As investors we talk a lot about the importance of people in our decisions; yet how much do we understand about the largely intuitive decisions we make about the people and teams we invest in?
In some areas we are overwhelmed with data, obsessing over metrics, cohorts, gross margin, payback on CAC (cost of acquisition), mom (month on month) growth. We can be empirical in our analysis and evidenced-based in our decision making but this is at best managing through the rear view mirror. What has happened in the past is no guarantee of what will happen in the future.
Many of our investments are very early, with minimal revenue, data or evidence. So much, if not most, of our investment hypothesis is predicated on our intuition and belief in the potential of the founding team.
“They have what it takes”, we say.
But what is “it”?
“She’s a machine”.
“He’s a force of nature”.
“They are a world-class team”.
But what do these words mean?
Without context and the ability to compare and contrast our decisions, these descriptions are unhelpful. They don’t help us in our decision-making, they don’t help us learn and they don’t help us to understand our teams, they don’t help us understand how we can help that founder to grow and to build a world class team around them.
As an organisation Notion is striving to engender a more meaningful understanding of entrepreneurial potential. First and foremost so we can better understand the people we are working with in order to help them reach their potential and build diverse, powerful and high performing teams. Our role is simple in this regard…
It’s interesting to consider what an entrepreneur actually is. The French Philosopher Jean-Baptise Say apparently coined the term in about 1800:
The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield. Jean-Baptise Say.
The term entrepreneur can encompass many people with varying ambitions, however, the technology entrepreneur, in particular, the type that appeals to venture capital investors is well captured by economist Joseph Schumpeter:-
Schumpeter’s view is that entrepreneurs are first and foremost innovators: people who come up with ideas and embody those ideas in high-growth companies.
These entrepreneurs destroy old ways of doing things and create value and stimulate economic progress by finding new and better ways of doing things at scale, seeing and exploiting opportunities.
As you would expect our approach to understanding founder characteristics combines a healthy combination of left brain thinking, which is really my input [i.e. Stephen Millard] with a right brain, slightly bonkers in a brilliant way twist that is – frankly – all Chris Tottman.
We believe the conventional measures of IQ and EQ are important as a starting point to give immediate insight into two of the founders’ core strengths. So smart both in terms of intelligence and their understanding of themselves and the people they work with.
We look for evidence of both of these, the latter being harder to judge, yet equally if not more important.
These are all important, we expect one or two areas within this section in which the founders are exceptional.
These three are often less tangible at the outset, but more evident in the founders with the greatest resilience over time and we believe that those with outstanding capability in these areas – balanced with the appropriate strengths in other areas such as leadership, learning, interpersonal awareness – will correlate with the biggest outcomes. Of course, only time will tell.
Firstly and most importantly these criteria give us a common vernacular to describe the people we invest in and secondly allows us to understand them better.
We recognise there are limitations. This is a subjective process and each of our team assesses and thinks about their founders differently, so it is evidently not a tool for ranking founders. What it also provides us with is a window into how each of the Notion team thinks about each of the people they have invested in a way that is actionable which may also be very interesting over time.
This is, of course, a relatively simple framework, but nevertheless, one that we believe will allow us to understand our teams better and over time support them better and faster, earlier in our investment journey.
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