I was chatting with a friend today about the rest of the year. He told me everything he plans to do and asked about my plans through the new year. I shared this ordered list with him:

• Spend quality time with family and friends for Christmas
• Read an interesting book
• Make progress on a work project

My list is noticeably shorter and simpler than his. Spending time with family and friends is my highest priority. I don’t want to commit to too many things or attempt to do much during this holiday season because I want to be present with them.

I’ve been helping a founder think through office options. His company is experiencing unexpected growth, and he’s bringing more people on board. He’s been remote since 2020 and wants to get a space for his expanded team to work in. We discussed coworking spaces, and I also shared the experience of my first office.

In the early days of my start-up, I needed something simple. Two desks and reliable internet. When I talked with seasoned founders, one of them suggested that I sublease from a larger company. He connected me with a founder who had excess office space, and we struck a deal. My new landlord had been an entrepreneur for many years and had built a company doing millions in annual revenue and operating in two states.

Over the course of a few years, my company grew from a few hundred thousand dollars in revenue to over a million. That sublease played an unexpectedly large role. First, I was able to observe the inner workings of my landlord’s company, which I learned a lot from. It was like being a fly on the wall watching a larger company manage growth. Instead of hearing about his management style, I saw it firsthand. Instead of asking him to describe qualities that make a top performer, I learned about them every day as I got to know his top performer. Second, my landlord became a mentor and advisor. He observed my journey and hurdles in real time. On many occasions, he pulled me aside to share how he’d handled a situation I was struggling with. And I’d often walk over to ask if he had fifteen minutes to chat. Those information sessions were valuable.

The knowledge I gained from my sublease was worth many times more than the rent I paid. I’m thankful for that experience.

With companies reducing staff and embracing working from home, I suspect there’s more underutilized office space than we’ve seen in a long time. Translation: lots of opportunity for small start-ups to sublease space from more mature companies. If you’re a founder looking for space and coworking spaces aren’t ideal, consider a sublease. You could end up getting much more than just office space out of the experience.

I listened today to a founder explain his approach to building his second company. His first company failed because he couldn’t get any paying customers. His big takeaway was that what he built wasn’t what customers wanted. He had a hypothesis and built a solution based on it, not realizing that his hypothesis was just that, a hypothesis that needed to be proven correct or incorrect. He was trying to sell his solution, not find out whether his hypothesis was correct. After reflecting on his journey, he realized that the company failed because he wasn’t listening to what customers were telling him, which was that his hypothesis was incorrect.

This time he’s taking a different approach. He has a hypothesis, but he has recognized from day one that it may be wrong. Right or wrong, he’s focused on learning the why behind what people say. He built an MVP based on his hypothesis and has been getting feedback from customers. The feedback told him he was wrong in his initial thinking and helped him understand his customers’ pain better. He built the second version of his solution, which is resonating with customers because it solves a real pain point.

It took this founder a few years and a failed start-up to learn a valuable lesson. In the early days, focus on proving your hypothesis right or wrong. Have mental flexibility so you can see things from the customer’s perspective and be ready to go where customer feedback takes you. He learned this lesson the hard way but is now succeeding in his second act.

I love hearing company origin stories. It’s always interesting to hear what led someone to start a company. I’ve started asking for the origin stories of younger VC funds too. Emerging managers are founders too, and going from zero to one with a fund can be difficult. I love hearing why they made the leap. I recently heard a VC fund origin story that was different than any I’d heard before.

Venture capital and its outsize financial rewards have been known in areas like San Francisco for decades. A founder from another country was able to take his start-up public and reap a massive windfall for himself and his investors. This hometown story caught the attention of founders and investors in his native country, who wanted to know how they could support the next local founder who’d have breakout success.

A multifamily office in that country was repeatedly getting asked by the families it managed wealth for if it could find some early-stage investment opportunities. Its leaders realized there was no venture capital in the country and decided to start the first venture fund there. They settled on a hybrid strategy of investing in other venture capital funds and making direct investments in start-ups.

Fast forward a few years, and they’ve raised a few funds and had one of their seed-stage start-up investments go public. The fund managers are happy, as are the founders they backed and the limited partners who invested in their fund.

What an interesting origin story.

I watched an interview Robert Smith gave recently. He’s a billionaire and founder of Vista Equity Partners, a private equity firm focused on software companies. Robert was very open, sharing details of his childhood, his journey from engineer to investor, and his perspective on a variety of topics. He did a great job of explaining private equity, venture capital, and capitalization at different growth stages in a company’s life cycle in a way that many people can understand.

I’ve spent time thinking about the impact of knowledge gaps on a founder’s velocity. Robert shared his thinking about knowledge gaps and how filling them is core to his strategy at Vista. Here are a couple of things he said that stuck with me:

“You’re accelerating the corporate maturity of that business. It might take you 10 years to figure out what we’ve done 45 times already. Now I bring that intellectual property into the company.”

“You may not have figured out or may not figure out because you may not be in an environment or circle of people who have dealt with that before. That’s why the expertise we bring is often more valuable than the capital.”

Even though he’s a private equity investor, Robert is also a founder. He founded Vista over twenty years ago and built it to almost six hundred employees and almost $100 billion in assets under management. He was speaking from the unique perspective of both a founder and investor who’s had outsize success. I think it says a lot that he’s built an organization whose success is largely based on creating value by filling the knowledge and capital gaps of people running later-stage companies.

