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The 7 Habits of Highly Effective VCs

Chances are, you’ve read or at least heard about the book “The 7 habits of highly effective people“. First published in 1989 and with over 40 million copies sold, It’s one of the bestselling non-fiction books in history. For the… Continue Reading

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Chances are, you’ve read or at least heard about the book “The 7 habits of highly effective people“. First published in 1989 and with over 40 million copies sold, It’s one of the bestselling non-fiction books in history. For the 30 year anniversary, the publishers kindly sent me a copy of the new edition with fresh insights from Stephen R. Covey’s son, Sean Covey.

Last year I published on VC Cafe a post titled the 7 habits of highly effective people… in startups, and this time I will apply the book’s principles to the world of Venture Capital.

First and foremost, Covey rejects the advice of most business books on sales, influence or persuasion, because they promote fake behaviour, intended to manipulate the other’s behaviour. I.e. he rejects the notion of ‘pretending’ to care, fake smiling, etc, to get others to like you. He claims that the 7 habits are natural principles, and advocates for an abundance mindset vs. a scarcity mindset. Meaning, a belief that relationships (personal and professional) are not a zero-sum-game – one person’s success doesn’t reduce the other’s.

Let’s dive into the 7 habits of highly effective people and how they can be reflected in the world of venture capital.

Habit #1 – Be proactive

“Focus your responses and initiatives on the center of your influence and constantly work to expand it.”

Proactivity can take several forms in venture capital. William McMillan from Frontline Ventures recently shared the importance of speed in venture capital. There are logical business reasons for it. A 2018 study by Creandum ventures found that speed is the third most important factor for entrepreneurs when dealing with VC, but it’s only the 10th on the list for VCs.

What’s important to founders vs. VCs (Creandum)

But being proactive goes beyond just speed. To be an effective VC, proactivity is part of the job description:

  • Proactively learn about new companies trends and markets
  • Proactively network (deal flow, peers, industry partners)
  • Proactively seek opportunities to help

Habit #2 – Begin with the end in mind

“Envision what you want in the future so you can work and plan towards it.”

My interpretation for VC has to do with portfolio construction. This is not merely a decision on the number of deals a fund should do or the percentage reserved for follow-on investments, but rather visualising where you want your fund want to be in X years time and what we have to do to get there. Visualising is an essential part of planning – Mike Maples Jr calls it ‘Backcasting’.

Starting with the end in mind also comes to play in investment committees. At the time of making an investment VCs often think about what could be the potential outcome for a company and what needs to get accomplished before the next round.

This principle is about not acting immediately, but thinking first. VC funding favours rapid growth, but “accelerating” without thinking where it would take the startup can often mean not ending up where you intended. Starting with an end in mind is also very good advice for working with portfolio companies.

Habit #3 – First things first

“Organise and execute around priorities”

The decision making quadrant (Source: Wikipedia)

My interpretation for the world of VC is learning effective time management. This habit is about separating what’s important, from what’s URGENT. The right thing would be to prioritise what is both urgent AND important.

We spend too much time on quadrant III and IV: calls, interruptions, busy work, networking events… For something to be deemed ‘important’ it needs to create results – contribute to your mission, or high priority goals. The book recommends delegating what you can (hire well and work with professionals) and don’t wait for important things like planning, relationship building, etc to become a crisis.

Apart from time management, habit #3 is about personal management. Putting first things first also means allocating time to be with family, take care of our health or exercise. Don’t wait until it becomes a crisis. In a recent interview to the Observer Effect, Marc Andreessen shared how he schedules every minute of his day, including ‘critical’ free time. To do just that, my partner at Remagine Ventures uses and recommends Clockwise.

Habit #4 – Think win win

“Think Win-Win isn’t about being nice, nor is it a quick-fix technique. It is a character-based code for human interaction and collaboration. Win-win is a frame of mind and heart that constantly seeks mutual benefit in all human interactions”

If you have a scarcity mentality, you believe that the majority of the retruns are concentrated in a small number of deals, and so to be a successful VC you must adopt a win/lose mentality. Meaning, you need to win, and the others need to lose. After all, most people have been deeply scripted in the win/lose mentality. There can be fierce competition between venture capital funds, especially in dense VC concentrated areas like Silicon Valley, but it’s not always the case. Collaboration is key.

