DZ - 015

It’s a common thing for investors to be asked how they got into investing as there never seems to be a “normal” path into the industry. People come from all over, and their paths can be quite fascinating.

While I don’t find my path to be all that interesting, I still get asked about it a lot. I like to describe my path as having a set of motivators, instead of functional steps. I’ve done this for some reasons that I’ll get into later, but I’ve distilled these motivators into four main buckets, that at least in my mind, were and are the personal driving factors for having gotten into this industry.

Environment: My father is an entrepreneur, so I grew up with a parent working obsessively to get a business off the ground and I saw firsthand just how difficult and yet rewarding that process can be.

Some of my fondest memories as a child were waking up to the sound of my parents’ shower kicking on at 4am. I’d rush downstairs, hop on the couch and wait for my dad to come out to the family room dressed in his suit ready to go to work. He’d grab me a cup of cheerios, turn on cartoons, then leave. I’d fall back asleep, go to school, get home, have dinner with my mom and sisters. More often than not, while lying in bed, I’d hear his car pull into the driveway sometime around 10pm. Rinse, repeat. While most of my buddies’ parents had standard work hours, mine were gone most of the time. But even at a young age, I knew how hard my parents were working to make things better and that there’s something special about someone trying to carve out their own place and do things on their own terms. There’s no question that seeing this process as a child had a tremendous imprinting effect on me, and I always knew that I would be involved in entrepreneurship in some capacity or another.

History: My Great Grandfather, who passed away at a young age, had, during the depression, helped to get companies off the ground. He helped a few local entrepreneurs build their business plans, get loans (he gave some as well), and operate their businesses until they were up and running. A couple of these companies are still in existence, and my family uses one of them for both home and business services. It’s a rare thing that you can point to something your ancestors accomplished and see how that work has carried through and affected countless people long after they’ve been gone. The concept of that as a child was always striking to me. That my great grandfather, on my mother’s side, who died long before I was born, had helped entrepreneurs go through the same process that now many decades later my father and mother were going through. I’ve always thought that was incredible and represents for me one of the many reasons society can be such a great force for long lasting good.

Personality: I’ve hated school my whole life and found the process and design of the education system to be archaic and inefficient. Wherein every child is treated like a robot shipped from the same factory, and “differences” in robots are bugs that need to be ironed out. Think differently, and your operating system will be adjusted. I remember a specific instance in 1st grade where one of my classmates, who was exceptional at drawing, was made to feel dumb because he wasn’t picking up math at the rate “he was supposed to”. So here he was, at such an early stage of development, crying in front of his peers because math wasn’t his strong suit. And he had already been ingrained with the idea that if he wasn’t successful in this environment, he was destined to become a failure. That to me is a travesty, and yet is something that, in my opinion, happens countless times throughout one’s educational path. Talent being shunned or wasted because we’re more concerned with getting everyone to the “average” in all subjects, rather than accelerating the exceptional, and accepting a longer path for development in different areas. In general, I had this overwhelming feeling that I was wasting my life while sitting in class, and how depressing it was to me that I’d never be able to recuperate the lost time.

I can’t oversell just how much I loathed school. My parents will tell you I cried virtually every morning before class and would have so much anxiety on Sunday nights that I would sometimes dry heave and cry myself to sleep. The physical reactions lasted until middle school, but I never got over my hatred of the educational system.

During this same time period, my father would sometimes take me along to some of his job sites to see buildings being built, or to observe development conversations with clients that were leading the charge for a renovation or redesign. Walking around these job sites and seeing people in cubicles (very common back in those days) always reminded me of school. Rows and rows of people, blanketed in unnatural fluorescent lighting, counting the minutes until their next break, lunch, close, etc. Desperately not wanting to be where they were. As we’d walk by, heads would turn around to face us or pop up over the short walls like prairie dogs in a concrete encompassed jail block. These are just kids in desks, with a different list of daily tasks, but they still bring their lunch every day, and they talk about the same things every day, and while I know there are countless people that enjoy that life, just like there are countless people that enjoyed school, I knew there was no way in hell I was ever going to do that. I would rather be a stone mason, in midwest humidity, than work at a cubicle.

