Yesterday I shared a few takeaways from reading The Power Law: Venture Capital and the Making of the New Future. The book does a great job of describing some early-stage venture capital investments that had outsize returns (Cisco, Apple, Google, eBay, Alibaba, Facebook, Uber, etc.). There’s a story behind each of these deals, and the book tells each story in an interesting way and even gives specific financial details on some of these investments.

These deals were all different, but they had one thing in common: the companies were early into new markets that quickly became massive. Most ended up dominating their markets (for better or worse).

Markets matter a lot. They have a material impact on outcomes. Founders should be aware of this and be honest with themselves about the market they’re going after. If you’re solving a problem in a slow-growth or declining market, an already difficult journey will likely be many times harder.

I just finished reading The Power Law: Venture Capital and the Making of the New Future. I’d pieced together the history of venture capital, but this was a fascinating chronological account of the industry with lots of details. A few takeaways:

• Family office origins – 1946 was the year venture capital investing was begun by wealthy families. The Rockefeller and Whitney families started to experiment with investing in risky early-stage businesses. It took time for others to embrace this model and put the right structure behind it.
• Angel investing – Google raised $1 million from individuals in 1998, which was unheard of at the time. This contributed to the rise of angel investing.  
• Sequoia – Founded in 1972 by Don Valentine, this firm has been at the top of its game for many decades. It has continued to evolve and expand the ways it invests by being curious and intentional. There’s an entire chapter dedicated to Sequoia because of the impact it’s had on the industry.
• China – The evolution of China’s venture capital industry is well chronicled. China’s tech industry was heavily influenced by American venture capitalists who found work-arounds to invest in promising companies.
• Ownership – In the early days of venture capital, investors would routinely own a significant percentage of companies in early founding rounds. A six- or low seven-figure investment for 40% of the company was not outside the norm. Over the years, these figures have come down as more capital has flooded the industry.
• Larger funds – Funds have exploded in size. The book details the impact of this fact on the industry and on founders.
• Networks – The industry was (as still is) highly dependent on who you know, for better or worse.
• Disruption – Even though it invests in disruptive companies, venture capital didn’t evolve until it was forced to because of disruption. Love them or hate them, investors such as Yuri Milner (DST Global), Chase Coleman (Tiger Global), and Masayoshi Son (Softbank Vision Fund) forced the industry to change. It’s likely time for more disruption in the industry.

This book is full of details and information about the industry and the most prolific investments over the last few decades. This book filled a lot of gaps for me, and I highly recommend it to anyone curious about the industry and how it evolved to what we see today.

Today marks the end of my one-hundred-twenty-fifth week of working from home (mostly). Here are my takeaways from week one hundred twenty-five:

• Culture – I spent time immersed in a different culture this week. It was interesting to see the differences in relation to entrepreneurship. Value creation means different things in different cultures.
• Network effects – I’ve been thinking about how high-quality networks have an outsize impact on early-stage entrepreneurship. Ideas and information flowing freely to early founders can be game changing. I’m wondering how to improve the network in Atlanta.
• Research – I spent time this week reading academic research and trying to track down the authors. I’ll spend more time hustling in that effort.

Week one hundred twenty-five was busy. Looking forward to next week.

I caught up with an investor about evaluating early-stage technology investment opportunities. Specifically, I was interested in his process is to get conviction. He went deep and shared things that made sense about timing, technology advantage, etc. And he described an interesting approach to evaluating founders.

He developed a concept that most founders fit into one of a few “buckets.” As he talks to them, he’s trying to figure out what bucket to put them in. He’s looking for founders who fit into a bucket he calls “builders.” This bucket is a mix of visionary and early-stage execution with a unique twist.

Builders can tell you what they believe the world will look like in five years and can get you from zero to one based on a unique insight that others have missed. The magic with this person is that they understand that the first step to a successful company isn’t linear. The first step is nonobvious. They have a contrarian insight on going from zero to one that others haven’t thought about. They also recognize their limitations and will surround themselves with other people who complement their weaknesses. For example, they aren’t master executors and won’t get a company from one to five, so they add execution ninjas to the leadership team.

This investor believes that other founder profiles can lead to success, but based on his experience, builder founders are key to a company having an outsize outcome.

One of the most impactful things for me as an early founder was connecting with other founders—those who had done what I was trying to do, and those who were still attempting to. Some of those conversations were pivotal. They led to key hires, experience sharing, and idea generation. I had access to these people because I was a member of Entrepreneurs’ Organization—EO, as it’s known.

EO, an elite network of high-quality people, facilitates the free flow of information, connections, and ideas. Member companies pay an annual fee. The impact on members is material. Because certain revenue criteria must be satisfied before admission to EO, though, membership isn’t accessible to all founders. Most early-stage companies are excluded from this high-quality network.

Early-stage founders in Atlanta need more free-flowing information and relationships. Some great groups are trying to fill this void, but I don’t think it’s something a centralized group can tackle. I need to think more about how you solve for this, but this void is one of the missing ingredients in Atlanta’s start-up ecosystem reaching its full potential.

