Almost exactly twenty years ago, my buddies and I skulked out of our client-presentable East Cambridge office to watch the OJ Simpson verdict at Lechmere.
(For New Englanders of a certain era, Lechmere – that’s pronounced LEECH-mere – was “Best Buy with Benefits”. The store’s extremely generous no-questions asked return policy engendered a verb: To Lechmere. Everyone knew someone who would lechmere a huge TV on Friday to return on Monday with nary a question about the inevitable nacho cheese stains or beer rings on top of the cabinet. There’s no doubt that “lechmering” led to the eventual demise of everyone’s favorite no-cost electronics rental shop . . . but I digress)
So there we were, watching the “Trial of the Century” in the TV department, jostling for position against a hundred other rubbernecks; I thought I’d never see anything like it again.
Until I did.
It was pretty interesting to watch the Ellen Pao Trial from inside the echo chamber of Silicon Valley. Out here, we like our national press congratulatory and fawning, not critical and accusatory. But 20 years past OJ, there I was again craning my neck for a view . . . not at a TV screen this time, but instead at multiple twitter feeds on my iPhone. Plus ca change, I guess . . .
As for the trial’s result, I won’t opine, but some thoughts kept coming back to me throughout: how bizarre was this crazy dysfunctional partnership? With all the infighting and intrigue, how were these people actually able to make investments? And who gave these people money to invest, after all?
Oh . . . right. It’s us, the LPs.
Never have we had a more acute (or public) reminder of our daily reality that investing in partnerships is a people business; as fund investors, we don’t have the luxury of investing in assets or cocktail napkin ideas. We invest in people. Driven, accomplished, fallible, confident, occasionally insecure, and sometimes crazy people. Most are amazing salesfolk and we LPs must sometimes wade through thickets of inauthenticity to fully understand the person sitting across the table. And getting one’s arms around someone’s behavioral footprint is tough enough; add in the cross-products of high-stakes interactions and it can be difficult to ascertain how people will work together as the years wear on, long after the ready smiles and easy camaraderie of a fundraising period have faded. One thing that’s always struck me is that we expect our GPs to be ruthlessly economic with the outside world, but gentle (or genteel) with each other.
At some point, the thought hit me: Watching this trial was like watching the 1966 classic, “Who’s afraid of Virginia Woolf”. For those who haven’t seen the movie, IMDB’s describes it this way: “A bitter aging couple with the help of alcohol, use a young couple to fuel anguish and emotional pain towards each other." There’s a great exchange where Elizabeth Taylor’s Martha clamors at Richard Burton’s George as he takes a turn too fast in their car, causing their tipsy passenger to vomit: “aren’t you going to apologize?” To which he replies, “not my fault, the road should’ve been straight.” It’s a dialogue I’ve thought of frequently as I listen to fund managers try to explain away a “Can’t Miss” portfolio company that succumbed to market forces.
And I’ve often said that VC partnerships are like marriages (but with the added complexity of multiple partners, united not by love, but by money.) And indeed, these unions generally last twice as long as the average American marriage when one takes into account the extensions (often at the GPs discretion) available as an augment to the typical 10-year term.
As in a marriage, few people really understand what truly goes on inside a partnership, but that’s where I think we LPs should be spending more of our time: getting a fly-on-the-wall’s understanding of partnership dynamics. To be sure, I’ve got no monopoly on wisdom, but when I’m on my game, I spend most of my diligence time with GPs trying to understand their individual motivations, their fears, their biases (explicit and implicit), their free time, their internal debates, their triumphs, their injuries, their pride, and their shame (often this last point can be a powerful motivator). How, then, do these individual behavioral footprints fit together to form a well rounded whole comprised of jagged pieces?
I often wonder whether groups will remain as cohesive as they appear during the kabuki of slide deck recitations (the main reason I take people off-script). Sometimes, even getting to the task of understanding non-verbal cues can be impossible: one group initially refused to hold an in-person meeting (despite the fact that their office was less than a half mile from mine!) because they insisted that they found introductory phone meetings to be “more efficient.” Only after asking if they meet entrepreneurs first over the phone and if that was their best practice was I able to weasel into a face-to-face. It made me think of what Mister McCance once told me: "venture works best when time is cheap and capital is expensive."
If you’ll indulge me for a moment, I should say that the best unintentional compliment I ever got after a meeting was, “this meeting was like therapy, where can I send my check?” On the other hand, someone else once old me, “most of the LPs I’ve talked to have been more polite.” And maybe that’s the problem . . . LPs can sometimes be too polite. I’ve found, though, that asking the tough questions and following up with “why?” or “tell me more” often gets GPs thinking and talking in ways that build respect, trust, and authenticity. Yet all of this extro-spection takes time and requires intimacy, two resources in short availability. I moved to Palo Alto to try to buy some more of each of these scarce commodities.
That’s why I’ve always scratched my head that people (including lots who are far smarter than me) would sign up for a Kleiner Perkins fund after one of their famously information-lite “due diligence” roadshow sessions which reputedly took place in hotel conference rooms in various cities, sometimes with multiple LPs in the room. “Fear Of Missing Out” can be a powerful motivator.
But nowadays, it seems like Venture World is spinning faster and faster. And whenever I feel breathless as I do today, I think of my favorite philosopher’s exhortation: “life moves pretty fast. If you don't stop and look around once in a while, you could miss it.” Of course, we LPs inhabit a prisoner’s dilemma; the time to make decisions has been compressed, as we seem to be climbing over each other to commit quickly to hot funds. It can be tough to build intimacy and authenticity in such an environment. One can dream, but my wish for the post-Pao world is that tradecraft will again be predicated on the old saw: “marry in haste and repent at leisure . . . “