There have been a number of pop culture related attempts to describe this environment and anxiety that I’ve always felt, and what I thought life in the corporate cubicle jungle would be like. But I’ve never seen anything that quite describes it so well as the movie Brazil. Specifically, the DEE ZED STROKE O ONE FIVE scene.

Focus: One of the reasons I hated school so much was that I found it nearly impossible to focus while a teacher was lecturing. It’s not that I can’t focus entirely. I can zone out into a specific task or project for hours and hours without exiting it and in fact, I can get incredibly angry if I’m forced to leave that mental state. But my mind would wander endlessly during class lectures, and I had to devise schemes and systems so that I could keep up with the rest of the class, knowing that I wasn’t going to absorb much during my school hours and that I would have an extremely tough time focusing during tests. The point is, I find it almost impossible to focus on things I’m not interested in. If I am, I can lock in and stay in it until I think I’ve learned enough to be knowledgeable. I’ve always felt that my classmates had a superpower in their ability to focus and memorize what a teacher was discussing. I however always had to go home and try to teach myself the material by covering the book content over and over. The point is I knew I needed to find something where I could dig into the things that interest me and stay away from anything that doesn’t.

About a year after undergrad, I read an article on venture capital, and I was hooked. Here was a job where I could work with and hopefully help entrepreneurs, where I could perform deep dives into countless industries with varying problems needing to be solved, and where I wouldn’t have to be at a cubicle from 9 - 5. Creating the functional steps to get there was, of course, another story, and I’d have to make sacrifices in order to get to where I wanted. But one of the most difficult questions I find entrepreneurs have answering is “What do you want?” and I don’t think it’s possible to truly know why you’re doing something if you haven’t analyzed the motivations for trying to get there. These are some of mine.

Empowering Laziness - Motif II

I spend a lot of my time trying to audit the points of friction for new products/services in our deal flow pipeline. What is the process currently like and what would it be like if [Company X] existed in its purest form? What I’m really trying to do is understand how much value can or will be attributed to the company. It seems obvious, but it’s my experience that very few founders obsess over removing as much friction as possible for their customers. Which in turn means we usually tell founders that they’re building a “nice to have” product or service as compared to a “can’t live without” product or service.

Some founders react poorly to this and ignore the comment or say, “yeah but it’s enough for people to pay for it”. There’s not much we can do at that point and so we move on from the company. Other founders however, perk up and want to know more.

For us, we like to say that companies that do this well are companies that “empower laziness”. In this situation, the ease with which a customer can complete a task is so satisfying that they completely set aside the analytical side of their brain that would normally perform a cost/benefit analysis and they just say “screw it” and use the service. They don’t even question whether there’s a competitor doing the same thing at a cheaper cost. It’s not enough to be merely convenient. Yes, there are thousands and thousands of businesses that are profitable off of being convenient, but you’re going to have a very difficult time finding a highly successful company that is just “meh”.

One of the best examples of this is Amazon’s one click service. Set an address, enter a CC #, and start buying with unlimited 2-day shipping. Who wouldn’t want that? I remember the days of having to go to multiple online retailers to compare price points and estimate shipping costs for a product…which was an ENORMOUS pita. I pass 5+ major retail stores on my way to and from the office EVERY DAY, and yet I’ll still purchase menial things from Amazon, instead of taking the 10 minutes to park, walk in, find what I want and be done. Instead, these stores act as reminders of what I need to buy, I get to the office or home, hop on the Amazons, buy what I want and two days later it’s at my door step. There’s no two ways around it, I’m LAZY when it comes to this shit and I’m willing to pay anyone a lot more than I normally would to empower that part of my brain. Now imagine if Amazon One Click had been Amazon Three Click…

You should, therefore, try to distill your service down to its simplest and most refined version of itself. Leave no room at the bottom. My business partner and I are always trying to figure out if there’s an easier (lazier) solution to what a service is trying to do. There’s a high probability that if we quickly find one, we aren’t going to be interested in investing. I like to think of it as the “6 minute Ab” problem (video below).  

