by Kunal Mehta
“I sit across from entrepreneurs all day. Sitting across from a compelling entrepreneur is like feeling swept up in a feeling that I’m sitting across from a future Wozniak of the world, or maybe they are already that type of person. I want to see a future maker. A future maker is someone that sees a vision for how they expect the world to look seven to 10 years from now and has an incredibly compelling picture of that world, how they plan to make that impact and how you (the investor), in a small way, can help them get there. If by the end of that conversation, you feel like you want to just quit your job and go work for them, you know that you are in the company of ‘genius’.”
Tactically, when acting as a ‘future maker,’ Rick Heitzmann believes that it is important for entrepreneurs to identify and present multiple points of simultaneous disruption that can predicate groundbreaking innovation. As an example, Heitzmann discussed the success of Uber as an innovation resulting from several minor disruptions and shifts occurring simultaneously and a subsequent, future innovation that would take place as a result of those changes. These converging factors included smartphone penetration (especially with taxi drivers), advancements in GPS technology, and the taxi and limousine commission in large cities not evolving fast enough to keep pace with growing urban populations. Heitzmann explained that genius founders are able to explain their vision for the future in those terms, of diverging forces and interests converging around one unique founder’s vision for the future, rather than being hyper-focused on the problem that they are hoping to solve in its current state. This type of thinking demonstrates that even if the specific solution or manifestation of a product is not apparent yet, there may be shared vision between the investor and the entrepreneur for a future where a product can take shape by monitoring user behavior.
Heitzmann admits that he would generally fund a team that he believes to possess these qualities even if their specific perspective on a solution does not have the typical investible product-market fit just yet. In that vein, Heitzmann and the FirstMark team have invested in serial entrepreneurs and trust that together, the investors and the founders would work together to build the proper product for that shared vision of the future. Genius, in Heitzmann’s eyes, is a founder who can eloquently sell him on a future where a product must exist, but while also articulating the exact strategy that will bring those forces together.
Conviction vs. Arrogance
Startup founders are often described as trailblazing disruptors who refuse to accept traditional rules or norms. While this description was once a positive indicator, some investors stepped back from this unapologetic approach. In a time where startup founders are likened to celebrities and scandals involving their often unchecked exuberance are widely reported on, the nefarious practices at companies such as Uber, Theranos, and Zenefits come under greater scrutiny. The investors I spoke with pointed to a tempered humility, rather than boundless confidence, when identifying the founders they prefer to partner with. They alluded to the chaos caused by the exuberance of the architects of the 2008 financial crisis and likened this same arrogance to some founders and investors they encounter today who have not lived through a downturn in a venture cycle. Elizabeth Holmes of Theranos defrauded seasoned investors such as Rupert Murdoch and DFJ (Twilio, Twitter, Skype) to the tune of $1.2 billion in invested capital. Journalist Caroline Polisi reported on Holmes’ hubris:
“Whether it’s confidence or hubris or just unbridled ambition, many truly believe that their company will be the next big thing, that they can pay off their debts as long as they can close the next deal, and that all will be forgiven once their investors are rich. By all indications, Holmes ardently believed that her company would change the world. And her promises to investors were consistent with the media image she was simultaneously cultivating for her company: that it was on the forefront of revolutionizing the diagnostics industry, breaking into new territory to drive change and quite possibly eradicate epidemics as we know them. Except, according to the SEC, she was lying to investors along the way.”
Starting a company does require a founder to be bold and willing to bend existing frameworks, but unchecked arrogance has led to a mass destruction in capital in recent years. With Zenefits, an insurance marketplace that had achieved a valuation upward of $4.2 billion before tumbling down after a series of internal scandals, CEO Parker Conrad was accused of having an arrogance that took him away from understanding the happenings in the corners of his company. After being replaced, Zenefits’ new CEO wrote to his employees and inferred that the hack-first-and-ask-questions-later philosophy does not work once a company matures past the startup stages.
Throughout 2018, this behavior appeared again at Facebook as the executive team comprised of Mark Zuckerberg and Sheryl Sandberg deflected blame from themselves to ‘rogue behavior’ within their organization. Silicon Valley’s ‘change the world at all costs’ culture is filled with fraudsters and arrogant egomaniacs who ignore the minute details of running a company. Investors have refined their intuition to stress test for these founders. Brian Laung Aeoah, the son of an education entrepreneur from Uganda and now a partner at KEC Ventures, says the genius of an entrepreneur is to be able to set vision and be a high-level thinker, but to have the willingness and humility to pay attention to the details:
“There are founders that are great at the big picture things but can’t get into the details or just don’t want to. What I’m generally looking for is someone who can do both. Someone who can talk about the $13 trillion market potential, but can then tell me what their strategic plan is for the next 12 months and how they’ll reach the customers who are going to buy their product. They can tell me what these customers look like, talk like, where they live, and what they do in their free time. Sure, the $13 trillion market is appealing, but if we don’t make it into the next 12 months, it’s going to be irrelevant. The second thing I want to know about is the vision. Everyone will have some kind of an answer to this question but may not have given it enough thought. One big vision answer will be very vague and lacking details, another one will have the details. That’s how you know that this is probably someone that can do both. You obviously want to figure out that they know who the customer is today, how to sell to them, what the pain points are, why those people are buying.”
