed,’ especially after we committed and signaled to other investors it was, at least in our minds, a startup to back. And I’d reckon same is true of every other peer fund of ours. And every Homebrew fund has had excess demand as well.
  • It’s Easy to Manufacture By Playing Cute With Figures: “We set out to raise $10 million and raised $10 million” = not oversubscribed. “We set out to raise $8 million and there was so much demand we raised $10 million” = oversubscribed. They are the exact same fundraise and the press will cover them differently. Which is nuts! Especially since most VCs will tell a startup to not price themselves out of a round prematurely. That is, go in with a figure that’s slightly below the total you’d like to raise, or a range, and let the market move you up. If you want to raise a $15m Series A and you’re doing well, but not knock it down great? Pitch people on a $10–12m round and then as folks bite, move the round up a bit. Sometimes you won’t be able to take all the additional dollars without incremental dilution but you’ll still have a much better chance of getting to $15m without scaring away potential investors.

I don’t mean to pick on any publications or specific reporters. In Googling for examples of this trope I happened upon some of my favorite journalists, who write amazing and insightful stuff. I believe though that this is one of the areas that being on the other side of the fence provides clarity on just how silly a term it is. So let’s put a stake through the heart of “oversubscribed” and just let a fundraise be a fundraise.

“I Can Really See Us Leading This Funding Round” Isn’t a Term Sheet

Why VCs Are Always ‘Very Excited’ About Your Progress But That Doesn’t Mean Anything Until They Make an Offer

My job as an early stage investor includes translation services, specifically helping startup founders take what they are hearing from potential investors and providing a read on whether that VC is actually ready to make an offer. Quite often a CEO will share all sorts of positive comments and praise they heard from an investor, and I’ll remind them these statements aren’t termsheets. Simply put, only a termsheet is a termsheet.

This reminder tweet set off a few good discussion threads that I wanted to capture and expand upon here.

Even experienced founders get ‘happy ears,’ not just first time founders

I definitely don’t blame founders for underestimating the distance between enthusiasm and a concrete commitment. VCs live in that world and have repeated experience. To the extent you trust your current investors’ feedback, you should *really* trust them when it comes to basic fundraising advice. Note: I understand that there are reasons to assume your investors are giving you advice based on their interests, not yours, but let me tell you, for the best VCs this isn’t the case. That’s not to say we’re always correct, but I will specifically tell a founder ‘and now I’m putting on my Homebrew hat’ when I have a POV that’s informed by my own needs as their capital partner versus what I generally think should be the company’s strategy. And I don’t take paths off the table for discussion that wouldn’t necessarily be my preferred choice.

Others VCs definitely know what I’m talking about

Everyone has experienced a termsheet that came with hidden surprises

Differences between the verbal offer and the provided termsheet; unacceptable clauses added; lots of noncommittal language ‘pending due diligence’ etc. We all have stories of a termsheet that didn’t pan out — either it never arrived even after it was promised. Or it was pulled for no reason. Or the investor didn’t have the money to close the commitment. And so on. This rarely occurs with established investors, because they know breaking their word is a reputation killer around our community. But it still does.

One of the benefits of working with someone like us, or Ed Sim at Boldstart, or one of dozens of other firms I’d recommend, is that you have some insurance against new investors fucking around.

Are VCs being duplicitous by always being ‘excited?’

I value coinvestors who run quick, direct processes with our founders, but I expect a certain amount of interest that doesn’t convert, especially early in a process. Ahead of having to make a decision, it’s always in the interest of an investor to stay in the game. This isn’t unique to the dynamics of fundraising, but a ton of person to person interactions. Whether it’s a hiring manager holding some candidates at bay while they continue interviewing. Or simply me telling someone I’ll “try to attend their afternoon BBQ” as opposed to just saying no right away. I don’t generally hold any ill will towards these types of responses, especially when it’s ahead of, or during, a first meeting with a founder.

Can someone develop a reputation for being a Mr or Ms Maybe or overpromising and underdelivering? Sure. Satya and I have a list in our heads of GPs who we think do this and help our founders manage those conversations accordingly. But I really don’t think it’s outright duplicitousness, just the incentive gap between two parties: a founder wants to raise a round within a certain time frame and align all bidders, while an investor often wants as much information as possible and barring high conviction or a forcing function, will often move slower than the founder. The phases of fundraising, how to get to a first term sheet, and what to do once you’ve got an initial offer is probably a blog series of its own.

But end of the day, if you screw a founder, they’ll never forget

Addendum: When is a verbal or email offer as good as a termsheet?