It’s at this point that I should take the time to explain that “lazy” for us isn’t a negative connotation. It’s basically just another way to say “efficient”. We look for companies that make humans far more efficient in their day-to-day lives. It’s a very simple equation, less wasted time = more time to do what you love = value.

I’ll give you an example of something on the opposite side of the spectrum of “empowering laziness”. Retail store self-check out. As a customer, every time I get to the self-check out lane I have an internal dialog that goes something like this. “I just spent 20 minutes walking around your store trying to find the items I need, by using a process that resembles a single player scavenger hunt, then I have to wait in line, to checkout your inventory, so that I can pay you. In case you aren’t aware, I’ve got a job, and I don’t need another one. There’s something grossly wrong with this picture”. Self-checkout lanes might be slightly faster for the average customer, and it certainly saves the retailer money in the form of deleted personnel, but it’s a gigantic frustration that most people loathe. I can’t imagine signing off on a new process that creates a negative final touch point for a large number of my customer base. And those same grocery stores were, and probably still are, amazed that people are willing to get their food delivered by Amazon, Green Chef, etc. As a customer, I’ll suffer the minor frustration of getting slightly less beautiful produce for not having to be treated like an early 1900s coal miner shopping at the company store.

“But what about Amazon Go?” Yep, just another example of Amazon empowering laziness to a T. They took the one thing that is attractive about self-checkout, no human-to-human interaction, and removed the biggest pain point, the work of checking out. Now I can grab what I need, and get back home so I can play Apex, all without having to do any real work or talk to any humans.


No Slashes - Motif I

“From one thing, know ten thousand things”

                     ― Miyamoto Musashi

One of my core themes with early stage investing is to invest in companies that have a singular focus, as we like to say, “companies that do one thing great”. It’s a common theme among investors, some describe it as obsession or passion, others call it single mindedness, but in either case, it needs to be there. Yes, a business can and should have an idea of how it will evolve into various areas/products over time, but it’s all too common for us to hear a founder describe their business as being a set of “slashes” and to do so at an extremely early stage.  What do I mean by this?

“Founder A” begins their pitch by telling us a little about themselves: where they come from, what motivates them, how they arrived at this spot, etc. All important things. Typically, we will ask the founder , “Describe to us what your business does.” Occasionally, there’s a short pause and then a sequence of “slashes”. “Well we’re a CRM for professional athletes, ’slash’ a point of sale system, ‘slash’ a media agent, ’slash’ [insert variable here].” This happens A LOT and it seems to be a common theme among first time founders, and we understand why.

It’s easy to see the potential offshoots of a great idea. Where it might lead, what customers might ask for, etc. and to immediately believe that you need to build for it. But it’s usually very rare that such products are necessary for success and in most cases, these endeavors become a tremendous distraction.

As a point of clarity, these “slashes” aren’t just general product features, instead, each “slash” represents something that could be an entire business. So, this isn’t an “Airbnb for bathrooms” situation, rather it’s a “We’re a taxi company/that sells shirts/and 401k plans/and…”

It’s impossible to be everything to everyone, and it’s common to think that you need to be in order to win over customers. However, though extremely difficult, being the best at one thing is absolutely attainable and doing so creates incredible value. It’s our experience that when a company has done one thing great, there’s a market reaction that is usually immediate and overwhelming.

We’ve spent countless hours with some of our companies working through go-to-market strategies, anticipated customer demographics, and more, but there’s one thing that I’ve noticed about companies that have hit the nail on the head with doing one thing great. It’s that you can never anticipate all of the potential situations where someone might find value in what you’ve built.