Humility is what guides entrepreneurs to spot opportunity and their genius begins to appear through a unique set of experiences. Josh Nussbaum expands on Aeoah’s thoughts:
“Genius does exist, but not in the traditional sense portrayed in ‘The Social Network’ that made everyone think they can become the next Mark Zuckerberg. It’s not only the internal factors — your aptitude, your intellect, your persistence — but it’s also a combination of the external factors that shape you. I’m always most curious why entrepreneurs ended up on a certain path and why did they see an opportunity over anyone else? After seeing the opportunity, why and how did they choose to execute on that? How did they have the foresight or experience to see roadblocks, hire the right people, be lean enough and open enough? One of the archetypes of the founders I gravitate to is that it’s their second or third or fourth company. Maybe they weren’t successful with the first three but does that mean they’re not genius? No. I’d rather bet on them because they know their mistakes. They know which bets to make or not make. They handle their cash well because they wait to see signs of a product market fit and then double down. They’re less arrogant than that to assume everything they do will be correct.”
Beth Ferreira, a venture partner with Rick Heitzmann at FirstMark Capital, transitioned into venture capital after gaining extensive operational experience at venture-backed startups like Etsy and Fab. Ferreira left a lucrative career in finance, when that was considered the hottest ticket after graduating from business school, to learn to become an operator. Having done this with two successful startups, she has a unique edge over her peers. Ferreira is able to absorb a founder’s vision but presses them on the details. Genius
, to Ferreira, lies in a founder’s humility and understanding of the minutia of an industry and not in the lofty statements that cover a pitch deck. With an acute understanding of the internal operations at startups that have raised venture capital, Ferreira believes that some founders are given ‘too much stock’ for their genius for being high-level thinkers — they’re given significant venture financing but are not encouraged by their investors to continue to push the limits of what is possible. Ferreira says that a founder’s unchecked arrogance can often be blamed on a board of negligent venture investors who do not push the founder in the way their fiduciary duty requires:
“It requires a heightened sense of awareness and humility to be a founder that is consistently praised in the press, and often times in board meetings by venture investors, to be fully grounded in what needs to be done. There is a lot of unsexy work from an organizational and operational standpoint. This means something different at every company and in some cases it’s dealing with supply chain issues, understanding network effects, working with or building fulfillment centers, managing customer complaints.”
To start a company, a founder is constantly ignoring feedback and focusing on what they believe is right. By definition, going after a big opportunity either implies that it is not obvious to everyone else or other people have tried it before and now believe it is impossible. For Ilya Fushman of Kleiner Perkins, it is important for a founder to be able to bend their risk curve over time and open their aperture for listening and learning. This is a trait he believes was best exhibited by Drew Houston of Dropbox who ignored discouraging feedback when critics of his vision could not define the market opportunity. Fushman explains:
“You have to be deeply opinionated about building a product in the beginning, but over time as your product user base grows, your users actually have a better sense of what they need. They can’t articulate it necessarily but they really will tell you if you ask them the right way of how you should build and change and evolve your product. You have to go from being opinionated and ignoring feedback about a product to eventually taking feedback as an input to your process and change your trajectory. That takes humility.”
Magnets for Talent
“Creativity is a collaborative process. Innovation comes from teams more often than from the lightbulb moments of lone geniuses. This was true of every era of creative ferment. The Scientific Revolution, the Enlightenment, and the Industrial Revolution all had their institutions for collaborative work and their networks for sharing ideas.”
Walter Isaacson, The Innovators
Walter Isaacson deviated from his typical approach of celebrating individual genius for his book, The Innovators, in which he discusses the collaborative efforts of individuals, across generations, in building the Internet and staging the digital revolution. After honoring hundreds of individuals who would have otherwise gone unnoticed in the history of the Internet, Isaacson credited the concept of collective genius. As future makers and storytellers set a vision and build with humility, they must recognize their shortcomings and surround themselves with the people who can fill those holes or blind spots. Historically, true change and execution has been brought about through a pairing of visionaries with people who can execute on that vision.
