I’m a huge fan of automation. My start-up was able to scale because we cracked the code of creating repeatable processes and automating them to gain massive efficiency. I’ve chatted with a few founders recently who also embrace automation—but too early. These companies are still trying to find product–market fit, but they’re automating some or all interactions with the customer. When I hear this, it’s a huge red flag.

In the early stage of a company’s life cycle, you’ve identified a problem and built a solution to it. You don’t really know how good a job you’re doing solving the problem (unless paying user growth is skyrocketing). You usually need to let users play with the solution and get feedback. The feedback usually leads to product improvements. This cycle repeats until your solution is so great you’ve reached product–market fit.

Getting feedback from the customer is a key part of the cycle. Sometimes a customer will casually write something that, when double-clicked on, leads to a eureka moment and critical product improvement. If you automate feedback collection in the early days, you run the risk of missing the opportunity to double-click on seemingly small pieces of feedback. Said differently, you run the risk of missing your eureka moment that leads to product–market fit.

If you’re early in your founder journey, consider deferring automatic feedback collection until later and making time to talk with customers/users. One conversation with a customer/user could change the trajectory of your company!

One of the traits I look for in founders is grit. Building something from scratch is hard. Lots of doors will be closed in your face, and you’ll hear “no” a lot (or nothing at all). Founders need to be able to power through all that and move the needle forward. When things look bleak, that’s when founders separate themselves from others by pushing through and finding a way.

What matters just as much as grit? The why behind it. Founders may have to run through walls. What’s fueling them so they can do it? Where is their passion coming from? When you understand this, you’ve really begun to understand the founder. You understand how they’re wired and why they’re doing what they’re doing.

When I spend time getting to know founders, I learn the why behind their grit when I hear the childhood memories forever etched in their brains. The insecurities (we all have them), fears, and other factors that drive them.

Grit is required, and understanding what’s fueling a founder’s grit is important too.

Today marks the end of my one-hundred-thirty-eighth week of working from home (mostly). Here are my takeaways from week one hundred thirty-eight:

• Truth – This week I thought about truth, which led to my post yesterday. Seeking truth isn’t something that most people do. I believe it’s one of the traits that separate the good from the great. Seeking truth allows you to make better decisions.  
• Networks – I started to think about network nodes. How can you create more nodes to increase the free flow of information at early-stage start-ups and the people who support them? Can creating network nodes increase early-stage network quality?
• Non-consensus  – This week I came across two great founders. They’re not in the right VC/start-up networks, and the problems they’re solving aren’t obvious (but they are painful). These founders are non-consensus and, in my book, great founders to back. They represent an opportunity for non-consensus alpha.
• Thanksgiving – Looking forward to time with family and friends!

Week one hundred thirty-eight was a focused week. Looking forward to next week and the Thanksgiving holiday!

Feedback can be tricky for some people. Some people are anti-conflict, so they avoid providing feedback to someone who may not be receptive to it. Some people don’t want to hear or see things that don’t fit the narrative they believe. I think about feedback differently. I try to focus on seeking truth vs. supportive feedback. What’s the truth in a situation? Do customers hate or love this product? Am I doing a great or awful job? I want to know the truth so I can make the best decision about whatever situation I’m in. I try to offer truth (or what I believe to be true) to others so they can make the best decisions they’re able to make.

The unfortunate thing about truth is that it isn’t always appreciated in the moment. It can cause awkwardness or even tension. It can strain relationships and change how people perceive or interact with you. Said differently, being truthful won’t make you Mr. or Ms. Popular. But being truthful doesn’t give you an excuse to be a jerk. Truth can and should be delivered respectfully.

As I’ve studied people who’ve accomplished the impossible or achieved outsize success, I’ve found that they’re often truth seekers. They seek, and offer others, reality. This has led to periods of being perceived negatively or having strained relations with others for some of these folks. But I believe that soliciting and accepting truth from others improved their decision-making. People who were patting them on the back for a genius decision may not have realized that hearing a painful truth may have led to the genius decision.

I try to be truthful with others instead of giving feel-good feedback—especially the founders I support. It doesn’t always make them feel great, but I do it in a respectful way I hope they can appreciate. In the end, I hope the truth helps them make better decisions so they can reach their full potential.

I recently chatted with a friend who had a very strong opinion about something. I respected his perspective, but I knew a material fact that weakened his argument. Unsure whether he knew the fact, I shared it with him. I wasn’t sure how he’d respond, since he’d expressed himself so passionately. To my surprise, he acknowledged that he didn’t know this fact and said he wanted to rethink his position and get back to me. His response reminded me why we’re friends: he’s an open-minded person who seeks the truth.

Some people view changing your position as weakness. I disagree. New information can warrant reevaluation. If you change your mind given new facts, that’s not a sign of lack of conviction. It’s a sign of rational thinking and decision-making.

Some of the most recognizable private companies usually don’t allow individuals to invest. The interesting thing is that individuals are often the most passionate customers or believers in the company. A well-known private company worth tens of billions of dollars has a die-hard fan base of individuals who don’t have access to investing in it. Only venture capital investors or others close to management get the opportunity to invest.

