Balancing Conventional Wisdom

There is a lot of conventional wisdom out there. Most people are happy to share even when not asked to do so..

And often it sounds really smart. I am referring to the kind of things that just make sense when you hear them. For example:

Founder A is looking to raise money for their startup. They will ask fellow founders, friends, family, investors, read blog posts and listen to podcasts. She will hear statements like the following:

Take whatever you can raise. Raising $1M is the same work as raising $2M or $10M so raise more if you are already raising.

Diligence your potential investors. Be sure they add value beyond capital and that they will be there for you during the hard times and not just the good times.

Raise only what you feel is completely necessary. Grow through hustle and hard work to create value that will be recognized in the next round’s valuation terms.

These three statements all make sense but could actually be contradicting each other. The best board member may not have the deepest pockets. The more capital you raise, the faster you can grow, right? Or are hustle and grit more important?

Let’s take this one step further.

Investor B is considering an investment. In “VC school” they were taught the following:

Never miss investing in a great company because of valuation.”

Be sure to make the numbers work because it is all about returns to your LPs through your ownership percentage.

Both are really important points. Which often contradict each other. This exacerbates the challenge faced by our Founder A above as she tries to develop her fund raising strategy and navigate the process, balancing the feedback she receives from each pitch.

Creating a balance and clear path from all of this good advice, is not simple. It is the “art” part of venture capital. Different funds have offered alternative approaches to solving this.

The large firms – A16Z or First Round Capital – have done a great job of creating value beyond their capital and an ability to support companies long-term. They are truly great investors and not just a brand name. But these types of offerings are limited to large funds who generously invest portions of their management fees (the larger the fund the more fess there are to go around) towards creating these support systems for their portfolio companies.

Smaller funds need to be more creative. A lot of the value is added through the active involvement of the investing partners themselves, with limited support staff if any. This makes the balance a lot trickier. I really like the approach created by Founder Collective (and now copied by many other small funds including SapirVP) by which they focus on getting all their capital in early and then position themselves to be diluted alongside the founders. This creates an alignment that I have found valued by most founders. In return the founders are willing to give up a little more equity in the early round so as to have such an investor onboard and in their corner for the subsequent rounds. 

Both approaches focus on value-add investing. These were the best type if investor I’ve worked with and from whom I learned much. Now it is our turn to provide this for the next generation of great founders.

I think it is important for Founder A to remember that when an investor says that they are “founder friendly” that does not necessarily mean that they are exactly on the same page. There are different interests at play. Maintaining this balance is not simple and can often derail an investment process. As I am constantly reminded. But when the balance is established great achievements can be realized together.

For further reading on this topic I suggest Jeff Bussgang’s Mastering the VC Game.

New Year Restrictions

In Israel we are on our way into lock-down. Again. Just as the Jewish High Holidays are upon us. A time of coming together to bring in the new year with prayer – giving our thanks for the previous year and sharing hopes for the new one – with family and friends, in synagogues and around our tables… Well, that is not going to happen this year.

While some may argue that this is most fitting considering the past 6 months, it is still frustrating. Frankly, I think we could have done better.

It is easy to blame the government (now that we finally have one!), and some might even say that they prefer this approach as the easy way out. It seems to me that the timing of the lock-down actually makes sense. Besides it limiting the masses customarily coming together, it also takes advantage of the numerous vacation days already built into the Israeli calendar during this time of the year. In their defense, I do realize that this is the first pandemic they have been called on to lead us through. But the numbers are rising quickly and every delay creates a sense of “too little, too late”.

The period leading up to Rosh Hashana – the Jewish New Year – is a period of introspection. Taking stock of where we are and who we are. Compare these with what and who we want to be. Make commitments to do better in the new year… Take personal responsibility for making the world a better place by each doing our part.

“An early lesson I learned in my career was that whenever a large organization attempts to do anything, it always comes down to a single person who can delay the entire project.”

Ben Horowitz
The Hard Thing About Hard Things:
Building a Business When There Are No Easy Answers

I look around and I know that we can do better. We must take personal responsibility to adhere to the social-distancing guidelines, while creating personal accountability for the health of others in our communities.

That is the only way we can contain the pandemic, as we continue the search for a vaccine… May it arrive swiftly in the new year so we can start to rebuild – emotionally, economically and, most importantly, together.

Shana Tova! May it truly be a good year of health and prosperity for us all.

Mission: Impossible?

When engaging with entrepreneurs trying to change the world, we look for people who are on a mission. We are not unique in using these buzzwords as many other investors also claim to back “mission driven founders”. So, for the sake of clarity (and transparency in the industry), we wanted to break down what “mission-driven” means to us at Sapir.

