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#BeYourOwnMentor – Independent Study in Early Stage VC

Every day is a journey, and the journey itself is home.
– Matsuo Basho
Big new ideas take years to develop. People make fun of you along the way. Stick with it.
– Chris Dixon
Adapt what is useful, reject what is useless, and add what is specifically your own. 
– Bruce Lee

Preface

Around March 11, 2016, Maya Horgan Famodu (@mayahorgan) sent me a text . . . she had agreed to sit on a panel at a conference at HBS to discuss the landscape for early stage venture capital and startups in Africa, and she was worried that she did not know enough about being a venture capitalist. Maya is the founder of Ingressive, a social network and venture fund that invests in early stage African startups.

I offered to create an outline that she could use to teach herself what she needed to know. Why? I have been compelled to do that for myself since December 2008 when I started this journey in the midst of the financial crisis, and I figured it could save her and others like her some time.

Since then I have shared that outline with a few other people . . . Most recently with Samantha Wong (@holasammy) – she runs investments operations at Blackbird VC in Australia, after she stopped by to chat over coffee at KEC Ventures on January 24, 2017. We had an interesting conversation about a range of topics, and at the end I told her about this outline saying I’d send it to her  . . . perhaps she’d find something useful. Her response after she returned home to Australia and finally had a chance to read through the outline took me by surprise.

Here’s a portion of her email;

“How widely can I circulate this (with attribution) eg to my team and others in my network? Have you published this as a blog post – if not, why not?
I would feel like a fraud just copying & pasting the links. It’s truly an amazing resource.”
I wrote her back and promised to publish the outline. So, this is it . . . I am keeping my promise to Samantha. I have made only a few edits to the email on which this is based, for added background and clarity. Weird formatting issues are related to problems with “copying  + pasting” stuff from gmail to WordPress.
I hope other emerging early stage venture capitalists find it useful . . . especially in situations where they lack easy access to mentoring from more experienced VCs. Traditionally, VC has been an apprenticeship business. And where possible, I think mentoring/apprenticeship is the best way to go . . . but, I also believe that . . . “if no one will help you, you must do it yourself.”
I am still working through some of this stuff myself. If you discover a book or blog post you have learned a lot from, please share it in the comments.
This is that email . . .

Re: Independent Study – Venture Capital + Startups: V10.0

Here are some suggestions to help you craft an Independent Study in Early Stage Venture Capital Investing. Consider this a mere starting point . . . The basic concept is that this could form the basis for a two-semester graduate-level seminar for budding venture capitalists. My expectation is that they could establish a fund after taking a class based on these recommendations – no, there are no fundraising tips or trade secrets.
I do not suggest books on topics for which professionals or outsourced service providers can be hired to set things up. It’s not that those topics do not matter, but rather that, in my opinion, they are not the activities that help a VC create the most value for a fund’s limited partners. So there’s nothing here for which a lawyer’s advice or an accountant’s advice is the way to go, for example. Also, no pointers on the operations side of running a venture fund.
I often post #Bookfies of books I am reading, or have added to my reference library, on Twitter and Instagram, if you want other suggestions.
Pointers;
  1. You do not have to progress through this linearly, you can jump around from one idea to another or even explore more than one topic at a time. You do not need to read the books from cover-to-cover either; you need to be able to implement “Just-In-Time” learning
    • That kind of learning is not the same as how you’d learn if you were taking the course in a college class, for example. Don’t get too bogged down at any point. You can always come back to material that is not clear at first. Also, you can ask people who understand that topic better than you do to help you understand it more fully.
  2. You should probably read the blog posts first, then read the books, and then go back to the blog posts and so on until you feel you understand a concept well enough to move on to another.
  3. Write. Write. Write, in order to sort through the concepts and ideas you are trying to understand. Apply what you are learning . . . Pretend you were making an investment, and then apply the topic you are studying to that investment. Write investment memos to explain why you think an investment makes sense. Here’s a link to the Deal Memo Roelof Botha at Sequoia Capital wrote to his colleagues to urge that they invest in YouTube. 
  4. This is just a starting point . . . The venture capitalists I admire most are always learning. To be a good VC you have to start by being committed to lifelong learning, how else could you connect the dots and invest in startups that will change the future?
  5. I like reading footnotes, endnotes, bibliographies, and references . . . That’s how I discover other sources and gain a sense of how the author built their own base of knowledge which then helps me decide what other sources I might consider.
  6. I like the idea of small groups of emerging venture capital managers forming mentoring circles and teaching themselves through group work.
  7. This article by Matt Turck is for anyone trying to find that elusive first job in venture capital; Playing “fake VC” (or the portfolio approach to getting a job in venture capital).

