There’s one thing that no one can ever take away from Adam Neumann—he was world class at fundraising.
His ability to tell a story and gain investor confidence was unmatched relative to the underlying progress of the company. He exuded confidence told people he was going to change the world.
It’s not actually surprising that investors bought into it, considering that for a long time, VCs have focused on one particular archtype of leader as being more worthy of venture investment than others—the bold, confident visionary who will talk big in the pitch meeting.
As an investor whose portfolio is run by diverse founding teams more than 50% of the time, I’ve noticed a difference in how people relate to talking about the future across various groups.
There are some founders who see predictions about the future as a kind of promise—and so they hesitate and get uncomfortable around the idea of insisting that X, Y, or Z will happen. They tend to pause or give concessions around direct questions.
“So, what will your margins on these new locations be?”
“Well, it depends on the location…and obviously, they need some time to get up to peak efficiency…but we think we can get somewhere between 30-35%”.
That sounds like a less confident answer than just “35%”.
But it isn’t.
It’s a more complete answer in the mind of an operationally focused founder.
If you flip the question around and said, “Do you think you can get 35% margins here?” that same founder will give the most unequivocal, most confident “Yes!” you ever heard. They just don’t like making solitary, definitive statements without making sure you know all the variables and caveats—so you can be as informed as possible and not surprised at all when things don’t go exactly according to plan as typically happens in a startup.
Those founders tend to be terrific to work with on the operational side. As an investor, you tend to fill more informed about the complete picture of the company’s performance—and not like you’re having smoke blown at you.
They don’t fare as well in fundraising, however. Investors might say they lack confidence or it feels like they aren’t really “on top of” their business, when in fact, they know their business extremely well.
In my experience, those founders are disproportionally from underrepresented groups. My theory is that in a world where they experience a lot more scrutiny than the average straight, white male founder, they’re more conscious of what it means to take on investor capital and the expectations around performance that it brings.
I think our view of successful leadership style needs to change just as much as these founders need to be more aware of the fact that we as investors are in this to take the risks, and that no VC is going to go homeless if a deal doesn’t work out.
You don’t need to tell us all the caveats around your prediction of margins, but we shouldn’t fault you if you do. Maybe it’s time we changed our perspective of what a strong leader looks like—that it’s someone who is transparent around the risks and is more conservative about predictions while still striving just as hard to crush expectations.
“Maybe it’s time we changed our perspective of what a strong leader looks like—that it’s someone who is transparent around the risks and is more conservative about predictions while still striving just as hard to crush expectations.” -
Does it make sense to write a bigger check to someone who talks a bigger game without being conscious of the execution details they need to get right to back it up—or someone who sweats the details, too?
Obviously, it doesn’t need to be either extreme, but I see too many otherwise terrific operators getting dinged in a fundraising meeting because they didn’t act like the ringmaster at a circus. We should be more ok with people who act in a fundraising meeting like they do at a board meeting—collaborative, flexible, opportunistic, and willing to measure twice before cutting once.
Here’s one way that these types of founders can win more investors over without trying to be someone they’re not: Own it.
Enter a meeting and set the tone by saying something like:
“Just so you understand where we’re coming from and to set a context for our conversation. We’re operators and we’re meticulous about getting all the details right that form a strong foundation for this company. We built a culture based around transparency and thoroughness--so when we talked to our team about what we’re going to accomplish, we don’t blow smoke. So, if you feel like you don’t hear a bold line like “We’re going to put a TV in every household one day” that’s not because we don’t think that’s going to happen—that’s because we know there’s no point to doing that unless the TVs actually work. Don’t mistake that for any lack of enthusiasm about the business or the size of the opportunity. This is a huge market and there’s no reason why this can’t be a public company one day—but we’re here to make sure we’re all on the same page about the plan to get there and to show you that we’re eyes open on the risks and that we can handle them.”
If Adam Neumann had run WeWork like this, he might still be running WeWork.
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