Having a win-win mindset means constantly looking for opportunities to collaborate, and acting with integrity and maturity. This can take many manifestations in VC – from sharing interesting deal flow opportunities between peers to being a reference for a new fund or making introductions to potential investors when you know a GP is raising. The results of this could yield much stronger relationships in the long run. Don’t be a short term optimiser. On this topic, I highly recommend the book “Give and Take” by Adam Grant.

Habit #5 – Seek first to understand, then to be understood

“Use empathetic listening to genuinely understand a person, which compels them to reciprocate the listening and take an open mind to be influenced by you”

To achieve habit #4 (thinking win-win) we need to adopt habit #5. Seek to understand by really considering the other side (wether it’s a founder, a VC or board member). We all suffer from cognitive biases, and while awareness is the first step for overcoming these biases, they tend to only get worse with time, as VCs believe they have sharpened their pattern recognition.

The cognitive bias codex (Source: Wikipedia)

This principle is not just about our ability to really listen, but to seek to understand the other side, or what Covey called “Emphatic listening”. I was particularly taken by one example:

A startup was negotiating a contract with a large national institution. The institution flew over their lawyers, negotiator and two presidents of their large banks to create an eight person negotiating team. The startup decided, it’s either a win-win, or no deal. The CEO of the startup sat across the table from the bank’s negotiation team and said: “we would like for you to write the contract the way you want it soo we can understand your needs and concerns. Then we can talk about pricing”

VCs that do this effectively with founders, can make even a pass decision become a positive interaction. Avoid can replies if you can and be thoughtful when giving feedback.

Habit #6 – Synergise!

Combine the strengths of people through positive teamwork, so as to achieve goals that no one could have done alone.

In the book, Covey refers to synergy as effective team work. To me, “Synergy” sounds a bit like MBA jargon.

Venture capital funds (especially the smaller ones) often have small teams, so my VC takeaway here is on the work of VCs with their portfolio companies and LPs.

When a true synergetic relationship exists between the VC partner and the startup founder, it’s often a story of 1+1=3. This is where a lot of the ‘added value’ that VCs bring (or claim to bring) comes into account. For me it’s about obsessing myself with the company and its market. Reading and sharing relevant news with the founder, digging deep on the product and thinking what introductions I can make this week to help the founder progress across talent acquisition, commercial deals, partnerships or follow on funding. It’s also possible to develop strong synergies with your LPs. It’s a magical moment if and when there’s a willing recipient on the other side.

Habit #7 – Sharpen the Saw; balanced self renewal

“The Upward Spiral model consists of three parts: learn, commit, do.”

When I was at Google, I took a course called “Search inside yourself” (you can also read the book by Chade Meng Tan). This principle, very much reminded me of that course. We have a number of sources of energy:

  • Mental – reading, writing, planning
  • Physical – exercise, nutrition, sleep, stress management
  • Spiritual – prayer, meditation
  • Emotional/ Social – service, empathy, intrinsic security

These sources of energy can be filled and depleted. To stay in balance, we need to engage in some personal TLC. This means working on your phone addiction, but for me it also means keeping the curiosity and passion that drove you to enter VC fresh.

***

It was great to re-read the book with my VC hat on, and a good reminder to never stop learning.

Eze is managing partner of Remagine Ventures, a seed fund investing in ambitious founders at the intersection of tech, media, data and commerce. We are backed by some of the world’s leading media companies.

I’m a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google’s first physical hub for startups.

I’m also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we’ve built 8 schools and 31 libraries in the developing world.

