Constraining The Path

(This is a post where, if it resonates with you, I’d encourage clicking on and reading the links embedded.)

In the context of entrepreneurship and the creative process, I am a big believer in constraints. I fundamentally believe that a shortage of resources, or a specific pain or trauma, or any set of conditions which are “less than ideal” can lay the groundwork for creative expression. There are too many examples from the world of music or art to list here; perhaps less romanticized, even in the creation of new companies, it can make a huge impact. I always cite the near-death experiences faced by Airbnb as a canonical example, or recounting the entrepreneurial track record of Travis Kalanick right before he started Uber.

I didn’t always think this way, however. Before the 2010 decade began, I had no concept of what constraints meant nor why they were so critical to the design and creation process. Thankfully, the world conspired to teach me anyway, and I had no choice but to listen. I won’t recount those details here, but encourage you to read this post from 2013, You Can’t Step Into The Same River Twice.

I don’t know much about constraints broadly speaking, but I do feel I know about them in the creation of a new investment fund that invests in startups. I was motivated to write this post because, even today, people will come up to me and make assumptions about the path in which I took to get here. Those assumptions assume that what is set up today was intentional and planned out. That’s not the right way to put it, actually. I kind of ended up here, more as a result of the reality I was interacting with.

This is how those conversations typically go… “How do you know so many Limited Partners?” Well, I have been meeting them for years and stayed in touch with them. They all said “no” to multiple funds, and so I was forced to spend more time with them, to interact with them, to learn their business model. This was planned, but now looking back, I have helped many of them in some ways, and many of them have helped me get to where I am without having a formal relationship or economic ties. The constraint of being told “no” by so many forced me to seek out why they said no, and to listen to their feedback, and to chart a path that would at least enable a chance for it to work out one day in the future.

Another comment I get is… “How did you build up the funds so quickly?” First, it didn’t seem quick to me! Second, the first three funds I raised were incredibly small. In the moment, I felt deflated a bit because I wanted them to be bigger. In the first four years, I was only able to raise and deploy a fraction of what new investors come out of the gate with today. At the time, I didn’t realize this constraint would give me the benefit of time, to take more shots on goal, and to keep things moving up and to the right.

Another musing I hear goes like this… “How do you set up the Venture Partner role at a larger fund? I’d like to do that.” Well, it’s not a turnkey thing. When I started, those funds were way too small to be a primary thing, so I got creative, and thankfully other VC firms I knew were open to that creativity. I began as a Venture Partner with Bullpen for a few years; then spent three solid years with GGV as a Venture Partner; and now I’m coming up on three years sitting besides the folks at Lightspeed. This wasn’t a path I intentionally carved out, but rather took on as a suitable alternative to other things. (Dialing way back, the reason the fund started is because I didn’t get the intended role within a firm that I initially wanted. Yet another constraint.)

Finally, I’ll hear about doing follow-ons… “How are you able to follow-on into companies as they scale?” This is where it all comes together, where all the constraints combine to have led me here. By being forced to be small, all you have early are the relationships with founders. Those are gold. All companies don’t work out, but a few do, and if you pick people and help them, most will stick with you because they remember you from the early days when there was nothing. And then, you can keep on investing, compounding the access, asymmetric information, and dollars into things that work. These are not moves I designed in some back room – these are all the result of initially being constrained. The funds I raised never reached their target; the LPs I met always said no but a great handful stayed in touch and mentored me; the VCs would never hire me but backed my funds, and let me sit with them as a Venture Partner; and the follow-on capital came as a result of building and evolving the model over time.

But enough about me. I’m a big music fan, and so I think about the constraints now-famous artists once had. But really when it comes to entrepreneurship, or finding someone who could build the next Airbnb, I do truly believe in constraints. It’s why I focus on investing early. It’s way I rarely invest in larger rounds or seed rounds that balloon. It’s not because I don’t think the those teams aren’t talented, but there’s something about investing into a constrained situation that makes things more real for me. Having infinite runway may feel soothing, but I don’t believe the early creation years are about comfort — to me, it’s about rapid iteration, staying small, interacting with the market, and surviving long enough until you catch fire. To take this analogy further, perhaps constraints are kindling. Hey, that’s not a bad name for a fund 😉