Re-Investing
It’s way better to be long-term greedy than short-term greedy. When you’re sitting on top of a venture firm and you can take the bulk of the economics, the ability to not do so, and rather instead invest your capital, is being long-term greedy. It’s about rewarding and honoring the platform that allowed you to make the money in the first place.
These are simple signals that tell a person the character of that individual. It’s very clear to see who really cares about their platform and who doesn’t.
That’s why at our firm, we are the largest LPs. We always have been. We are the biggest at risk, and we’re not a multi-billion dollar foundation. We worked hard for our money but we put it all back in. The reason we do that is we think we make better decisions, but also the reason we do that is it aligns the incentives.
Faith and Struggle
We made fundamental mistakes in the execution of [Better]. It is a business that people love, and want. Unfortunately, we could not get it funded. We poured $10 million into this thing. We signed deals with all these payers, we had thousands of subs, but it’s crickets chirping when we were raising capital. We were flabbergasted.
I think it’s a scary business and it’s capital intensive. It’ll take a lot of money to scale. You’re dealing with people, and very sensitive things that relate to those people.
I get it: there’s complexity, but there’s also value and these beautiful things that are happening because you’re actually giving them a service that they actually need. These people are suffering in the world and nobody’s helping them. So let’s just use some fucking software to help them.
But you trumpet up and down Sandhill, and it’s not what they want to hear. And you see the shit that gets funded and you’re like, “What is going on?!” It doesn’t make any sense to me.
We struggled, we struggled, and we struggled.
This is about long-term greedy and short-term greedy. This is a business that is, in my opinion, the epitome of long-term greedy.
Syapse is another example. Those guys couldn’t get funded for two years. We funded them within two weeks of meeting them.
That’s a business that took three years to get through an 18 month trial at Intermountain. That’s going to be a huge company, long-term greedy.
Glooko almost went out of business. Three years, multiple FDA reviews, multiple FDA approvals, couldn’t get funded by other people. We had to recap it once, we had to fund it personally. Long-term greedy: they’re winning.
In all these cases, it tells us that we have to stand up and put in more money or just draw a hard line and just believe.
Slow Compounding
Jeff Bezos realized slow compounding. My little theory about company value creation: The faster you build it, that is the half-life, it will get destroyed in the same amount of time. So when you think of a lot of social businesses, that’s played out.
Does it take 8–10 years to build a really great consumer business? It’ll take 8–10 years to destroy it. We may see the tipping point at a couple of these businesses right now.
Amassing capital to me is about finding a smart, useful solution to a very hard, practical problem, and being slow and methodical.
You have to rewire your brain for that to be okay.
How do you, in year two, or year five, come back to a reunion and say, “I’m still working on the same thing.” And somebody says, “How’s it going?” You have to have to courage to say, “It’s hard. I haven’t figured it out yet, I don’t know.”
But if you figure it out and you have this moderate growth, moderate compounding, that is the key: That’s gold.
You can get so enthralled by IRRs in our business. I have friends who run other organizations, and they’re like, “We posted 92% IRR.” I’m like, “You can’t eat IRR.” What does it really mean?
Fast money returns can completely decay long term thinking and sound judgment.
I would love to compound at 15% a year. If I can do that for 50 years, that’s 250 fucking billion dollars. It’s a crazy number.
Slow and steady against hard problems.
Start by turning off your social apps, and giving your brain a break. Then you’ll be a bit more motivated to not be motivated by what everybody else fucking thinks about you.
Think about how all this stuff plays together. How does posting your fucking waffles online relate to me starting a business and accumulating capital? This is wiring your brain for super fast feedback, it’s the same brain you’re using to build a company. Don’t think they’re not the same.
You have one brain. So you’re training your brain here, whether you think it or not.
Acknowledge that these things, where you’re spending hours a day, are rewiring your psychology and physiology, in a way that now you have to use to go and figure out how to be productive in the commercial world.
There’s a reason why Steve Jobs was anti-social media.
I am proactively trying to rewire my brain chemistry to not be short term focused.