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I’ve attended many holiday parties over the years. My general thought is that the larger the company, the larger the party and the less depth there is in people’s interactions at the party. For some (not all), the party can feel like a chore. For a big company, team holiday gatherings can be a better option than a single large party. For example, if the sales team has 12 people and the marketing team has 8 people, have two separate team parties organized by the team leaders.

Small gatherings like this can bring more value. They’re more like a big family’s Sunday dinner than a huge family reunion. Teams who work closely every day can bond outside work and add a social layer to their relationships. Instead of trying to connect with people you barely know or don’t know at all at a huge party, you can strengthen relationships with people you already know in a more intimate setting.

Holidays are a great time to get team members together, and small team gatherings can be a great alternative to a huge company holiday party.

Today marks the end of my one-hundred-forty-second week of working from home (mostly). Here are my takeaways from week one hundred forty-two:

• Recession – Discussions with a few friends and more headlines revolved around recession and the tough road ahead in 2023. I assumed that recession was a given for most, but it feels like the reality of it is hitting more and more people the closer we get to 2023.
• Fewer meetings – I was intentional about keeping my calendar clear, so I was more productive and focused. A few unexpected things happened, but they didn’t derail me. I plan to repeat this next week.
• Christmas – One more week until Christmas. This is the final push for the year.  

Week one hundred forty-two was a productive week. Looking forward to next week!

I listened to some folks from a multifamily office explain how they help clients (wealthy families or family offices) invest in tech start-ups. It works like this: The client tells the multifamily office they want to invest in tech start-ups. The multifamily office then talks to various venture capital fund managers that match the client’s parameters (stage, sector, etc.). The multifamily office sends the fund docs to the client for review or sets up meetings between the fund manager and client. If the client likes the manager, they invest and hope to invest with them for a number of funds.

As I was listening to this, I thought about the various layers:

family > multifamily office > venture capital fund manager > start-up

This process to match a tech start-up with the capital from a family seeking to invest in start-ups is inefficient and highly relationship driven. This is just one example based on one conversation, but it’s a good example of the inefficiency endemic to matching capital and start-ups.

I had a conversation with a friend about sleep. She’s reading Why We Sleep: Unlocking the Power of Sleep and Dreams. I haven’t read the book, but I’ve heard good things about it over the years and have it on my to-read list. She shared some of the things she’s learned. The gist of it is that sleep is important to the body and mind (e.g., decision-making). The things we put in our body can affect the quality of our sleep, which has a ripple effect. Changing time zones frequently also isn’t ideal for the body’s circadian rhythms.

When I first started my company, I didn’t make sleep a priority. I pulled all-nighters, functioned on four or five hours of sleep a night, and traveled a lot. I usually felt bad mentally and physically but pushed through it. Over time, I realized that sleeping and taking care of my body are important because they boost my energy level and mental clarity. I embraced an exercise routine and targeted seven to eight hours of sleep. These changes helped me feel better mentally and physically, which no doubt benefited my company too. I now make sleep a priority and have even done research to learn more about the optimal sleep situation for my body.

Working a hundred hours a week and getting minimal sleep is glorified in the start-up world, but the reality is that that’s awful for you mentally and physically. Every so often, when you’re pushing to get something important completed, it makes sense . . . but week in, week out—no. It leads to founder burnout and can lead to a burnout culture where you churn through good people. Let me be clear: I’m not saying you shouldn’t work hard. Hard work is critical to founder success, but hard work doesn’t have to equate to not taking care of yourself. The human body isn’t meant to go without adequate sleep for long periods of time. If it does, that shows up in other ways. I don’t have data on this, but I suspect that people who live this kind of lifestyle for years have success professionally but pay for it with more health challenges than others their age.

People think founders are superhuman, but they aren’t. They’re human. They get only one body just like everyone else. They have to take care of themselves, and sleep is a big part of doing so.

I chatted with someone who used to work at a family office with a real estate background that manages a large investment portfolio across different asset classes. This person shared a few things that stuck with me:

• Opportunities to create value and wealth in real estate won’t look like the past. The return profile will look different. Individuals and families who own real estate will likely keep it and pass it on for a variety of reasons (taxes is a big one). The acquisition prices seen in the last few decades likely won’t be repeated, making it harder for new entrants to create returns like those of people who started thirty or forty years ago.
• Other asset classes, such as public equities, aren’t great for multiplying wealth.
• Venture is the best asset class for value and wealth creation. It’s a great asset class for those looking to multiply wealth, not just preserve it. But it’s one of the hardest asset classes to penetrate if you don’t have a background in it or existing relationships. It’s also hard for family offices to be successful if they don’t have the appropriate risk appetite and portfolio construction strategy (i.e., in relation to check size and stage). Family offices like venture as an asset class but can struggle to have success.

Interesting thoughts. Some of them I’ve heard from people in other family offices I’ve talked with. We’ll see more capital flow toward owning private companies (i.e., private equity), with many family offices and other institutions specifically wanting access to early-stage private companies (i.e., venture capital). Overall, I think this is good for entrepreneurship and founders. I do think we’ll need to see improvements in how that capital (and other resources) are matched to founders. At the early stage (seed and pre-seed), the process is massively inefficient.