I’ve talked to many emerging and established venture capital investors over the last few months. They confirmed that starting a venture capital fund is very much an entrepreneurial endeavor. When funds are first getting off the ground, these partners are no different than any other founder. I’ve heard consistently that there’s no playbook for starting a venture capital firm.

I’ve dug into this, and I haven’t found a playbook. A few programs offer to help emerging fund managers with specific challenges. That’s not a playbook. Many emerging fund managers are relying on word-of-mouth information and figuring things out as they go. Some have the benefit of being coached by seasoned fund managers who help guide them along their journey. But that’s the exception.

I’m not convinced that the world needs more venture capital investors, but this got me thinking. What impact would a playbook have if it were put in the hands of people with a unique perspective who’ve identified high-potential founders or early markets outside the purview of venture capital networks and start-up ecosystems? How would that change the impact entrepreneurship could have on society?

I had independent chats with two people who work remotely full-time, one for a tech company, the other for a non-tech company. Headquarters is thousands of miles away for both people, and they work mostly from home. The tech employee is part of a team working to complete projects but is the only person in his city working for this company. The non-tech worker is an individual contributor (he doesn’t need others to complete his work), but he has coworkers in his city (though he rarely sees them). These conversations were enlightening. The tech person loves his work, but there’s a bit of feeling like he’s on an island (my words, not his). The non-tech worker loves his work setup and wouldn’t change a thing.

I’ve been a proponent of remote work for over a decade. My first full-time hire at my start-up was someone in Europe. She was an A player with my company for seven or eight years and opened my eyes to the quality of talent available remotely. We hired more people over the years in a hybrid model. Some were in-office in Atlanta and others were remote working in various cities worldwide (including Atlanta). I made mistakes managing this hybrid team but learned a lot. The biggest learning was that some roles (and personalities) are better suited to remote work than others. Individual contributors and those who like working alone tend to thrive in this environment.

Remote work is here to stay (in some form or fashion). I think every company must figure out what that means for them and their culture.

Harj Taggar discussed why being a partner at Y Combinator (YC) is so powerful for an investor. He’s done two stints as a partner at YC, so I was curious to hear his thoughts. During his interview, he shared that working with hundreds of companies a year allows a YC partner to learn more, faster, than a traditional venture capitalist can. Learning what works and doesn’t work is accelerated, and YC partners feed those learnings back into the companies—all with a goal of reducing the overall failure rate over time.

Harj’s interview made me think of what a good friend said: the faster you learn, the more successful you become. Harj’s thoughts on YC being a place of accelerated learning, which leads to more success, make a lot of sense. It’s a feedback loop of sorts. The learning is compounding with each YC cohort of founders.

This has me thinking . . . what are other ways are there to create feedback loops for outlier entrepreneurs—those outside the purview of venture capital networks and start-up ecosystems?

The path to success at my start-up was product. We sold automotive products to consumers but didn’t want to buy lots of inventory. (In fact, we couldn’t.) We needed to work with manufacturers and distributors to sell their inventory in their warehouse infrastructure. We knew who the big, established players were—the ones who had the best inventory—but they wouldn’t work with us. No return phone calls, no responses to emails. They had enough business to keep them busy and didn’t want to bother with some pesky start-up.

Realizing we needed to work with partners who needed us, I went to the other end of the spectrum. I found the suppliers who didn’t have as much business and hadn’t adapted to the changing times. Those players embraced us with open arms. We learned from them, and they learned from us. Testing until we identified the optimal way to work with them, we built software to systematize and add scalability. And we provided them with reports detailing where their operations fell short of our expectations so they could improve.

We gained a solid reputation with customers and early suppliers. When we again approached the established players, they were eager to work with us. What had changed? We were no longer an unknown entity doing things differently. We had some street cred. They’d consistently heard great things about us and knew we were growing quickly. By the time our paths crossed again, they knew they needed to work with us because of the weight of the momentum we’d built in the industry. Negotiations with them were easier, too, because other suppliers had told them what they’d negotiated with us.

We ended up winning by thinking like a cheetah: we went after the slower, weaker players in our space first.

If you’re a founder trying to get something off the ground and need others to play ball, consider thinking like a cheetah. (But remember that your objective is different—your goal will be to find someone willing to work cooperatively with you, not someone to eat for lunch!)

Today marks the end of my one-hundred-twenty-fourth week of working from home (mostly). Here are my takeaways from week one hundred twenty-four:

• VC research – I’ve been researching the origins and history of the venture capital industry. Success in venture capital can be random, but sustaining it for a long time requires intentionality.
• Frustration – I ran up against some hurdles that set me back this week. I was reminded to push through the frustration and not dwell on the situation.
• Good people – I spent more time this week with good people I’ve known for a long time. It was energizing and refreshing.

Week one hundred twenty-four was trying. Looking forward to next week.