Tips on Learning How To Learn

  1. How I Rewired My Brain to Become Fluent in Math
  2. Some Tips for Reading Difficult or Challenging Material
  3. A Brief Guide To Learning Faster (And Better)
  4. How To Drink From A Fire-Hose Without Drowning – Successful Study Strategies in Medical School Courses
  5. Study Tips from the Perspective of a Medical Student
  6. Reading a Textbook for True Understanding
  7. Active Reading: Comprehension and Rate (Advanced, with links to other material.)
  8. How To Read: 7 Simple Reading Strategies To Help You Read More Effectively
  9. How to Effectively Read and Implement Non-fiction Books (Note the subtle differences and similarities btw reading a textbook and reading a non-fiction book.)
  10. How To Read A Scientific Paper Seriously

Understanding The Business of VC

  • Books
    • Creative Capital
    • The Startup Game
    • The Business of Venture Capital
    • Zero To One
    • Marc Andreessen’s Blog Archive As An EBook
    • The Innovator’s Dilemma, The Innovator’s Solution, and The Innovator’s DNA. The Creator’s Code is a good complement to The Innovator’s DNA.
    • The Disruption Dilemma
    • Superforecasting: The Art and Science of Prediction
    • The Hard Thing About Hard Things
    • Crossing The Chasm and The Gorilla Game
    • High Output Management and Only The Paranoid Survive
    • Fooled By Randomness, The Black Swan, Antifragile, The Bed of Procrustes (Advanced Reading, okay to read after reading everything else.)
    • Advanced Reading
      • Technological Revolutions and Financial Capital
      • Doing Capitalism in the Innovation Economy
      • Thinking in Systems
    • Moneyball: The Art of Winning An Unfair Game
    • The Intelligent Investor – I believe Venture Capitalists are closet value investors.
      • A Reexamination: Can Venture Capitalists be Value Investors?
    • Venture Deals
      • Passion Capital’s Plain English Term Sheet
      • Also, this compilation of my blog posts on term sheets might help.
    • Investments by Bodie, Kane, and Marcus – Advanced Reading, worth the effort to gain an understanding of financial markets and a basic understanding of modern portfolio. This is not essential. Do not buy it brand new.
      • Along the same vein; Narrative and Numbers, Investment Philosophies, and The End of Accounting
  • Articles, Blogs
    • Capital Economics – How do VC’s think about what they should invest in?
      • Demystifying Venture Economics – Part I
      • Demystifying Venture Economics – Part II
      • Demystifying Venture Economics – Part III
      • Demystifying Venture Economics – Part IV
      • Demystifying Venture Economics – Part V
    • How Venture Capital Works
      • Power Laws in Venture
      • Power Laws in Venture Portfolio Construction
      • The Babe Ruth Effect in Venture Capital
      • Three Core Principles of Venture Capital Portfolio Strategy
    • All Revenue Is Not Created Equal: The Keys To The 10x Revenue Club
    • The VC Struggle – Psychology of A VC and How To Take Advantage of It
    • First Round’s 10 Year Project: What They Have Learned After Pioneering Seed Stage Investing 10 Years Ago
    • Calculate the Total Addressable Market (TAM) – PDF
    • Understanding Power Laws and VC
    • The Rise and Fall of Great Venture Firms – Part 1
    • The Rise and Fall of Great Venture Firms – Part 2
    • Marc Andreessen’s Blog Archive As An EBook
    • Should Startups Focus on Profitability or Growth?
    • The Dangerous Seduction of the Lifetime Value Formula
    • Anything written by Andy Rachleff
    • Tren Griffin’s Blog Posts about VC and Investing
    • Anything about Charlie Munger, Warren Buffett; E.g. Psychology of Human Misjudgement, Charlie Munger: The Complete Investor
    • Everything written by Warren Buffet, Charlie Munger, and Howard Marks of Oaktree Capital on decision-making and investing
    • As much of Michael J. Mauboussin’s work as possible
    • I recommend Bill Gurley’s blog “Above The Crowd“
    • Other blogs you should read frequently; Paul Graham, Fred Wilson, Albert Wenger, Brad Feld, Jerry Neumann, and David Teten. Chris Dixon and Naval Ravikant no longer blog often, but you can find them on Twitter and as guests on various podcasts. The Andreessen Horowitz blog should be on your frequently read list of blogs too.
    • Subscribe to the email newsletters from CB Insights, Mattermark and Y Combinator.
    • ValueWalk’s Behavioral Finance Resource Page – learn to keep your biases from impairing your decision-making as an investor.
    • Aswath Damodaran’s blog is worth reading to get a sense of how a public markets investor sometimes thinks about valuing startups as they consider going public, or before that. For example his blog posts about Uber: here,  and here. The latter coming after Bill Gurley’s rejoinder to the first post.
Angel Investing
Note: Many VCs started out as angel investors, and then built upon their success.
  • Angel Investing – David Rose
  • What Every Angel Investor Wants You To Know – Brian Cohen

Documentaries

  • The Marathon de Sables. There’s a clip on YouTube.
  • The Barkley Marathons: The Race That Eats its Young.
  • Stretch And Bobbito: A Film About Radio That Changed Lives
  • Something Ventured
  • Jiro Dreams of Sushi
  • Joan Rivers: A Piece of Work
  • Enron: The Smartest Guys in The Room
  • American Experience: Henry Ford
  • Freakonomics
  • Burtz’s Buzz
  • Somm
  • Food, Inc.
  • Downloaded
  • The Director
  • Print The Legend
  • Once In A Lifetime
  • Standing In The Shadows of Motown
  • Ayn Rand
  • The Call of The Entrepreneur
  • Dogtown and Z-Boys
  • Beer Wars
  • Steve Jobs: One Last Thing
  • Startup.com
  • We Live In Public

