May 26, 2022 Suraj Gupta via Forbes Business Council : Diversity: The Holy Grail Of Venture Capital

No matter how you slice it, diverse teams outperform homogenous teams, and the numbers back this up. Teams that are diverse by gender and ethnicity generate 30% higher MOIC (multiples on invested capital) compared to homogenous teams. Companies with at least one female or one ethnically diverse founder generate over 60%+ in business value. Ethnically diverse founders enjoy an average exit multiple that is 30% higher than those of solely white founding teams (3.26x vs. 2.5x). This gap becomes even more pronounced when we consider diversity in the C-suite. Ethnically diverse C-level teams have an average exit multiple that is 64% higher than their solely white counterparts (3.31x vs 2.02x). (read more…)

CATEGORY: leadership, resilience, VC

May 6, 2021 Aaron Dinin via Medium : I Sacrificed a $50 Million Company to Chase a Billion Dollar Business, and It Didn’t End Well

I didn’t know it at the time, but, once I took venture capital, it meant I had to start operating like a venture-style company regardless of whether it was appropriate for the type of company I needed to build. That meant operating at a loss. That meant pumping tons of money into growth at the expense of creating a stable and maintainable infrastructure. That meant hiring lots of people. That meant scaling as fast as possible. That meant getting on the VC merry-go-round and never being able to get off.

There was a consequence to those decisions. As the VCs who rejected me recognized, the market I was chasing couldn’t support the type of venture-backed, billion dollar company I needed to build. As a result, the company that should have been a successful $50 million dollar company that I would have been thrilled to own never materialized. Instead, I had a company that failed to become a billion dollar company.

While not ideal for my investors, the outcome certainly wasn’t devastating. They expect most of their investments to fail, and, when one does, they get to focus their attention on other investments. But it was a much worse outcome for me. I only had one company, and, when it failed, I didn’t have anything else.

CATEGORY: growth, leadership, resilience

April 21, 2021 European Straits : Bill Janeway on Who Should Be in Control

It’s about how you address what Hyman Minsky always referred to as the “survival constraint”, that is, when you have obligations that you have to meet in cash: you can pay those obligations out of operating revenues, out of the sale of assets, or out of the issuance of new securities. And when you run out of those three alternatives, that’s when you call in the lawyers! And so this is my concern with the entrenchment of founders: in my experience, unless they have previously been through a failed startup or at least the near-death experience of an established business (that is, flirted with bankruptcy), they are insensitive to those stressors. And that’s the problem in the current environment: there’s no need for them to be sensitive! But I find it extraordinarily unlikely that the current environment will last indefinitely. (read more…)

CATEGORY: leadership, resilience, risk

February 3, 2021 Courtney Rubin via Medium : The Shocking Meltdown of Ample Hills — Brooklyn’s Hottest Ice Cream Company

As Smith tells Marker, having Disney behind them fueled much of the co-founders’ overconfidence, encouraging them to think they could become the next Ben & Jerry’s. Disney’s interest also helped the company attract investors, he says, which created “a runaway train of raising and raising and growth and growth.”  By chasing rapid expansion without paying enough attention to how much they were actually spending, the co-founders ended up making big bets that cost the company millions — and mistakes that left thousands of gallons of ice cream literally swirling down the drain. “It was a fairy tale,” says Greg O’Connell, one of Ample Hills’ biggest investors. “They were kind of living in a dream world because their marketing was so great.” [...] Meanwhile, Smith and Cuscuna still hoped they could fundraise their way out of the problem. (read more…)

CATEGORY: leadership, resilience

February 1, 2021 Brett Fox via Medium : What Happens When Your Investors Give Up on Your Startup?

But none of this answers why Donald Ventures would kill a company they decided not to invest in. Here’s my educated guess as to why they would act this way.  It’s much easier to not have to explain to a limited partner (the people that invest in a VC fund) why you gave up on a company that later became a success. So, you just kill every company you walk away from.

And, you the entrepreneur that gave your blood trying to make the company a success, you’re just collateral damage.

CATEGORY: resilience, VC

December 21, 2020 Tech Crunch : Silicon Valley should reward zebras, not unicorns

Unicorns thrive so long as they remain in the enchanted forest of endless venture rounds; zebras tough it out in the savannas of the free market. A zebra company won’t become the next behemoth like Facebook or Amazon, but neither will it become the next Quibi or WeWork. One-way extraction of value is replaced with a circular flow of value. Exponential growth is neither the best nor the only way for businesses to operate. (read more…)

CATEGORY: bootstrap, leadership, resilience

May 15, 2020 Crunchbase : Why Startups Should Become ‘Camels’ – Not Unicorns – During COVID-19

While head-spinning valuations make for great headlines, challenges facing the tech economy indicated a shift in this “growth at all costs” mindset for a while. With economic uncertainty looming, the shift accelerated, and it’s no surprise as startups look to how they can survive an increasingly likely drought. Soon, unicorns will become myths once more as we see the rise of the “camel.” (read more…)

CATEGORY: downturn, resilience, risk

April 9, 2020 James Currier, NFX : The Psychology of Founders Who Win in Downturns

In times of ambiguity and dislocation, fear can take over. Even exceptional employees get disoriented and confused. They may become paralyzed. Founders can best prevent this from happening by shifting their mindset back to the mission that got them started on this journey in the first place. They should find themselves back at the office (or the home office) recommitting to their mission — even if there is only one week of money left in the bank. Because it’s what they want to be doing no matter what, regardless of the money. Lead with that spirit, and the team and board will follow. (read more…)

CATEGORY: downturn, leadership, resilience

April 6, 2020 Madison Wright via Medium : Company Building and Venture Investing in a Downturn

Most asset classes struggle during economic downturns, but the impact is far more nuanced than that. Private markets have proven resilient as the venture, private equity and startup lifecycle are long term, and as such, downturns tend to be more of a short term consideration. It is during these times that the perception of the illiquidity of private markets shifts from a disadvantage to a feature. That being said, certain effects will be felt more acutely, such as revenue decline, supply chain disruptions (in the case of the virus), and lengthened fundraising duration (read more…)

CATEGORY: downturn, resilience, VC

April 4, 2020 The Economist : Technology Startups are Headed for a Fall

On the surface, DoorDash stands to benefit from the pandemic, and Lime to suffer. In fact, the coronavirus may prove more indiscriminate than that. It strikes at a time when many of the world’s 450-odd unicorns were looking ropy. Their perpetually loss-making business models—only a small proportion are in the black—were increasingly being questioned. So were their exuberant valuations, which added up to perhaps $1.3trn globally. A reckoning was afoot; some unicorns would “go under”, Dara Khosrowshahi, boss of Uber, a ride-hailing giant which relinquished its unicorn status by going public last year, told The Economist on March 2nd. (read more…)

CATEGORY: downturn, profitability, resilience