allensblog

Ten Commandments for Entrepreneurs

Over the next few of weeks, I'm going to post my version of "The Ten Commandments" for Entrepreneurs -- my ideas of the 10 most important "procedural" things to keep in mind when you approach a VC.

These insights, for whatever they're worth, stem from nearly 20 years as a lawyer who represented entrepreneurs seeking VC funding, as well as 6+ years now on the other side of the table as a VC evaluating funding pitches.

 

Although I'm going to write about 10 Commandments, there are really 13, the first three of which are, sort of, "Uber Commandments": (1) have a great technology idea, (2) have a great team and (3) pick a huge market in the midst of a major transition.  That's the hard part -- and it's where advice from a VC can't really help you.  But the next 10 Commandments are things you can control, more or less, and you should take advantage of this whenever possible.

Commandment No. 1:

Whenever you're approaching a VC firm for funding, it's always optimal (surprise!) to connect with the partner in the firm who has the closest investment interest to the space your startup is going after.  As busy as most good VC's are, it's usually hard to stop what one is doing and take time to come up to speed on a new market unless one is making a calculated shift in one's area of investment interest (which does happen --- over time).

No matter how hard you try as partner in a VC firm (and I have to say that, at Mayfield, I’m pleased at how hard we try), it’s difficult to be as interested in a deal passed along to you by a partner as you are in one that comes in directly through your network.  A number of reasons, but it mostly comes down to the fact that most good VC's are pretty busy and – for a referred deal -- you don’t have the same “context” as you do for a deal that comes to you directly from someone you know.

Not to say that good things don’t happen.  At Mayfield and some other firms, the partners do pretty readily pass around deals that seem more appropriate to the interests and backgrounds of other partners.  For example, at Mayfield, we have done two deals this year that came in initially through me but ended up being “done” by other partners (who, BTW, are better suited for the companies than I would have been).

Despite the above advice, however, there is a caveat:  it's definitely better to get a good personal introduction to any partner in a particular firm than to it is to merely approach the “right” partner out of the blue.  For a whole variety of reasons, VC firms almost never seriously consider deals that come in “over the transom”.

So, whenever possible, do your homework on the partners in a particular firm, and try to get a personal introduction to the one whose background and investing interests seem to best fit your company.  From an informational perspective, this is usually not hard to do.  Most VC firms have good descriptions of their partners’ backgrounds and interests on their web sites, and you can also tell a lot about what a partner is interested in by looking at the deals they’ve done.

Philosophy of Science

Yet another excellent entrant in the Very Short Introduction series from the Oxford University Press (check them out: http://www.oup.com/us/catalog/general/series/VeryShortIntroductions/?view=usa).  Samir Okasha, Lecturer in Philosophy at the University of York, gives a well-organized quick tour of the main topics in the Philosophy of Science.

Starting with an introductory chapter on “What is Science”, he takes the reader on a tour of “Scientific Reasoning”, “Explanation in Science”, “Realism and anti-Realism”, “Scientific Change and Revolutions”.  He then adds a chapter on three specific historical philosophical disputes in the Philosophy of Science:  (1) the dispute between Newton and Leibniz about the nature of space (absolute or relative), (2) the dispute among three different schools of taxonomic classification in biology and (3) the dispute among psychologists about the ‘modularity’ of the human mind.  He then ends with a wrap up chapter on some of the disputes about science (‘Scientism’, or an over-reliance on ‘science’ as a model for all of (or the only legitimate kind of) ‘knowledge; Science and Religion; and the debate around whether Science is ‘value-free’).

In each case, he gives a very clear, even-handed overview of the arguments that have raged (since the 16^th Century) about these topics.  He is quite good at giving analogies or examples that make otherwise abstract propositions understandable.  He deftly lays out (which is difficult to do) the reasons why philosophical questions about science are not resolvable by science itself, and thus why disputes over these topics continue even today   (e.g., all ‘empirical’ scientific theories ultimately rest on concepts that are more or less ‘metaphysical’ – which doesn’t mean that choosing among fundamental principals is simply a matter of taste, belief or faith (e.g., Creation Science is clearly not just as good a ‘scientific’ theory as Evolution), but it does help clarify the nature of the assumptions that serve as the foundations of our scientific beliefs.  In Okasha’s descriptions of the debates over these topics, I often couldn’t tell from his writing anything about his own – one of the marks of a good introductory work.

Given the importance of science to modern life, understanding the debates around the core concepts on which modern science rests (and the enormously broad reach (as well as the limits) of science as a way of generating knowledge), is something every educated modern person should do at some level.   This little book is an excellent way to get started.

