"In looking for people to hire, look for three qualities: integrity,
intelligence and energy. And if they don't have the first, the other
two will kill you."
-- Warren Buffett
I was having dinner with a good friend the other night and we began to talk about ways to deal with the increasing pressures and velocity of today. We were talking about my recent post on burnout. He agreed that the current late stage of the business cycle increases demands on the average person but added that the intrusion of instant communications (Blackberries, IM, etc) exacerbates everything. You can’t wind down and it becomes more difficult to escape the rat race.
My friend is one of the most productive people I know. He gets more done by Tuesday than most people do by Friday. I probed him for a nugget or two on how to manage the 28 hour day. Instead of a time management strategy, he surprised me with one simple piece of advice:
“ Life is too short to deal with assholes, so I don’t"
As I reflected on his advice, I realized how much this resonated with my world. There is no shortage of stress, surprises or setbacks in the life of an entrepreneur or venture capitalist. Over 50% of VC deals end poorly and the ones that succeed usually dance with death at least once or twice. While this is not enjoyable for either entrepreneur or VC, it is the interpersonal behavior that makes life bearable or miserable for all involved.
As I look back at the variety of experiences I’ve had, I see several themes or characteristics that emerge. I’ve had successful investments like FeedBurner where the management team was phenomenal to work with. I’ve also had situations where, despite the success, it was contentious to the very end. I’ve also had less than successful investments, like 800.com, where the team (led by CEO Greg Drew) worked ethically, hand in hand with the investors to find the best solution for all.
What are the early signs that your partner (VC or entrepreneur) will be easy to work with or a potential nightmare? Looking backward, I’ve come up with several guide posts:
1) Are communications open, transparent and proactive or are they reactive and filtered? Good CEO’s communicate frequently and openly with investors and give them the good and the bad. They take responsibilities for poor decisions and identify potential icebergs well before others see them. Poor CEO’s filter the information that flows up from the ranks. They continually spin bad news (only after having to divulge it). They suppress comments from the rest of the management team and make comments/threats to them like “are you committed to being a member of this team or not…”. Both sides know when the other is being insincere and less than forthcoming.
2) Do they help others or are they always taking? Good CEO’s realize that building up goodwill is critical for future success. Opportunists are always trying to figure out how to suck more out of others. Look at their behavior and see how often they are helping others advance, especially when there is nothing in it for him/her.
3) Is the leadership in the game for a greater good/purpose or solely as a mercenary? When you ask a CEO what motivates him/her, will he/she say “to make a lot of money” or “to change a part of the world”? Investors are playing with fire when they back leadership that is looking primarily to strike it rich in two or three years. They are driven primarily by profit motive and will either begin to self-optimize or head out when things don’t go as planned. This is not to say that managers don’t burn out or lose conviction in realizing the greater good, but how they interact and respond to crisis illustrates a lot.
4) Does the CEO (or VC) strive to grow the pie or simply to enlarge his/her piece of it? If the different sides continually try to recut the deal or comment on how they are getting screwed, you will have trouble on your hands. Should things not go well, the in-fighting will make the external developments pale in comparison. CEO’s or VC’s that portray themselves as “victims” will make very poor partners.
5) Does the CEO (or VC) look out for the other key team members or will he/she self-optimize his/her own position at each point in time? Early on, you get a taste of this when dilution from a new financing occurs. Some CEO’s will take less for themselves so that others on the team are taken care of. Others will spend very little time discussing the impact of the event on others.
6) In the end, do you trust your partner or are you plagued by suspicion? Your gut is very accurate on matters like these. Does it question your own behavior/actions or do you worry that others’ key actions are going on behind your back? If you find either your partner’s responses evasive or that you are being evasive, then you’ve got trouble brewing.
A good partner is rewarding to work with and you are appreciative of their commitment and value-add. In venture capital & entrepreneurship, whom you back or hire will amplify the good or the bad. Good CEO’s attract top talent and deceptive ones repress it. Both types are competitive but one sees a broader horizon while the other simply looks at his/her own path.
Julian Robertson, the legendary founder of the Tiger hedge funds, was maniacal on the importance of management. “Have you done your work on management?” He’d grill subordinates on all aspects of management ranging from where they went to school to actions they had taken to details about their lives. He wanted his team to know everything there was to know about the people running the companies they invested in.
Life is too short to deal with assholes. Be very careful with how you pick partners to work with. It is very difficult to stop the cascade of misery once you start down the path of “overlooking” certain personality flaws or “explaining away” certain aberrant behaviors. Over time, work towards creating an asshole free environment.