Let’s start with the formal definition offered by a Google search:

a formal summary of the aims and values of a company, organization, or individual.
“a mission statement to which all employees can subscribe”

Google

Even with such a simple definition there is already a lot here for us to unpack.

formal summary – indicates it should be crafted with a formal tone and language but in brief form rather than War and Peace.

aims and values – this is the core of the statement as it is the message you are conveying in the to grab the attention of your audience and connect with them around what truly matters.

statement – I recommend one sentence. It can be a long sentence, but the message needs to stay brief.

all… can subscribe – the end product needs to inspire and drive to action.

With this in mind we would like to propose some practical steps to create this monumental sentence so it is deserving of being called a Statement.

1. Define your purpose. What are you setting out to do? How will you be changing the world and making it a better place? Why does the world need your company? Why now? – If you have read our previous posts about your company’s Vision and how to create one then you have already developed this core material.

2. Drill down to first principles. Get specific around what is important to you as far was what you want to achieve and the values that guide you in your pursuit of these aspirations. First principles make it easier to quickly comprehend your message.

3. Create inspiration and drive action. A call to arms, so to speak. This statement will be the rallying call that introduces or reminds the audience of the grander (and longer) vision each time they hear or see it.

4. Iterate until you have a single comprehensible sentence.

Your Missions Statement is not your vision. It is not a grand description of the utopian future you are creating or a list of your core values. It is not even your Why. These are all different components of your corporate culture and each piece plays a different part. I’ll illustrate how you can use your mission statement with a personal story.

After 4 months of basic training and 3 months of advanced training our infantry platoon was stationed at an outpost along the Israel-Lebanon border. Our training had included seminars on ethics and conduct, not to mention the code-of-honor drilled into our minds throughout, balanced with the need for a military force to defend the Jewish people (the IDF is the most moral and ethical military force in the world!). But despite all of this advanced preparation, in every mess hall and briefing room there was a sign that said: “Protect the Northern Towns!”

A brief history can be found here, but ultimately we knew we were there so as to guarantee that civilians living in a town or in a kibbutz a couple of kilometers away could do so peacefully. And yet, every time we walked into the room, we had that super simple three-word statement front and center reminding us of all the other details – values, purpose, training, etc. – without needing anyone to repeat them all again.

The Mission Statement is concise because it can be if there is a strong vision shared in advance which incorporates the grand purpose and core values so it does not need to iterate them again. Rather it is a sentence that reminds those who know already and captures the attention of those who do not yet so they will want to learn more.

It is also important to emphasize that your Mission Statement is not your Elevator Pitch. We plan to discuss the Elevator Pitch in a separate post. The Mission Statement can be part of your Elevator Pitch, but it is still just one sentence so at most it would be 10 seconds worth of your 1 minute elevator ride.

As a final note, you can have multiple mission statements geared towards different audiences. Though the core should remain the same and thus the different versions are similar, the emphasis can be adjusted to best address an employee or a customer or an investor.

Sapir Venture Partners empowers Israeli founders solving grand problems by leveraging deep-technology and cutting-edge science, while holding themselves to core inspirational values with which we align allowing us to provide mentorship at the early stages of their journey to create a positive global impact.

Sapir Venture Partners

This is our mission statement.

Super Vision

In a previous post we discussed the need for a strong Vision as a way to inspire people to join you in your pursuit of making the world a better place. It is an important part of your story which can be used to attract talent, customers and investors.

How do you create your Vision? – We share here a 3-step process to get you started.

First you need to understand what your Vision is. Read this post.

Next, I recommend answering the following 4 questions which I have used with dozens of founders in my sessions at MassChallenge. The best results will come if you can be honest and detailed in your answers.

1. Purpose: What is my company’s reason for existing? Why do what I’m are doing? Why now?

2. Values: Why do it this way? What are the values by which we operate and which will guide us as we pursue our goals? How do we do it better/different than everyone else?

3. Impact: What is the ultimate impact we want to have on the world? What is the utopian future we are creating?

4. Customer: Who is my customer? Why does my customer need me? What do I need to be able to provide so as to allow my customer to benefit from what I offer?

If you are a team of founders then using brainstorming techniques to develop your answers will be very helpful once you have each answered these questions individually.

Some tips for getting good results when answering these questions:

  • Keep it simple and clear
  • Think long-term (5-10 years out)
  • Dream big yet stay rooted to reality
  • Focus on factors that will drive success
  • Make sure you can convey your answers with conviction

The last step is to test and refine till you are happy with your end result. One way to test yourself is to try and define specific goals and metrics by which you can evaluate the realization of your vision. If you can’t identify these yourself then, most probably, others will not be able to do so either. Another test to share your vision with others – family, friends, mentors, etc. – and get their feedback. Did they react with a resounding “can I join you?” or were they more like “ok, good luck!”?

Developing a strong vision for your company will take numerous revisions. It is a process that ultimately tells a story across time – where you have been, where you are today and where you want to be in the future – which requires iteration to both hone the message and learn to convey it passionately.