I’ll give you an example. A year and a half ago, I invested in a company called Dor Technologies. Dor Technologies designs and manufactures a peel and stick sensor that mounts above a commercial retail entryway. The sensor monitors foot traffic in and out of any retail location. Now, neither my business partner nor myself have any real-world experience working in retail operations, so we knew virtually next to nothing about the industry Dor is tackling. However, after a few short calls with people we know who do work in retail, it became abundantly clear that there was a huge need. Why? Because believe it or not, until now, it has either been extremely expensive ($5k+) to have a hardwired sensor installed at a store’s gate or extremely inefficient (i.e. a high school student counting heads in and out). This means that retail stores have lacked the opportunity to see many of the basic KPIs that SaaS companies often take for granted. Top of the funnel metrics: How many people came into the store today? Average time inside the store? Avg time to purchase? And more...

At the time I invested, there were plenty of competitors trying to do something similar to Dor, but most, if not all, of them were in my opinion trying to do too much like Heat mapping, individual customer tracking, behavior analysis, you name it, they were trying to do it. But they all failed to recognize that there was one key variable that would unlock 90% of the total value, and you could deliver that single variable at a fraction of the cost and do so right now.

So, what does this have to do with “slashes”? Dor focused on ONE key metric (people count) and drove it so far down to perfection that within days of launching the product, they had people reaching out from industries we had never even thought of targeting: Commercial real estate developers (yep they’ve never known how commercial space is actually used), Automotive Dealerships (how do our techs move around the shop?), Hospitals (where and when are people moving), the list goes on.

Many founders would have seen the technical whitespace around Dor and started building to capture as much of it as possible, but in doing so they would have buried the lead within their feature set, spread their resources too thinly, and crippled their ability to be successful.

I like to think of it like this.

What is the probability of success on Project A when you have 100% of your time dedicated to it (~10%)? Now imagine you add another project, Project B, how much time can you independently dedicate to either of them? Every “slash” decreases you and your team's ability to focus, and it’s hard enough to be successful at one thing, much less five.

At the far end of the “do one thing great” spectrum, Google sees about 3.5 billion searches a day. 15% of those searches have never been searched before. That’s 500 million queries a day that are completely new. When you do one thing great, customers will find an overabundance of needs for your seemingly limited product (it was just a search engine after all).

It goes without saying that as an investor, it’s very difficult to believe that an entrepreneur can be successful at multiple endeavors when success at one thing is already an outlier.

So, we don’t invest in “slashes”.

What Matters Most - Originally posted in Fall 2014

Being a CEO can be a daunting, humbling and lonely endeavor. Daily stresses are numerous and the ever-present possibility that the house of cards is suddenly going to come crumbling down can become petrifying. Burn rates, runway, revenue, hiring, firing, receivables, payables, are employees happy, is the team working together, are investors satisfied…the list goes on and on. As my father would say, “Being an entrepreneur is a lot like being the plate spinner for the Ringling Brothers. No matter how hard you try, there is always going to be some plate of responsibility that needs a serious amount of attention.” It can be difficult to find time to eat and even harder to sleep, and in this onslaught of responsibility, it is far too easy to become lost in the day-to-day trappings of startup life.

Days fly by, weeks sometimes even faster, and hobbies slowly change into “former interests”. More often than not little time is left to those things that should in theory mean so much: family, friends, laughing, crying, and living. We do this under the guise that we’re working towards something: money, fame, a catalyst of change, something that makes us all tick. We believe that at some point our hard work is going to result in a form of success that will systematically remove all of our stresses and those of our loved ones. This hope is one of my greatest day-to-day motivations and often times makes my job so satisfying. The belief that we, as a team, are working toward resolving some fundamental flaw in our industry, and are doing so, in hopes of bettering our own lives along the way. But while we focus on this goal, it’s possible and all too common that family and friends can become impatient, distant or even lost.

This isn’t to say that monetary and social success isn’t attainable, quite the opposite in fact. But the reality is that reaching these goals often damages the relationships we so heartily work towards strengthening in the first place. Never intentionally, but indirectly due to the natural requirements imposed on all early stage employees. And while we thrive on the constant influx of challenges that entrepreneurship provides, we all secretly fear what we know will eventually befall us. At some point, we’re going to receive a knock on the door from a stranger informing us of some catastrophic loss or have to handle a scratchy telephone line with a parent who can barely control their emotions. Some news that results in an uncontrollable shift in our daily routine, a situation that drops us to our knees and renders us human. Try as we may to control and compartmentalize our lives, we are abruptly reminded that it’s completely out of our hands.