Interesting Political Theory Book

I recently read a very interesting book that gives a very useful “overarching structure” of the history of political philosophies (or at least the part of the history of political philosophy that depends on a view of human nature).  “A Conflict of Visions”, by Thomas Sowell, is an historical/philosophical analysis and exposition of the two major views of human nature – called the Unconstrained Vision and the Constrained Vision --that have dominated mainstream Western European and American political debate for the last 350 years or so.  Sowell explores the different views, and the consequences of holding those views on a number of important issues: liberty, equality, freedom, etc., of a number of well-known Western European and American political writers, both historical and current (e.g., Locke, Hobbes, Burke, Condorcet, Godwin, Rousseau, among the historical figures and G.B. Shaw, O.W. Holmes, Ronald Dworkin and Milton Friedman among the more recent).  “A Conflict of Visions” stands on its own and may be read to great benefit without any prior acquaintance with Sowell’s work, but it can be most fully understood as one third of a trilogy, the other two parts of which are: “Knowledge and Decisions” and “The Vision of the Anointed”.

The Constrained Vision more or less asserts that (1) human beings (whether individually or in groups (e.g., legislatures)) are incapable of broad knowledge (i.e., at the societal level) about the effects of their actions, that therefore societies are better off relying on structures (e.g., markets, cultural traditions) that in some sense collect (or in the case of traditions, have collected over time) the limited knowledge of many independent actors, (2) that the Law of Unintended Consequences is alive and well, (3) that human nature is basically self-oriented (if not downright selfish) and (4) that, because of these profound limitations, only suboptimal “trade-offs”, not “solutions”, are possible on most important social and political issues.  Adherents to The Constrained Vision -- definitely -- do not believe in the “perfectibility of man”.  This view has most often been associated with thinkers that most would characterize as “conservative”. 

Believers in The Unconstrained Vision basically believe the opposite: that humans are so-called “blank slates” whose human nature is not innate, but is more or less completely determined by their environment, and that large social improvement/political projects are possible because human beings are capable of knowing much about the consequences (at the societal level) of their social actions.  People holding this view do believe in the Perfectibility of Man, and this view, not surprisingly, has most often been associated with thinkers that most would characterize as “liberal”.

 

The analysis is very clear (typical for a Sowell book), easy to follow (also typical) and is fairly even-handed, especially for someone like Sowell, who more or less holds the Constrained Vision (as do I).  While he uses strong versions of each Vision as foils to explicate the analysis, he also is clear that many positions along the Constrained/Unconstrained spectrum are possible and have been held by writers, and that some famous thinkers (e.g., Marx and Mill) have actually held hybrid versions of the Constrained and Unconstrained Visions.

None of the writers discussed is a scientist of any kind, much less a scientist in a relevant field; and most of the writers discussed wrote before anyone knew (or certainly understood well) what a gene, a neuron or a hormone was.  Because of this, after finishing “Conflict of Visions” (and, if you’re up for it, the rest of the trilogy), one wants to know the answer to the question: what does “science” currently say about Human Nature – which Vision does the generally accepted empirical evidence support:  Constrained or Unconstrained? 

Several (conflicting) books (all well-written) that help fill out the debate include:  “The Blank Slate”, by Steven Pinker, “The Selfish Gene”, by Richard Dawkins, “Guns, Germs and Steel”, by Jared Diamond, “Human Natures”, by Paul Ehrlich and “Nature via Nurture”, by Matt Ridley.  Ehrlich (famous for making a series of wildly wrong predictions of environmental disasters, and for losing several high-profile bets about the environment (loosely speaking) to the late economist, Julian Simon) and Pinker (evolutionary biologist/psychologist, now at Harvard, who studies the brain and language), for example, strongly disagree about mostly everything, and there is no broad consensus that emerges from these books, read together (Ehrlich and Diamond give more weight to environmental factors – Pinker and Dawkins more to genetic/evolutionary factors.  Ridley attempts a modern synthesis of the positions). 

What does seem to be true, however, is that two (sometimes inconsistent or at least not wholly consistent) views are gaining ground:  (1) most basic (and some not so basic) human drives are increasingly believed to be genetically determined (and many, though clearly not all, of these are “antisocial” or “selfish”); but that (2) this genetic determination can be very complex, including complicated interactions among genes (or more accurately the proteins they express) and between genes and the environment (broadly conceived – e.g., whether a person is well fed, has access to good medical care, is raised in a stable, loving environment, etc.).

Sowell, in “A Conflict of Visions”, helps organize in a sensible analytical structure a great deal of the core thinking (some not even explicit) of the two main camps of traditional Western political thought over the past few hundred years.  It provides a lens for a deeper understanding of the original profound thinkers analyzed in the book, and makes one want to return to them for re-reading.  In this sense, as well as many others, it is a very good book.