Brian Laung Aeoah chooses to invest in entrepreneurs who exhibit a hunger to succeed, while also recognizing their shortcomings and being able to plug those holes before they adversely affect their companies. He shares:
“I’ll use my mom as an example. While I was growing up, she tried a few different businesses and eventually started a school. She is passionate about, and great at getting children to fall in love with learning. They do extremely well when they’re with her, and then they go to other schools and continue to outperform their peers. She enjoys it and is also very persistent. That is why she is successful. Her persistence and her passion. Even though she has that knack, and it has enabled the school to grow, she is the first to admit that more formal training in accounting, management, or strategy would have been helpful and might have enabled her to accomplish even more than she has. Maybe the genius some founders have that others don’t is in the awareness to recognize when one lacks certain skills or knowledge, and then surrounding oneself with people who fill those gaps. They can focus on becoming phenomenal at what they do, and then empower others to execute based on their specific expertise and the team’s goals and mission. That’s one of the things I noticed about the two turnarounds I was managing between 2008 and 2013; this distinction can separate startups that succeed from those that fail. I think it’s a mix of both. It boils down to self-awareness and recognizing where you need help as a leader.”
Venture capitalists are searching for inspiring leaders who can rally teams around them to cover for the founder’s shortcomings. As Ferreira, Nussbaum, and Aoaeh suggest, founders must intrinsically have a self-awareness to know what areas of a business will struggle because they are not equipped to handle those entirely on their own. Starting a business requires support across acquiring customers, predicting legal hurdles, optimizing the user experience through design, and nurturing engineering talent, and a founder’s job to build the right team is critical. Josh Nussbaum delves into this further:
“The ability to hire, and an understanding of what hiring or recruiting means is super important to me. Knowing that this founder or CEO will know how to build a team is critical. Their job is to continuously hire themselves out of their own job and set strategy. When I meet someone that is fundraising, I get a good sense of whether they’ll be able to assemble a world-class team around them. By the way they communicate, tell their story, connect with someone and generate excitement, I can tell if they’ll be able to scale a team. I ask detailed questions around their hiring plan: who will they hire first? What is the roadmap? What channels will they use to hire those people?”
The phrase “founder first” has become a common buzzword plastered across websites of most venture funds. They seek to portray an entrepreneur-friendly venture firm. Yet, many of the investors I spoke with articulated why promising founders, regardless of business concept, oftentimes help de-risk the investment process for an investor. That being said, they were more concerned with solo founders and grew excited about teams of founders working together towards a common mission. Jonathan Teo of Binary Capital, an investor in Snapchat, articulated his thoughts around forming teams, and the fabric that draws teams together to solve some of the world’s pressing technological problems:
“I’d rather invest in a stellar team once I’ve understood what brings them together. I’m okay if they are operating in a new, untested space if I can understand the background of what has brought them together. Is it a shared experience and now a breakthrough idea that they are rallying around? I would much rather invest in two non-technical co-founders who are brought together because of a strong desire for something they want to solve but need built. This is more attractive than two hackers that have been brought together just to build something generally without much charisma or passion.”
Think Differently
Genius entrepreneurs are built to withstand risk and ambiguity, are humble enough to recognize their shortcomings, and act as beacons for others to rally around towards a shared vision. They are storytellers who develop a passion for change and possess the persistence to see that change come true. Like the artists, athletes, and inventors mentioned at the beginning of this section, entrepreneurs are wholly committed to their pursuit of genius; the successful founders are eccentric, focused, and have a disposition far removed from most people. Fred Wilson prescribed some of those qualities of entrepreneurial genius over a decade ago and many of those qualities have been reinforced by the dozens of partners behind successful venture funds. Ilya Fushman believes genius appears when all of these qualities collectively exist in a founder. The absence of even one often leads to a startup failing.
Peter Thiel, a co-founder of PayPal, went on to become a venture capitalis
t through his fund, Founders Fund. This fund has invested in the companies that have shaped the startup revolution, such as Airbnb, Spotify, Stripe, Facebook, Flexport, ZocDoc, Twilio, Oscar Health, and SpaceX. According to Trae Stephens of Founders Fund, Thiel established the fund around the thought that human beings tend to be followers and generally want to do the things that others want them to do. We want our friends to tell us that we’re working on something interesting and crave validation that we are doing the right or important things. Thiel believes that humanity’s need for validation is often what leads people into structured paths where they waste away their genius and don’t think differently about their purpose or mission to solve interesting problems. Thiel believes that the most interesting thing about the founders he has worked with is that they were individuals who did not seek that peer validation. In fact, their businesses were initially deeply unpopular and unsexy, but the founders were committed to building them over 15-20 years.
CHAPTER 6
FUTURE MAKERS AND STORYTELLERS
Future makers, as Andrew Parker calls genius entrepreneurs with an ability for storytelling, show us how our lives and surroundings can be improved. They masterfully paint a picture that expands our imagination of what is possible. Through broad strokes, these geniuses tell humanity stories of how the world should operate and how they’ll work tirelessly to get us there. This bold future includes a world with autonomous vehicles, the highest quality of healthcare, new forms of human behavior and interaction, and a superior quality of living for those who have too often been marginalized. Oftentimes, these future makers are leveraging innovation and technology to realize this vision. And because of their ability to tell a good story, it is human nature for the masses to support them in their mission.