Learning To Assess Startups & Their Business Models

  • Books
    • The Startup Owner’s Manual
    • The Lean Startup
    • Business Model Generation and Value Proposition Design
    • Lean Customer Development
    • Design Thinking: New Product Development Essentials from PDMA
    • Sprint: Solve Big Problems and Test New Ideas in Just Five Days
    • Traction
    • Buyology
    • The Founder’s Dilemmas
    • Hooked
    • How To Build A Startup – Is a collection of lectures from CS183b which was taught by Sam Altman at Stanford University in 2014. Sam Altman is President of Y Combinator.
  • Articles, Blogs
    • The 11 Risks VCs Evaluate
    • An Open Letter to YC Founders on Fundraising
    • Overcoming The Market Size Objection
    • Question Everything – My Remarks at FOCUS100 2014
    • All Revenue Is Not Created Equal: The Keys To The 10x Revenue Club
    • Evergreen Project: The Power of Network Effects, Why They Build Such Valuable Companies, and How To Harness Them
    • Lean Customer Development: Build Your User Base With These Human Behavior Hacks
    • 74 Articles And Books That Will Make You A Great Product Manager
    • Economic Moats
      • Revisiting What I Know About Network Effects & Startups
      • Revisiting What I Know About Switching Costs & Startups
      • Revisiting What I Know About Intangibles & Startups
      • Revisiting What I Know About Efficient Scale, Cost Advantages, & Early Stage Technology Startups
      • Case Study: Fab – How Did That Happen?
      • “Liking” Facebook’s Business Model – The #EconomicMoats Remix
      • Economic Moats (Presentation Deck)
      • Evergreen Project: The Power of Network Effects, Why They Build Such Valuable Companies, and How To Harness Them
    • Investing in The Unknown and The Unknowable – add this to the advanced reading category.
    • Pitching
      • Lessons From A Study of Perfect Pitch Decks
      • The Art of Enchanting Investors
      • In Defense of The Deck
      • User Manual: The Early Stage Startups I want To Hear About Most in 2017 and 2018 – my attempt to explain what I look for in startups as I am assessing them for a possible investment by KEC Ventures.
      • Anything written by Nancy Duarte
      • Building Financial Models: Taylor is great.

Assessing People and Teams

  • Books
    • Influence
    • Thinking Fast and Slow (Advanced Reading, okay to read after everything else.)
    • To Sell Is Human
    • Creators Code
    • Originals
    • The Success Equation
    • Think Twice
    • The Coaching Habit
    • Leading, The Real Madrid Way, Quiet Leadership,
    • Brilliant Orange
  • Articles, Blogs
    • 6 Things I Have Learned About Building High-Performing Teams
    • Notes On Strategy; What Can We Learn From Religious Leaders About Building Early-Stage Startup Culture?
    • What’s the Second Job of a Startup CEO?
    • John Kotter’s Required Reading
    • Marina Gorbis’s Required Reading
Resources for Managing Founder Anxiety and Depression: This is a topic I personally care about more than anything else, because of my experience watching my mom build a number of small businesses from scratch in northern Nigeria. That was before she started a school in our garage in 1986 . . . She’s been doing that since, and has now educated hundreds of kids who have gone on to work all over the world. I know the physical and emotional tolls that entrepreneurs face. I am always looking for new resources to add to my list.
  • 60 Podcasts To Make You A Well-Rounded Entrepreneur in 2015
  • Product Hunt Tackles Startup Founder Depression
  • SoundCloud – The Reboot.io Podcast with Jerry Colonna

Negotiations – With Other Investors & Potential LPs

  • Books
    • Negotiation Genius
    • Getting To Yes
    • Difficult Conversations – important both for discussions with investors, but also for when you have made an investment and need to start monitoring that investment.
    • How Did That Happen?
    • Never Split The Difference
  • Articles, Blogs
    • Read Their Minds – Prepping for Investor Q&A – you should have anticipated and already answered every question that an investor would ask before you meet them – those you can think of. A “best practice” is to have an FAQ document that you can email to investors who express high interest after you meet them. This should be updated as you encounter questions you have not previously thought about.
    • Control The Negotiation Before It Begins
    • Negotiation Techniques – Items under the “negotiation techniques” tag at the Harvard Law School Program on Negotiation.
    • Take it, or Leave it: The Only Guide To Negotiation You Will Ever Need
    • More stuff at https://innovationfootprints.com/hack-your-startup/negotiate/ but the stuff I have not included on this list pertains mainly to startup term sheets . . . The topic Venture Deals covers.

Career Reflections

    • Man’s Search For Meaning
    • How Will You Measure Your Life
    • The Alliance
    • To Sell Is Human
    • Drive
    • Start With Why
Have fun!
Brian
(Twitter, Linkedin, Facebook . . . and you can email me: brian@kecventures.com)

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