What GOOD looks like…
Lessons from Founders and Investors
After documenting insights from several 20VC episodes, I have noticed a few patterns and wanted to summarise my findings.
In a nutshell, culture (or how these components manifest through company culture) seems to be the most important aspect of a successful venture. This is broken down into a few key components:
Mindset
Values
Relationship with customers
Mindset
Mindset refers to the collective thoughts, values, and beliefs that form the foundation of a company. Adopting a growth mindset, where challenges are seen as opportunities for improvement, not obstacles, is crucial for business expansion and longevity. Companies and investors that foster this mindset are often more resilient and determined, which leads to consistent success in an environment where change is the only constant.
“But you really have (to have) a culture of continuous learning, because there are plenty of things that we invested in where the facts change or where we were just wrong and throwing good money after bad when you were wrong is a really bad idea.”
- Brad Gerstner, CEO of Altimeter Capital
“And that learning mindset, I think, is really important in venture is really important in entrepreneurship, really important in partnerships, because you share learnings, you're what I call explicit learners together, you share your principles, so you can teach other people around you, and you can learn together”
- Reid Hoffman, General Partner at General Catalyst
As an extension of adopting a learning/growth mindset, many of Harry’s guests also highlighted the importance of working with constraints and ambiguity. The general consensus is that constraints are the building blocks of creativity and innovation. These constraints can include resource limitations, market uncertainties, or regulatory challenges, among other things. Mastering the art of navigating these constraints and ambiguity is a distinctive trait of highly successful companies and founders. They view constraints not as hindrances but as catalysts for innovation.
“Creativity always comes from constraints. This is I think what the best teams do everywhere. They are greedy for constraints. They wanted to understand how can we restrict our space so that we get to get started, develop something, feel each other out, develop an appreciation for each other’s aptitude and skills, right?”
- Tobias Lütke, CEO of Shopify
Values
Values are the guiding principles of an organisation that dictate how it will operate. They set the tone for decision-making processes and shape the overall company culture. Most importantly, they signal to employees, customers, and investors what the company truly stands for.
Some of the values highlighted by successful founders include:
Honesty & Integrity
Upholding moral and ethical standards, even when inconvenient or difficult. This also includes intellectual honesty - a commitment to truthfulness, integrity, and fairness in the pursuit of knowledge, understanding, and communication.
“Being willing to tell the truth, as I would have wanted as a founder. Fialkow, when he was on my board, trust me, in 2000 when the world was coming undone, he talked truth. Or on September 11th, when planes ran into buildings, Rich Barton and I and David Fialkow, we talked truth. And so to me, I treated founders the way I'd want to be treated. I tell them exactly the same thing in front of them that I tell them when they're not in the room.”
- Brad Gerstner, CEO of Altimeter Capital
“But I've been in the game long enough now where if you leave a nice taste in those people's mouths and you always be the good human and be the honest, honorable person and speak truths, people come back and they remember you. And when they are ready for that career change or when an opportunity does arise, they often come back. And I really think about business as a really long game. And one of my biggest philosophies is just be honest. And if you say something, stick to your word. There's nothing I can't stand in business more than people that go against their word.”
- Cliff Obrechet, COO of Canva
Resilience & Drive
Not shying away from challenges but facing them head-on even in the face of setbacks or adversity. Entrepreneurs must be resilient and have a go-getter attitude in order to succeed in spite of the high rate of failure and constant setbacks they endure. Resilience and perseverance are key to overcoming adversity and continuously experimenting and testing hypotheses.
“Drive is more important than IQ points. I really look for is drive because there are a lot of really smart people who don't actually have that inherent drive for greatness, who will walk through fire, break through walls to achieve greatness, especially in a startup-type environment where the odds are stacked against you”
- Jag Duggal, CPO of NuBank
“But if you have this idea about how to unlock distribution, and it makes sense to me, and you recognize all these problems in the industry, and you're just a force of nature that's going to break through, maybe that will work anyway. And so I guess my view is, you don't just turn away from all problems because this space has traditionally been hard. But it should educate you as to, does the founder recognise that? And can they navigate out? Are they doing something to uniquely breakthrough?”
- Sarah Guo, Founding Partner at Conviction Capital
Relationship with Customers
The relationship a company has with its customers is another frequently discussed topic by many founders. It's about more than just delivering a product or service - it's about fostering a deep, meaningful, and ongoing connection.
The importance of understanding customer needs and continuously improving to meet those needs cannot be overstated. It's an area that requires constant attention and investment. The most successful companies tend to be those that put their customers at the centre of everything they do and strike a fine balance between addressing their present needs and anticipating their future ones.
“One of the biggest issues in business, this goes back to that dirt under the fingernails. We very quickly get into our ivory tower at our big conference rooms and we have big meetings and we go over survey results and we're very proud of ourselves, but we don't get ground truth. I think listening to ground truth directly is one of the most valuable things you can do to continue to grow. And the other CEO that I know who did it was Jeff at Amazon.com.”
- Jamie Siminoff, Chief Inventor of Ring
“Yeah, I think it's really important to understand the customer problem. I think it's less important in understanding like all of the nuance of the industry and dynamics and other things that are going on. But I do think if you don't deeply understand the customer problem, it's likely you'll build the wrong solution.”
- TJ Parker, General Partner at Matrix Partners
What are the implications for Founders and Investors?
Founders:
Set goals that are ambitious, challenging and constantly shifting to the ever changing startup landscape
The use of artificial constraints should be encouraged across the organisation but applied judiciously to avoid stifling creativity and impeding progress
When hiring, take as much time as possible to understand how a potential hire
Is receptive to feedback and committed to learning
How resilient are they
How comfortable are they working with ambiguity
Foster open, clear communication with all individuals involved in your business, including employees
Entrepreneurship is a series of iterative experiments, therefore, executing with strategic clarity is of utmost importance
Aim to seek truth instead of attempting to prove yourself right
Establish a close and healthy customer feedback loop
Investors:
Term sheets should be carefully crafted with reasonable and challenging milestones - reevaluate accordingly if goals are not met
What’s the founding team’s history of navigating ambiguity? Consider how the team has managed with resource constraints in the past.
Have they demonstrated creative solutions or innovative approaches?
Provide frank feedback and be honest in your evaluations
How well does the business understand its customers?
BONUS
Common points of contention (will be covered in a future post):
Founder v.s. Market - Which is more important?
Product: Is it a Science or an Art? What’s the split?
Investments - How concentrated/diversified should your investments be?
Is startup defensibility a myth?
Hire fast fire fast? How should one hire?