My friends Keith (Founders Fund) and Sam (Slow) pointed out that founders can rely on their offers without it being in a formal termsheet. I agree with Keith that an email from a Managing Partner at a Tier 1 fund with all major term components written out is 99% as good as a termsheet. I do not like verbals only — there’s too much potential for confusion is what was said, even in good faith conversations. The best practice I’ve seen is follow-up your call with an email that says something like, “per our discussion, we’re thrilled to offer ….” and include the major terms like Keith suggests.

When would I prefer a termsheet to an email, even with a Tier 1 fund?

A. When it’s a junior partner. Sorry, but if you’re just getting your feet wet at a fund, I want to know that there’s a managing/senior partner behind the offer.

B. When a founder is going to stop most of their other conversations as a result of the offer. Again, just good hygiene to have a termsheet in hand before you start slow rolling/canceling/opting out of other meetings. It’s company specific too. When I believe a startup is a slamdunk in its funding, we’ll use the first acceptable termsheet to eliminate 75% or more of the open conversations and really narrow down to a handful of firms the team is considering.

C. When there’s something non-standard the founders and GP have agreed to outside of the primary terms Keith mentions. This could include anything around board seats, secondary sales, and so on. Again, not because I don’t trust the GP but rather because it’s helpful to see it spelled out in legal language rather than short-hand intent. Maybe if your GP went to law school (again, hi Keith), I’ll be ok with just the email and its phrasing.

We Don’t Talk Enough About Money In Silicon Valley, Revisited

Things to Remember As You and Your Friends Get Wealthy

“Giraffe money.” That’s the phrase which stuck with me from Erin Griffith’s NYTimes article this spring about the latest set of wealth creating events in the tech community. To quote,

For Palantir, a data analytics company that went public in September, Feb. 18 was “giraffe money” day. That was the first day that current and former employees could cash out all of their shares after the company went public.

In a Slack channel for former employees called Giraffe Money — an apparent reference to wealth that can support casual giraffe ownership — many anticipated their windfalls by sharing links, mostly in jest, to absurdly expensive home listings and boats, one former employee said.

I never heard about giraffes after Google’s IPO, although reportedly one early engineer did buy a carnival-size ferris wheel. But that was back in 2004 and the trillions of dollars of wealth created since in startups, big tech companies and crypto makes earlier questions of extravagance seem quaint.

We are truly in a k-shaped economy and for those fortunate enough to be in the top arm of the K, it’s easy to benefit from being in the right place at the right time.

So I wanted to reshare a post I wrote suggesting that we actually don’t talk about money enough in Silicon Valley, at least not in the transparent and healthy ways that allow us to consider its impact.

https://hunterwalk.medium.com/we-dont-talk-enough-about-money-in-silicon-valley-no-really-e9335367e733

Reading it back 3 1/2 years later it still rings true for me personally. We are well-off and happy, those resources having played a significant role in mitigating the risks of the pandemic and the anxiety of a disrupted world. I still worry about the tension between wanting to provide my daughter more experiences and luxuries than I had access to as a child, but not distorting her values or work ethic. Some of the founders we backed in Homebrew’s first fund have realized — or will soon realize — outcomes that will net them hundreds of millions and perhaps even billions of dollars. And I’m thrilled for them and their teams.

More recently we launched an effort called Screendoor to help fund new emerging venture capitalists from underrepresented populations. The idea being that there’s economic opportunity in this segment that’s not being captured today, and there’s a chance to start a virtuous cycle where the investments they make will likely include folks in their networks, who will also hire people in *their* networks, and everyone succeeds together. Those of us who’ve had access to the right hiring manager, or cap table, or referral network have already put ourselves in a position to capitalize, but the pie can be expanded. It’s not about scarcity, it’s about abundance.

Ok, please read my earlier blog post and tell me what you think. I’m off to research how much it actually costs to privately own a giraffe….

2 1/2 Angel Investing Mistakes You Can Easily Avoid

I Made These Mistakes A Few Times But You Don’t Need To

Part of successful angel investing is picking winners. Another part is avoiding picking losers. Before we founded Homebrew I made ~20 or so investments in startups using my own savings. I wasn’t necessarily trying to do anything impressive, just taking some risk capital and putting it towards people and products that struck me as compelling. All in all it worked out fine, driven primary by some fortunate acquisitions to companies like Microsoft, Pinterest and Facebook, the latter two in pre-IPO equity which grew substantially prior to their public listings. I never really tracked IRR or net returns, but I did pay close attention to ‘lessons learned.’ Here’s 2 (and a half) mistakes I made that you should avoid

Sin of Ego: Never make an investment as an angel believing that you can be the difference between a team succeeding and failing. A couple of times I encountered very likable first-time founders who were operating in an interesting problem space but lacked strong product instincts or experience. Should have passed and wished them luck, but instead an internal dialogue started. “Hunter, you’re a ‘product guy,’ just coach them up and you’ll have a huge winner on your hands.” Next thing I knew hands were being shaked and wire transfers sent. And the investment pretty much went to zero within 12–24 months.

