December 1, 2011

“Great” is Tough to Pick out of the “Good” Crowd

by Bryan Roberts

(A version of this post also appeared at AllThingsD.)

The oldest adage in start-up’s, for entrepreneurs and VC’s alike, is “the key to success is the quality of the people.”  Markets and innovative approaches are important, but my experience supports this notion unequivocally. I have had the good fortune to be involved from an early stage with several billion dollar companies, and most found success after a material pivot from their original approach – Athenahealth, Ironwood Pharmaceuticals and Sirna Therapeutics to name a few.  “I invest in people” is the start-up ecosystem’s version of motherhood and apple pie, but how do you identify “Great” prospectively?

Whether explicitly or not, everyone has their own answer to this question, and based on the success rates, those answers by and large stink. I don’t have a Magic 8 Ball on the topic, but two things make this the issue I wrestle with most: (1) the often-unpredicted success or failure of “nobodies” or “sure things” respectively, and (2) the outsized rewards for locating great, juxtaposed with the probability of abject failure when settling for good. The A+ entrepreneurs with whom I have partnered have come in unusual packages – simply put, there has been no central casting: a biology post-doc who thought about opening a microbrewery B&B; a large animal veterinarian who went to business school in his late 30’s; an x EMT who was also nephew to the President among others.  The best VC’s seem to show the same diversity of background.

I now focus on these attributes:

1. Great talent finds a way to win… and is relentlessly driven to do so with a real sense of urgency.  They follow through and complete the task – starting is easy, finishing takes real will.  It is not that they think out of the box, there simply is no box.  They view ambiguity as opportunity, not risk. When things get uncertain is when they really perk up and start to pay attention because that is when real change is possible.  Most of all, they exceed expectations. They bend the space-time continuum in some fashion and their accomplishments are extra ordinary.
2. Experience is overrated. By and large, the world is changed by the young and the hungry. Experience can be enabling or constraining, but it is not even close to the silver bullet many believe it to be.  If you are seeking a VP marketing or head of sales at a 100+ person company, absolutely look at a resume.  But to find someone with the passion and uniqueness to actually create an early stage venture, you have to spend the time: watch them and see what they do, talk to them and see what they think, ask around and see how respected they are.
3. Balance exploring/driving with learning/listening. Great people have a very clear grasp of the their vision, while understanding that the world has a lot to teach them. They are humble students of the game, but very confident in their abilities, and never “do what they are told.” They don’t avoid conflict and will always bet on themselves rather than shy away from risk.  They ask questions and argue on facts, balancing their gut with innumerable data streams to get to what they believe is the right answer.
4. Great people are magnetic. They are not only smart and driven, they attract resources when all the data suggests they should not – whether capital, people or partners – and thereby become larger than just their singular efforts.

While potentially controversial today, I have come to believe that great entrepreneurs and great VC’s are two sides of the same coin.  Both embody these characteristics.  They are maniacally focused on changing the way we live with innovations others thought were not possible. They are passionate about building a great company and put the company before themselves.  No great VC takes solace in having a portfolio when an individual company struggles – like entrepreneurs, this is deeply personal and about so much more than just money.  Their roles are complementary, like looking down opposite ends a telescope, but those different perspectives to a problem can be extraordinarily synergistic.  Great future entrepreneurs can look like great young VC’s, and vice versa – three of my recent investments are stellar companies started by these “crossover” folks.

All venture firms are simultaneously never, and always, looking for team additions.  I believe this is a direct result of how elusive it is to identify those who will be not only smart, passionate, personable and high integrity, but also successful in this ever-changing, ambiguous entrepreneurial world where what worked last time is no recipe for future wins – and more likely charts a path to mediocrity.   In fact, my own difficulties in finding conviction around potential team additions for our firm is what spurred putting these thoughts on paper.