How do you Pick your Partners?
The Three Amigos

How do you Pick your Partners?

As a child of the 80s I learned everything I need to know from movies. I must have watched The Three Amigos dozens of times. How did Dusty Bottoms (Chevy Chase), Lucky Day (Steve Martin) and Ned Nederlander (Martin Short) decide to be partners? The heroes formed a team when they came together to save a beautiful young woman and her village from El Guapo. They also needed the money because their last few silent movies had bombed so maybe it was just out of simple necessity. It did make for a gloriously funny movie.

As an adult navigating the world of corporate, startups, and VCs I have been involved with and advised several founding teams. There is nothing more critical than the alignment and shared vision of a founding team. If everything is working well these relationships can often be the basis for multi-decade commitments. First lesson of course, is GO SLOW. Don't move fast to assemble a team until you know how the parts fit together and how to appropriately split roles & responsibilities and the commensurate value splits that logically follow that. Also know what you value and what the team values. Raw intelligence, pedigree, and previous successes are important as you want to have talented partners. Above all I recommend optimizing for grit, integrity, honesty, openness, curiosity, transparency, and a growth mindset alongside of the measurable skills.

When it comes to picking partners in investment management the qualities have commonality but each asset class has different orientation. The qualities needed to be a great FX trader, private equity professional, crypto quant et al. require different core disciplines. Are your trades short or long duration? Is the answer grounded in quantitative or qualitative measures? Is the investment passive or active? My focus is venture capital as a professional investor. Make no mistake venture capital is not easy and successes are easily amplified by social media, but failure is often abstracted away. Interpreting the future and growth potential of an industry is hard. Then getting the access to a great new company in that category at a reasonable valuation is harder. Valuations are more a function of supply and demand than revenue multiples. If everyone wants to pile into a deal it will move to irrational terms instantly or vice versa, many founders lament not finding a lead and get crowded out of venture funding because in reality it is still very inefficient for both parties involved.

With all of the new money flooding into the space from the top with big firms like Tiger Global going deep into private investing and Greylock going further downstream into seed investing as well as operators going bottoms up on AngelList. To say nothing of token drops, ICOs, SPACs and other liquid vehicles. With all of this industry change and perhaps accelerated by a post-COVID era priority realignment we see several big players exiting the stage. Roger Ehrenberg, Founder Partner of IA Ventures just announced his "retirement" and sites his co-founders as critical to the firm's success, "Our symbiotic relationship, grounded in safety, trust, truth-telling and the relentless quest for improvement created the dynamic tension necessary to succeed at a high level."?

This is a long preamble, but please follow me to the point of this blog post, picking your general partners. Whether you are setting up a venture syndicate, rolling fund, or institutionally backed VC fund, know your partners on many different dimensions. Below is a list of what I consider. I appreciate your comments and feedback to make this list better.

Investing Experience

  1. Describe your investment background across asset classes.
  2. What is your ideal portfolio composition now? What about 20 years from now?
  3. How much direct private company investment experience do you have??
  4. Roughly what % have gone on to raise additional capital? Any acquisitions or IPOs?
  5. Describe your risk tolerance and approach to margin of safety / risk management.
  6. Have you led investment committees / written deal memos?
  7. Have you ever lost money on an investment? How did that make you feel??

Business Acumen

  1. Have you ever built a company?
  2. Launched a product?
  3. Have you done sales? Describe your sales style (relationship, technical, persistent).
  4. Can you build 3 statement financial models??

Technology Acumen

  1. What is your favorite emergent technology? (i.e. AI, blockchain, CRISPR, 3D printing)
  2. Are you able to code / manipulate data? (beginner, medium, expert)
  3. Describe how much experience you have with product teams.

Mentoring / Startup Nurturing

  1. How do you find founders to invest in? (meetups, Linkedin, personal intros)
  2. Do they see you as a peer, advisor, coach?
  3. Please provide 3 founder references that understand you well and the type of contributions you have made to their company.?

Fundraising Experience

  1. Have you ever raised money for a private company, emergent growth company, a fund?
  2. How many personal LPs do you directly feel comfortable asking for $100K?
  3. Do you have experience pitching institutional investors?

Creativity / Uniqueness

  1. What is your most proud accomplishment?
  2. What differentiates you from other candidates we are speaking with to join our team?
  3. What do you believe that no one else believes, but you are pretty convinced?
  4. What do you do for fun?

Hustle / Commitment

  1. Who is your favorite VC? What do you admire about them??
  2. What would your spouse / partner say about you doing this in your free time until we can make this a full-time opportunity?
  3. What has been your biggest professional challenge to date? How did you overcome it?

Personal Branding

  1. How would you describe your public facing persona??
  2. Do you have experience writing blogposts?
  3. What is your favorite platform? Twitter / Github / Reddit / LinkedIn? Why?
  4. List professional publishing / book / certifications.

Heather Kosiek

Strategic B2B Product Marketing & GTM | Partnership Activation | Demand Gen

3 年

Very helpful article, thanks for sharing.

Adam Slackman

SVP of Revenue at Markerr | Growth Leader | Gen AI

3 年

A plethora of great info here

I’m here for the three amigos ????♂?

Great post

Thomas DelVecchio

Investor & Advisor to Enterprise Technology Companies | founder, Fc Centripetal

3 年

Very good perspective & approach. Thank you for the candor.

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