With the launch of our Atlanta Ventures Accelerator along with some opportunistic angel investments through Atlanta Ventures, I’ve had the opportunity that is one of the most fun for any entrepreneur: to wear the hat of the investor.
No telling where exactly I will land in the bell curve of how well entrepreneurs transition into successful investors, but so far I feel like it’s a natural fit: given my love for connecting people, helping those I can help, and focusing on the right people for the right roles with the right values. It’s also exhilarating and educational given that I’ve always bootstrapped and never had the opportunity to raise equity money in my previous companies. We always used personal credit cards, family, and bank debt to get from point A to B. (I’m not sure I would do it that way if I had it to do over again, but that’s for another post.)
Some observations that any entrepreneur who transitions to investor will experience:
Optimism’s Complicated Role.
This is by far the biggest contrast between the two roles. Typically, the most successful entrepreneurs I know are the most optimistic ones. It’s not that they don’t acknowledge the dangers and challenges out there, it’s that they choose to focus on their resources at hand, and the vision of what they’re trying to accomplish. They are constantly and relentlessly optimistic. I’ve been told a few times that this describes me. Now that I’m wearing the investor hat, however, it is impossible, and as such, ill-advised to invest in every opportunity that comes along. (That’s putting it lightly. ) I meet tons of amazing people. I hear about countless brilliant ideas. Yet, optimism as to be put aside and realistic measures of probability of success have to be counted on when making decisions about a very limited supply of capital and unlimited demand.
At SxSW last year, Peter Theil describe a quadrant of macro economic sentiment. It crossed Informed vs. Uninformed with Optimistic vs. Pessimistic. His point of the talk was to say that we are currently in the quadrant of Uninformed-Optimism. He generalized that we are happy about the world right now, and we are saving up tons of cash, but we don’t really have a large purpose of overall societal goal.
That’s a long way to say that the frame work of Uninformed Optimism vs. Informed Optimism is how I have to think about investments we make despite my naturally optimistic tendencies. Where an entrepreneur can typically do well with Uninformed Optimism as the M.O., an investor must be informed about the Optimism. There must be overarching goals with intentional strategies and directional control from Day 1. At a minimum, there must be some basis for the decision to invest other than “it just feels right.”
As an entrepreneur, I can’t tell you how many times I would think of a new idea or direction as I was falling asleep and jump out of bed to spend several hours in the middle of the night creating, launching, building, or plotting. As an investor, everything is driven by conversations with people. I cannot decide that tomorrow I want to meet 10 investable startups. It just won’t happen. I can control only one thing– the top of the funnel. I can meet more people. I can help my team meet more people. If we fill the top of the funnel, we will find some percentage of investable deals. This is a fun transition for me. I’m not sure I would have had the patience for this just 5 years ago. It’s a new understanding of slowing down to go faster.
Freedom and Joy of Accountability.
It’s not secret, just like most VC’s out there, I too am using mostly OPM in these investments. As a bootstrapped entrepreneur, I reported to nobody but my customers (and I can fire them). If I felt like a half-ass year was ok with my bank account, there was nobody to discuss it with except my wife. Investors with Partners who fund the activities however, have a fiduciary obligation to deploy capital and answer for the decisions made. I have to be honest, I absolutely love this structure. It gives me a needle to move and for some reason I do much better when challenged externally. If left to my own money and total freedom I find it hard to achieve the same focussed staying power.
Helping Seems Easier.
Because I meet so many people every week (for details on this, read The Grind post by Fred Wilson. This is spot on.), I find it much easier to make connections that change trajectories for people. For talented folks looking to be placed, I have no problem finding them a role in some startup I’ve met… same goes for startups looking for team members, customers, or even additional investors. I felt connected as an entrepreneur, but nothing like now.
Gut feelings still help, but must be checked.
Believe it or not, a gut feeling comes in handy as an entrepreneur turned investor, but there’s a caveat. First, it requires the self-awareness to know that my FIRST gut feeling almost every time will be an optimistic one. After I’ve gotten over that and still like an opportunity, I’ve already benefited from acting on a gut feeling either positive or negative. When a fut feeling turns out to be right, it’s awesome.
I enjoy this new hat very much and look forward to sharing more thoughts here on the journey.