The ‘(Wo)man’ on a Mission

“Investing is both art and science. Science is the analysis, the sums and the ‘reps’. Art is judgement and good taste. Whereas science encompasses skills that can be learnt or acquired, art is unevenly distributed amongst talented individuals. This is all to say that as private and public markets become more competitive, edges in science become slowly (and sometimes quickly) eroded; art may be one of the few sources of enduring outperformance.

This is even more loaded for early-stage investing given the limitations in the sources of data to appraise opportunities. Most principals invariably reduce their decision-making to (i) founder quality and (ii) market attractiveness because that is all there is at the early stage.

The ‘squishy’ question that follows from this is ‘what is a good founder’ or ‘how do we evaluate founder quality’? One would receive about as many different answers to these questions as there are early-stage investors active in-market today. This is the topic Mart and I spend the most time discussing when we are together and where we are working to build a real edge.

What we are trying to answer for ourselves during the diligence process is whether we believe the entrepreneur in question is going to build a big company. Within our container this expresses as a belief where we cannot see the founder building another company or doing anything else, however trite this may seem.

There are more concrete and less concrete factors that go into this exercise, all of which are generally present in a coherent manner in cases where we have decided to invest. The Woman and Man on a mission will generally exhibit the following characteristics, listed from most to least concrete:

• They have rare and relevant ability: They have a skill (broadly defined) in which they rate top 99.99^th percentile, which will overlap with what the company needs to be successful.
• They are commercial actors: They have a track record of productively allocating resources, whether it be time, money, or labor. This can be true in both their personal life or be evident from a prior business.
• They are very fast learners: It’s unlikely that any entrepreneur could learn or know all that will be needed to build their business before they start. Knowledge also expires quickly in dynamic and complex games; constantly learning is the only way entrepreneurs are able to stay ahead. This trait generally shows up in big leaps of insight and progress at successive meetings with an entrepreneur.
• Customers believe they will solve their problems: Founders will be doing the selling in the early days. Moreover, when there is little product validation, founders are selling themselves more than anything. Customers are more likely to purchase goods and services from people in their domain or from people who are credible enough to win them over.
• They have a very strong need to be successful: Willing a new business into existence is very difficult, and the odds of success are not what we hope them to be. Powerful motivations are not always objectively ‘good’. In the cases of outlier success, the entrepreneurs are always motivated by more than making money. These motivations are generally very personal things, but always present as an extremely strong sense of needing to be successful, almost at any personal cost.

If you have ever met a truly exceptional entrepreneur, you would know the ineffable feeling of excitement and belief and the sense that you just needed to find a way of being in business with them as you walked back to your car from the meeting. This is ‘The Woman and Man on a mission’. If you decode it, we hope you will be able to pick out the factors laid out above.

If we can attract these founders and earn the right to become their business partner, our investments will perform exceedingly well; there are few sources of leverage as powerful.”