MONEY TALKS by Andrew Waitman
Great start-up executives see the world through a lens of conventional business rules and constraints, to be sure, but they also see unique opportunity, unusual direction and paint their success in ways that others are unable or unwilling to do.
Portrait of the artist as entrepreneur
From SCAN's Print Edition
What makes an artist like Renoir, Cezanne, or Monet great? In this column, I will try to paint a portrait of the people who make start-ups great. I will attempt to illuminate how the venture capitalist tries to identify the great artists of the start-up world.
In the last column I discussed the importance of pattern identification and simple rules of thumb to reduce complexity when selecting successful start-up companies and teams. Often a venture firm will choose to invest in a start-up with a substantial portion of the team yet to be recruited. Selecting the best people to bring into the tent is a crucial part of the value creation process to improve the odds of success.
Successful venture investing, which includes team selection, is more art than science. What do I mean by this statement? Art is chess. Science is checkers. (In 2007, University of Alberta professor Jonathan Schaeffer "solved" or identified the relevant solution space out of 550 billion billion possible arrangements.) Art shares with science a basic set of rules, conventions, or heuristics that require formal training, knowledge and skill through practice to master. However, unlike science, it is an unbounded opportunity for creativity, imagination and unconventional possibilities. To say something is art more than science is to suggest it has a vast "opportunity" space, infinitely open for new insights, expressions, directions and re-evaluation of the current conventional understanding.
Sometimes, the best explanation of ‘great’ is simply to point to it, rather than to attempt to deconstruct its attributes. In the past few years, Celtic House Venture Partners has invested in these six start-ups in the Ottawa area: Third Brigade, Diablo Technology, DNA13, Moda Solutions, TrialStat and, most recently, Overlay.TV. Each of these start-ups is run by a first-time CEO. Each of their founding teams has added executives and board members recruited with Celtic's introduction and influence. While they still have to prove they are ‘great’ investments, they have already jumped a high hurdle simply by securing Celtic House investment. Collectively and individually they share the attributes that we at Celtic consider necessary for success.
If you were to study these six companies and the more than seventy individuals who make up their respective boards and executive teams, you would find fascinating differences in personalities yet vast consistency in many attributes.
What do these individuals share? Many of the ‘great’ attributes are paradoxical. For example, we seek individuals with humility yet remarkable self-confidence. We want individuals who are ruthless competitors and who don’t wilt in response to brutal competitive tactics, but at the same time, treat people respectfully, decently and even kindly. We seek people who don’t follow or listen to conventional wisdom, yet seek good advice.
We identify highly autonomous, strong-willed individuals who can make decisions on their own yet know how to contribute toward a successful team. We look for people who can and do take risks though not recklessly. We want people who are ambitious and who want to make a great deal of money, but not so much that they are unable to share the wins with others. We seek people who are extremely knowledgeable about their domain yet recognize the limits of their knowledge and remain curious and committed to continued learning and understanding.
We find high-profile, highly successful executives and board members who can bring recognition, credibility and connections but don’t dominate meetings or distract from the goals and objectives of the start-up. We like people who are creative, imaginative and inspire others, yet we recognize that scale success is driven in the trenches day-by-day, with relentless focus on successful execution and tactics.
The list of ‘great’ attributes, both obvious and paradoxical, can go on and on. Great start-up executives bring their unique mosaic of skills, personality, ambitions and idiosyncratic character to the start-up. What makes the great artists great is that they take the basic set of rules, knowledge and esthetic understanding of their time and push forward into new frontiers of expression and understanding. They explore something untouched, unappreciated or just unknown prior. They show us a new, different and often better way.
The great start-up executives and teams do the same. They see the world through a lens of conventional business rules and constraints, to be sure. But they also see unique opportunity, unusual direction and paint their success in ways that others are unable or unwilling to do.
Recruiting the right people to your start-up has been talked about so often it has become a cliché. However, it should be the one area where you spend the most time, energy and effort in the early stages of a start-up. Anyone you bring into the tent, whether investor, board member or employee, should be carefully vetted.
In the next column, I will begin to explore the journey of start-ups and identify some elements that indicate potential strengths and weaknesses for the scaling of venture success.
Andrew Waitman is managing partner of Celtic House Venture Partners, specializing in early stage investments in high technology companies.