The final product of these exercises is intended to be a paragraph or two, not necessarily a single sentence or statement. It should be future based – aspirational and motivating. It should be a clear message which drives your business forward. These will in turn be used to further develop your Mission Statement (one sentence) and Elevator pitch (1 minute). We will cover these in future posts.

Does my company need a Vision?

Simon Sinek, in what has become one of the most watched TED talks ever, explains his theory of “Start with Why”. The talk captures the key message of his book by the same name. At the core of Simon’s explanation for motivating people to take action, is the simple understanding that people want to do something that has meaning. They want to be a part of something that they feel is meaningful.

As a founder you are always selling. You are selling to your customers, obviously. But you are also selling to your corporate partners and to your investors. You are also selling when you search for top talent to join your team as you hire them and then motivate them to stay and perform. We will explore this further in a separate post.

But what are you selling? Especially in the early days when there is as of yet no product/service to be shared?

You are selling your vision. You are sharing your personal “why?” and motivating people to support you in pursuing it. It can be as grand as you like. Actually, it should be almost unbelievable. But only “almost”. There needs to be a sense that the vision is rooted in reality, no matter how high the aspirations, so that it can be believable. We follow visionaries because we want to be a part of the type of world they describe and which we believe is attainable.

The first step is for you to understand your “why?” – why do you do what you do? Why did you decide to dedicate yourself to doing this? And why do it in this way rather than alternative options to achieving your goals? – Simon says: People don’t buy what you do, they buy why you do it…

Asking these questions should help distill the core purpose you are trying to achieve along with the core values that drive you achieve it in the first place. They will also allow you to map out the general path by which you decide to travel on your journey to make it a reality.

In their important article – Building Your Company’s Vision (Harvard Business Review, 2000) – James C. Collins and Jerry I. Porras build a two-layer framework in which to insert these answers as you create your company’s vision.

Collins and Porras define the first layer as your Core Ideology. This layer is comprised of your Core Values and your Core Purpose. Your Core Values are the handful of guiding principles by which the company navigates. They are used to weigh decisions on a moral level. E.g. – first do no harm. Your Core Purpose is your organization’s most fundamental reason for being. For example, when we started Sapir Venture Partners we first needed to answer the question – why does the world need another early stage venture fund? – This forced us to map out the ecosystem and define where we add value. From this we crafted our investment thesis against which we evaluate every investment opportunity we consider.

The second layer is defined as your Envisioned Future. This layer is comprised of your Monumental Goals and a Vivid Description of life once these goals are achieved.

The first layer, your Core Ideology is a fundamental part of your “why”. By layering in the Envisioned Future you are beginning to craft your story to be shared with the world.

The key word here is story. An audience can relate to a story. They can connect to it and even try to see themselves as a part of it. This is what happens when you read a good book. You can see yourself as the protagonist and experience the adventure first-hand.

Great storytelling is an art. It is a skill we all learn at an early age. But there is a difference between good storytelling and great storytelling. The key to great storytelling is connecting to people on an emotional level. Use your own feelings, dreams, aspirations to generate reactions from others. This will attract people who feel the same way and aspire to the same outcome.

Using a personal experience is the most genuine way to do this. Sharing an experience that made you feel a certain way will immediately create a “hook” for someone who can relate, either because they have been through it themselves or because they can empathize. But this can be a hard thing to do as it requires opening up about things that may not always be easy to share. For example, if you are driven to cure cancer because someone you love suffered from the disease or if you were driven to create change because of a personal failure you experienced in the past. Retelling this story in an inspiring way will surely be challenging for you emotionally as you relive the pain each time. It could certainly not be fun to tell this story hundreds of times before complete strangers while asking them for something in return.

Another key to great storytelling is iteration. Practice makes perfect. Each time you tell the story you get better at it. You learn from how the audience reacts to certain parts whether you are sharing too much detail (this is always the hardest part for me to overcome) or you rush the outcome to get to the punchline. Timing, pace and passion will reel your audience in.

Another important tip I recommend to all founders is that you create multiple “hooks” in your story. You usually will not know in advance which hook will catch any given member of your audience. By creating multiple hooks you are essentially spreading a wider net (see what I did there? Mixing fishing metaphors!) to catch more of your audience but also allow an individual to hone in on the element that is most attractive to them within your story. An investor is usually looking for a path towards outstanding financial returns. But they could also be interested in supporting a potential global change in a field that is dear to their heart or back a breakthrough cure to a disease that afflicted someone they care about. You never know. So add hooks to your story and then watch how they respond and listen carefully to their feedback so you can emphasize the elements that most appeal to that audience when you continue the conversation.

A founder telling a great story can inspire others to act – build, invest, buy, sell – so this is a critical skill for a founder/CEO to master.