Eze Vidra
Latest posts by Eze Vidra (see all)

Source: https://www.vccafe.com/2020/07/31/the-7-habits-of-highly-effective-vcs/

Private Equity

Alternative Investments: Accelerate’s Alt ETFs Now On RBC Dominion Securities A+ Platform

Accelerate Financial Technologies Inc announced this week that its alternative ETFs have been added to the RBC Dominion Securities A+ platform. RBC Dominion Securities describes the A+ as the next level of wealth management.

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Alternative Investments: Accelerate’s Alt ETFs Now On RBC Dominion Securities A+ Platform

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The A+ is for you if “you require serious investment management for your serious money.”

Accelerate Financial Technologies Inc announced this week that its alternative ETFs have been added to the RBC Dominion Securities A+ platform.

RBC Dominion Securities describes the A+ as the next level of wealth management.

For select clients with serious money, the platform provides greater convenience, customization, RBC’s Unified Managed Account technology, access to elite money managers worldwide, and tax efficiency.

Accelerate’s Alt ETFs on RBC A+

The range of alternative ETFs from Accelerate allows investors to diversify beyond stocks and bonds by including alternative asset classes in their portfolios.

The firm is known as a pioneer in institutional caliber alternative ETFs including hedge fund and private equity ETFs. It claims it is “disrupting the asset management industry by offering performance-oriented alternative investment strategies previously reserved for wealthy investors at a fee significantly lower than competitors.”

“We are pleased to be chosen by RBC Dominion Securities, a global leader in wealth management, as one of the select group of high-quality investment managers on the exclusive A+ platform for RBC Dominion Securities advisors and their clients,” said Accelerate CEO Julian Klymochko. “In an era of rock-bottom interest rates and record-high stock market volatility, we are pleased to provide investors with diversification, alternative yield, and alpha generation solutions through alternative investment strategies including absolute return, arbitrage, enhanced equity, and private equity replication.”

Selected ETFs

The alternative ETFs on the RBC Dominion Securities A+ platform include:

  • Accelerate Absolute Return Hedge Fund (TSX: HDGE) – a diversified, liquid, and performance-oriented long-short equity hedge fund
  • Accelerate Arbitrage Fund (TSX: ARB) – provides exposure to SPAC arbitrage and merger arbitrage investment strategies
  • Accelerate Enhanced Canadian Benchmark Alternative Fund (TSX: ATSX) – combines exposure to the S&P/TSX 60 plus a long-short Canadian equity overlay
  • Accelerate Private Equity Alpha Fund (TSX: ALFA) – designed to provide investors with private equity-like investment returns

Related Story:  Liquid Alt ETF Provider Accelerate Offers Ready-Made Alternative Investment Strategy                                                

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Source: https://dailyalts.com/accelerates-alt-etfs-now-on-rbc-dominion-securities-a-platform/

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Private Equity

Venture Capital: AgTech Startup Benson Hill Lands $150M

Benson Hill, an agtech startup based in St. Louis, announced Thursday its close of a $150 million Series D round led by Wheatsheaf and GV (formerly Google Ventures). It uses biotechnology and data science to enhance the nutritional qualities and sustainability of crops.

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Venture Capital: AgTech Startup Benson Hill Lands $150M

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Benson Hill uses biotechnology and data science to enhance the nutritional qualities and sustainability of crops.

Benson Hill, an agtech startup based in St. Louis, announced Thursday its close of a $150 million Series D round led by Wheatsheaf and GV (formerly Google Ventures).

The company said other strategic and ESG focused investors also participated. These included Argonautic Ventures, Caisse de dépôt et placement du Québec (CDPQ), Emart, GS Group, Louis Dreyfus Company, iSelect Fund, Fall Line Capital, Mercury Fund, Prelude Ventures, Prolog Ventures, S2G Ventures, and additional strategic and family office investors.  (FOOD navigator-USA.com)

Benson Hill technology

Benson Hill uses biotechnology, data science, and AI to enhance the nutritional qualities, flavor, and sustainability of crops and vegetables.

The firm’s “Cloud Biology” is the fusion of data, machine learning, and AI techniques with biology. Its “CropOS” is a proprietary platform that facilitates the accessibility and actionability of Cloud Biology.