As an angel investor you can certainly be helpful, and perhaps even de-risk a specific question or problem the founders face, but you aren’t on the org chart, aren’t spending enough reps to be the product manager of a product-led company. Your mileage may vary, but believing you’re the difference between a company succeeding and failing isn’t an investment thesis. Sure, if it’s a problem area that’s a personal mission for you and you want to spend a disproportionate amount of time trying to help them figure it out, go ahead, but know at that point you’re making an emotional, not financial, decision.

Sin of Enthusiasm: Summarized as “shut up and listen to the founders describe how *they’d* build the company/solve the problem.” You know when you really hit it off with someone and it’s just an amazing jam sesh? Like you’re just finishing each other’s sentences? Feels great right? Well, if it’s in the context of an angel investment it might not be. Did you walk away excited because of what they said or because they agreed with you? Do you have a sense of how they problem-solve? How they want to build this company? Or do you just have a notion of how you’d do it? Well it’s not your company. It’s theirs. And before you invest it’s probably better to understand how they want to build it, since, well you know, they’re going to be building it.

In some ways the above two mistakes are sides of the same core principle: don’t invest in people because of your ideas or your capabilities, invest because you believe they are capable of building something amazing. Then if your help simply gives them the chance to move faster with a high probability of success, you’ll have more than earned your spot on the cap table.

Ok, now that half-mistake….

Sin of Social Proof (unless it’s your specific strategy): Some folks will tell you the best strategy as an angel investor is simply to find a handful of great investors and get into every deal they do. If indeed you can execute this it would seem to be a reasonable way to try and match their performance. But if you’re *not* following this sort of playbook, my advice is to not take the presence of ‘other smart people’ in the round as evidence that it’s a good investment. Especially if it’s collections of small checks. And doubly so if you yourself don’t think it’s a solid opportunity. I certainly had my one or two “eh, I’m not sure about this guy” moments where I still wrote a check because of the heat around the deal. You know what, those were incredibly disappointing experiences. And I should have trusted my judgment. So my half advice is, if you want to train on social proof, go all in, but otherwise trust your judgment at the end.

Have fun! And make different, more complicated mistakes 🙂

End of an Error: As Conan O’Brien Wraps Up 28 Years of Late Night, I Was an Idiot to Leave the Show

What I Learned From Working On Conan’s Season #2 and My Own Fears

Actor John Lithgow playfully tossed a show at me, boxer Larry Holmes jokingly (I think) threatened to knock me out and actress Jennifer Tilly might have flirted with me over the phone until she realized I was just an intern and not a Segment Producer. Memories like those, plus a dressing room sign with my name on it, were what I took away from interning on Season Two of Late Night with Conan O’Brien while in college. And looking back, I never should have left the show.

Conan bid farewell to late night TV this week after an amazing 28 year run, an incredible milestone by anyone’s measure, but especially impressive given where he started: a talented writer but minimal on-screen experience. When I joined, Late Night aired at 12:30am and was still on quarterly renewal cycles, meaning that NBC hadn’t yet even decided to give Conan (and his team) the stability of an annual commitment. Despite his rawness two things were clear: (a) Conan is wicked smart and (b) they assembled a team of new voices who were willing to take risks and commit to the mission of the show. Sounds like a startup, no?

So what was I doing as part of this group? Primarily researching upcoming celebrity guests and drafting potentially interesting interview questions. If they’d been on the show before I rewatched the previous appearances to note stories they’d already told and/or callbacks/running gags that could be revisited. And every once in a while I fact-checked monologue jokes or ran across NYC to pick up celebrity-related props (the vintage denim jacket photoshoot they appeared in pre-stardom, the Japan-only release of a terrible movie they’d try to bury) — you have to remember this was 1994–95 and the consumer internet was still largely in its formative stages.

My time on Conan meant that I spent much of my senior year at Vassar off-campus in NYC, crashing with family and friends, or taking early morning and late night trains to/from Poughkeepsie. My senior thesis on America’s first national women’s magazine filled the other available hours, especially since the primary research could only be done in the special collections room of our gorgeous library. And thanks to a supportive professor, I was able to spin the talkshow experience into another independent study project on the importance of celebrity in American political history (Davy Crockett, Daniel Boone, Ronald Reagan), which gave me all the credits I needed to graduate with the rest of my class.


Several folks from my intern cohort joined the show after graduation but I was not one of them. Late Night had begun to pick up some momentum and the signs it could be something special started to spill beyond our small Rockefeller Center offices. Why didn’t I look to stay? Ego mostly. I thought I was ‘smarter’ than the other new hires and decided to take a job in management consulting. But if I revisit that internal narrative it was probably also that I was afraid to be 100% myself. If I tried consulting and didn’t achieve I could always tell myself that it was because the job was just a costume I put on, something I did because it paid well and had the respect of my peers and family. Picking something less important to me provided an excuse and protected my most vulnerable questions: was I creative? was I interesting? was I liked?