Four weeks ago, in the twilight hours of a beautiful Labor Day, I was notified by my father, scratchy voice and all, that two of my very dear relatives were in a horrific car accident. All that was known at the time was that my aunt had passed away at the scene of the accident, and my uncle had been medevacked to the nearest hospital in hopes of saving his life.

As is common in these situations, information continued to trickle in over the next couple of hours, and it turned out that my uncle, who had been in the Emergency Room for some time, was transferred to ICU. The doctors notified my family, who by that time had all arrived at the hospital, that he would most assuredly not last the night. Family gathered around his bed, and while everyone took the time to say their goodbyes, he slowly drifted away.

My aunt and uncle were married at the age of 19, they had two children, and after having worked his entire life for one company, my uncle Ken retired at the age of 65 on Friday August 29 th , 2014, two days before his death. Years had been spent planning a retirement filled with travel, hobbies, events, etc. and in one seemingly preordained moment, all of their hopes and dreams were wiped away forever.

The instant prior to receiving my father’s call informing me of the situation, I was buried neck deep in email, focused on things that certainly could’ve waited until the next day to be addressed. While I could have been spending quality time with the people I was surrounded by, I was instead focused on the things that are superficially important. In that moment, I realized I had run adrift.

In recognizing my error, my mind momentarily drifted away back to one of a thousand times that my grandfather and I were alone together talking about life. We used to spend countless hours alone discussing everything from his war experience, to children, love, hated and everything in between. I can’t stress how formative this relationship was for me and how much it still effects my daily thinking. But out of everything that stands out of the many lessons learned, his general mantra has, and I hope will always stay with me, and it’s especially poignant to this story.

Among his many sayings, witty remarks, and often hysterical viewpoints on life, he taught me from a very early age to “treat every decision as if you are on your death bed.” That is to say that if the result of a decision isn’t going to affect your thinking while on your death bed, it probably isn’t worth worrying about. If it is, then be thoughtful, be calculating and never waiver on a decision for fear of the outcome.

The point is simple, think consciously about the decisions you have control over. It’s far too easy to get lost in the background noise of our daily lives, fail to take a step back, and look at the current opportunities we have to make key decisions on things that will ultimately change the direction and happiness of our lives.

Externally, I continually find myself in conversations with startup CEOs that are telling me they’re “killing it”, yet the half second delay and tentative stare at the ground before answering my question of “How are you doing” belies their actual feelings and their inherent need to talk about the shit they’re dealing with.

This most recent situation in my life certainly rattled my cage, forced me to step out from the trenches of “fucking killing it” and back into the reality that none of this is guaranteed and that NO ONE is actually “fucking killing it”. We’re all dealing with serious issues, whether professional, social, emotional, or physical, we’ve all got something. The important thing to remember is that sometimes there are decisions to be made that will have a dramatic impact on our path and our story of life. I know how easy it is to look at the week ahead on the calendar and say “I’ve just got too much going on to take a break right now”, but the reality is you’ll regret it for the rest of your life that you didn’t take the time to go see a loved one fighting a losing battle with terminal illness, gather with the family during holidays, or simply turn off the phone and enjoy the “normal” moments.

My intent isn’t for this post to be some macabre sermon to tell everyone to run away from their professional aspirations for fear of missing out on life or to never sign up to become a CEO. That would be a gross misrepresentation. I love my job, in fact I’m obsessed with the challenges it presents, but that same obsession caused me to get derailed. I’m merely hoping to remind everyone how easy it is to get lost in the tumult of day-to-day life and to forget how precious every day really is. There is no guaranteed ending to this path you see before you, and as my father would say in the case of the plate spinner, “eventually, everything comes tumbling down. Don’t fret, they’re just plates. You can always get more”. Some things, however, aren’t replaceable.