A founder I chatted with decided to do something about this. He created a petition for individuals to sign to express interest in investing. Each person had to indicate a dollar amount they wanted to invest. He figured that if he aggregated $5 million in commits, he’d be lucky and have a strong case to present to the company’s management. Far exceeding that goal, he got close to $40 million in commits from individuals. The strong showing blew his mind and got the attention of company management. They like the idea of letting passionate individuals invest through a single entity on this founder’s platform.

Time will tell if this deal gets done, but it clearly highlights the massive enthusiasm individuals have about investing in private companies. A lot of capital wants the opportunity to invest in high-quality early-stage private companies. And there’s ample demand by such companies for the capital. The traditional matching process is inefficient and can impede the flow of capital. I like the petition experiment this founder is running and hope it leads to something bigger or a blueprint others can follow.

I met with an idea-stage founder who asked me about fundraising—specifically, when’s the best time, very early on, to start fundraising? He still has a full-time job, and he has a nontechnical cofounder (and he’s nontechnical himself).

The answer is, it depends. Every founder’s situation is different. If you have the right relationships with venture investors, you may be able to raise with just an idea and PowerPoint. If not, think in terms of risk. Idea-stage investors are comfortable with risk, but not unnecessary risk. For example, execution risk is a big one. Ideas are great, but execution separates founders from everyone else. Can the team build the solution? Teams that don’t include a technical leader are viewed as having high execution risk and are less likely to get funded. The next thing investors consider is the market. Is this a painful problem? Is the pool of people experiencing this pain big enough to build a large company around? Painful problems in markets that have the potential to be large are desirable (to investors) because the market demand for a solution can catapult a company to success.

The founder who asked me about this has a great idea and a way to mitigate the market risk. He’s got large potential customers lined up who are willing to sign letters of intent because this problem is so painful. He’s working on the execution risk now by trying to find a technical cofounder.

It’s never too early to raise capital for an idea, but the right time depends on your situation.

Tech layoffs have been top of mind for many and a topic of conversation with my founder and investor friends this week. Anytime anyone loses their job as part of a big layoff, it’s distressing. I recognize the real pain of anyone in this situation and sympathize with them. Also, though, I’m a big believer in playing the hand you’ve been dealt instead of dwelling on the hand you didn’t get. I try to look at situations that don’t seem great on the surface and think about nonobvious silver linings.

One unintended positive from these layoffs is the creativity they’ll spur. When people have ample resources, they have less incentive to be creative. If you’ve got the budget for a project, you can spend your way to completing it. When resources are scarce, people get creative. When you don’t have the budget, you start thinking of scrappy ways to check the box at minimal or no cost.  

I think the layoffs will lead to more people solving problems in creative ways and those solutions turning into companies. Said differently, layoffs will lead to more entrepreneurship.

If you find yourself unexpectedly short on resources, don’t give up . . . keep going, and embrace creative ways to accomplish your goal. Creativity could lead to something life changing.

Earlier this week, I shared a story about a venture capital fund having LPs renege on their capital commitments after signing paperwork. That was the first time I’d heard this from a VC fund manager I know personally. I assumed it was an exception rather than the norm but decided to do some digging.

Yesterday, Forbes published an article about this exact topic and why it’s happening. You can read it here. The article alludes to more established and larger venture capital funds being safer bets for institutional LPs than emerging funds are. I don’t agree with the connection this article makes that institutional LPs are investing now in established funds instead of in emerging funds. Institutional LPs don’t usually invest directly in emerging funds. Rather, emerging funds’ investors are usually family offices, high-net-worth individuals, funds of funds, and maybe some endowments (depending on their size).

I suspect that the LPs that emerging mangers target are being affected by the macro environment more than established funds are. And I suspect they’re trying to avoid selling assets at depressed prices to meet their commitments to emerging funds, or venture capital now represents too big a share of their overall portfolio (given that other asset types are more depressed than venture), or they’re gun-shy because of a looming recession and want to conserve cash.  

LPs reneging might not be the norm in venture capital, but it’s happening more than I realized and likely disproportionately affecting emerging managers. Emerging managers play an important role in getting capital to founders outside the traditional venture capital network and providing alpha to their investors. I suspect the savvy LPs will take advantage of this period and back high-potential emerging managers who will back non-consensus founders who generate outsize returns.

Today marks the end of my one-hundred-thirty-seventh week of working from home (mostly). Here are my takeaways from week one hundred thirty-seven:

• Focus – In my downtime, I’ve been learning about society’s inability to focus. I read about a new habit that helps with focus and other things. I tried it this week, and the early results are good. I plan to keep up this habit for a month before committing to it for longer.
• Packed schedule – This week was packed with meetings, including a half-day one. I was intentional about scheduling time to focus, which worked out well.
• Paying it forward – I spent half a day this week learning more about three early-stage businesses and providing feedback. These types of feedback sessions can be life changing for entrepreneurs, which is why I enjoy doing them. I remember this phase well and want to do for others what was done for me.  
• Pitch – I’ve been honing my pitch with friendlies who are aware of the problem/industry. This week I pitched non-friendlies who don’t know the space. It went over well. Still some things to improve, but it’s getting better.
• Networks – This week was a reminder to share what you’re doing. You never know who knows whom.
• 2023 – I’m starting to think about next year and what habits I want to stop, start, or continue.  

Week one hundred thirty-seven was a busy week. Looking forward to next week!