I left management consulting after the analyst program ended. With more confidence and self-awareness steered towards a next set of career choices which corrected the identity gap, embracing the idea there’d no longer be a separation between Hunter the Person and Hunter the Professional. 12 years at the intersection of creativity and consumer tech, followed by starting an venture firm with a friend and former colleague to back founders who were on their own missions.

And now in 2021 despite overflowing with joy and satisfaction on what’s been done and what I still have left to do, there still sits one truth: that if I’d had more guts, I never would have left Studio 6B in 1995. Maybe I would have been there through 26 more years (and a few location changes). Or eventually left the show with my boss, who went on to become an early producer on Rosie O’Donnell’s, and then and Ellen’s, shows (remember, I mentioned the early Conan team was *very* talented in their own right). Or be somewhere else in the mix of media, technology and entertainment.

Is there a lesson? Basically if you have the chance to join a 6’4″ flame haired wonderkid on a cutting edge new project, please take it. Whether it’s a tv show, a startup, a marriage or anything else that feels *so right* for you. Even if you’re a little scared. Actually ESPECIALLY if you’re a little scared.

Don’t Let Your Best Product Managers All Become People Managers Or Your Company Will Suffer

Why Ken Norton’s Dual Product Management Career Path Can Also Encourage Innovation At Scale

Rising to your level of misery” is how Arthur Brooks frames the trap of being good enough at your job that you continue to climb a corporate ladder until arriving at a rung which leaves you in a role that makes you miserable. And oh my does this concept speak to my own experiences as a BigCo product lead. I don’t blame my previous employer but rather my own inability to reconcile happiness vs striving and ego, but after reading Ken Norton’s essay advocating for dual Product Management career paths, I’m think it’s also an org chart issue, not just a personal one!

Ken’s argument is that most tech companies treat product management careers in a very different way than they do engineering and design. Namely, there’s typically not a ‘terminal point’ where you can stay a contributing individual contributor (it’s more ‘up or out’) and, more importantly, an advancement track which focuses more on the PRODUCT and less on the MANAGEMENT. Not an IC role per se, but one where you manage the product resources for a project scope, not for a division.

There’s a reason that I support this amended career ladder, and it’s not just about personal preference, but instead it preserves what I believe is a necessary component for innovation in large companies: the effective, but independent, product leader.

Organizations by design as they grow, scale with people who thrive in more complex hierarchical environments. While the traditional org chart structure might one day be replaced by more evolved thinking better suited for technology-driven economies it has dominated capitalism since industrialization. For what it’s worth, I’m not disregarding or criticizing the people who fill these roles or rejecting the notion that large companies can’t innovate or do good work. But I also don’t think it’s controversial to suggest that the amount of process and structure do challenge certain types of individualistic thinking and the challenging of norms.

Now, combine the bias in org structure and people attracted to that environment with an incentive structure dependent upon pleasing your boss. At larger, more mature companies your opportunity for wealth accumulation is tied to advancement. Advancement is very directly linked with making your boss happy so they can make their boss happy, and so on. (Sidenote, this is why I think the best compensation systems don’t let the direct manager control the purse, but instead heavily incorporate their feedback into a 360 degree process, self-evaluation and other more measurable criteria).

So, in my experience, the senior product managers who had also opted out of the standard VP promotion track, were also the truth tellers, the culture carriers and the inglorious but complex work-doers. This is an important distinction: they’re not ‘rest and vest’ — they still want to work hard on actual projects; they’re not ‘bomb throwers’ — they’re just people who understand the company and can ask questions that either wouldn’t occur to newer employees or who don’t rock the boat.

At Google during my period these were mostly folks who had been around pre-IPO or soon after, and just wanted to stay around to work hard but not assume organizational ownership roles. They had reached a comfortable level of wealth from that early compensation, and grew up around the colleagues who were now in senior roles (ie they were trusted and knew how to get stuff done). The smartest product VPs would grant safe haven to one or two of these folks with an implicit quid pro quo: I’ll keep you our of unnecessary meetings and politics, you can work on hard projects with small teams, and I’ll reward you to the best of my abilities but you’ve probably maxed out on salary band levels if you can’t get promoted. I had one of these people on my team for a bit and it was glorious for both of us.

So what does Ken’s framework do? It lets these people continue to advance and get awarded for that advancement, eliminating the need for these folks to only be individuals who carbon date back to the earliest days of the company.

Anyhow, please read Ken’s essay. As hopefully articulated here, I think it’s not just a potential solution to talent retention and personal happiness, but could also help preserve innovation as companies grow. Thanks Ken!