The CropOs platform uses plant phenotyping, predictive breeding, and environmental modeling algorithms to better control the plant breeding process and realize these advantages:

  • Produces plants that are highly productive, highly nutritious, and better tasting
  • Better texture
  • Reduce the number of processing steps
  • Reduce the need for additives
  • Grow plants that “do more with less,” thus boosting sustainability

The company’s work so far has been concentrated around soybeans.

Its new, ultra-high-protein (UHP) soy products spiked the interest of investors. They come from a highly productive non-GMO soybean that is rich in oleic oil content.

Use of funds

Benson Hill plans the commercial launch of the first Ultra-High Protein soybean varieties in 2021, among other product launches.

It also plans to expand its team by adding top talent and continue the development of Cloud Biology and CropOS.

“As a society, we’re at a crossroads made more evident as the pandemic has revealed strengths and vulnerabilities in our food system,” said Matt Crisp, Benson Hill CEO. “Food choices that create enjoyment, make us stronger, and help preserve our environment need to be accessible to everyone, and the power of plant diversity and technology innovation can help fuel that evolution.

Related Story:   Smart Farm Technology To Take The Drudge Out of Plant Breeding

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Source: https://dailyalts.com/agtech-startup-benson-hill-lands-150m/

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Private Equity

FinTech: Alliance Data Buys BNPL Fintech Bread For $450M

Alliance Data Systems (NYSE: ADS) said Thursday that it will acquire Bread and its digital platform for $450 million of which $100 will be paid through Alliance stock. The transaction would expand Alliance Data’s own digital offerings by including buy-now-pay-later (BNPL) products.

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FinTech: Alliance Data Buys BNPL Fintech Bread For $450M

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Alliance Data will pay in cash and stock for the acquisition.

Alliance Data Systems (NYSE: ADS) said Thursday that it will acquire Bread and its digital buy-now-pay-later (BNPL) platform for $450 million of which $100 will be paid through Alliance stock.

The transaction would expand Alliance Data’s own digital offerings by including BNPL products. BNPL is a major trend now that consumers have embraced the interest-free, zero-fee facility to pay in installments. Alliance is a provider of data-driven marketing, loyalty, and payment solutions. (Alliance)

Digital BNPL is particularly popular with millennials and the younger set. They prefer not to run up credit card debt and like the speed and convenience. The technology and products acquired from Bread will address this segment of the population.

Bread already has tie-ups with merchants such as online jewelry seller Noémie, the luxury watch seller Hublot and Newton Baby, the crib mattress provider.

BNPL customer experience

“Bread’s flexible, easily-integrated payment solutions, coupled with Alliance Data’s Enhanced Digital Suite, will improve the digital customer experience and support increased acquisition and checkout rates, offering the best payment product to the right consumer at pivotal moments in the customer’s online shopping journey,” Alliance said in a statement.

Alliance intends to leverage Bread’s solutions along with its own existing private label, general-purpose and commercial products.

COVID-19

Its brand partners will therefore get another advantage in the eCommerce channel, with online businesses already getting a boost from COVID-19.

“With the timing of the holiday season upon us, the COVID-19 pandemic has accelerated the adoption of digital technologies, and perhaps nowhere as significantly as in financial services and payments,” said Val Greer, chief commercial officer, Alliance Data.

BNPL is now crowded with cash-rich players

Payments giant PayPal (NASDAQ: PYPL) announced in August that it would begin offering BNPL services, recognizing that COVID-19 had triggered a dramatic increase in their popularity.

Other players in the BNPL field include Klarna, Affirm, Afterpay, and Quadpay.

In a recent study, Tech Crunch found that PayPal had the highest retailer coverage with a presence of 65% retailers. Afterpay was a distant second at 10%, then Affirm 6%, Klarna 5%, and QuadPay 2%.

The study concluded that PayPal was primed to dominate the BNPL wars.

Related Story:   PayPal Challenges Klarna In U.K. BNPL Tussle                                                

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Source: https://dailyalts.com/alliance-data-buys-bnpl-fintech-bread-for-450m/

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