Hiring Smart People To Get Funding – Interview with Dan Weinfurter
Posted by John Livesay in podcast | 0 comments
Listen To The Episode Here
Episode Summary
Dan Weinfurter is a serial entrepreneur and the author of Second Stage Entrepreneurship. He is the founder of GrowthPlay, a company that helps drive profitable revenue growth by improving overall sales effectiveness. Dan dives into the hiring process and believes it’s better to hire no one than hire the wrong one. After all, hiring the right person is often a multi-million dollar decision. So, how can an entrepreneur hire the right person? Listen in to today’s interview for more information.
Hiring Smart People To Get Funding – Interview with Dan Weinfurter
Hi and welcome to The Successful Pitch Podcast. Today’s guest is Dan Weinfurter, the author of Second Stage Entrepreneurship. He’s also the founder and CEO of GrowthPlay, which is a sales effectiveness business consulting firm. Dan consults with many organizations, developing and implementing sales and leadership effectiveness, strategies that drive profitable growth.
Second Stage Entrepreneurship: Ten Proven Strategies for Driving Aggressive Growth
In his 25 years of being a serial entrepreneur, he’s built three, not just one, but three successful companies including Parson Group, his first start-up that landed number one on the coveted Inc 500. In addition to consulting, speaking and interim management, he guest lectures at leading business schools and was a mentor for the Clinton Foundation’s Institute for Entrepreneurial Excellence. Dan, welcome to the show.
John, pleasure to be here.
What a great background that you have and what great experience you have, especially for a podcast like this, one called The Successful Pitch. You obviously know how to sell and pitch. Can you take us back to your early career of selling and your first start up, and how did you know that that’s what you wanted to do?
It’s probably a two-part question so I’ll try to answer succinctly and then we can go from there. Right out of college, I was hired by General Electric and I went through their sales training program. That was back in the day where a company would hire a 22 year old and put him through a year of training with the hope that the 23 year old would be able to sell sophisticated services to executives in big companies. Those days are somewhat gone where companies spend that amount of time and effort bringing young people up to speed.
For me, it was really fortunate and has got me started in a career. Really, even the businesses I’ve started, the common denominator has been the buildup and deployment of an effective sales organization. My GE career lasted eight years. Subsequent to GE I’ve now done, this is my fourth actually that I’m working are now, all in business services, trying to help companies do one thing or another.
Let’s talk about the Parson Group. Did you have to raise outside funding for that, and how did you come up with the idea?
I resigned, wrote a business plan and raised essentially $4 million on a PowerPoint. I was hiring smart people in Chicago in July 1995.
The idea for Parson Group actually came from a business that I was involved with previous to starting Parson Group. It was an information technology staffing business. We watched ourselves grow and we completely and continuously outran our operational capability, which included finance and accounting. We turned to the outside staffing temporary service providers for help. As we watch what these firms did, we saw that they frankly were terrible and violated all of the things that we thought were responsible for our group at the firm that I was at.
The notion was hatched, “What if you took our business model and applied it to the finance and accounting vertical and you had capital and you built it correctly, what could you do?” After ARC, which was the firm I was at, went public, I resigned, wrote a business plan and raised essentially $4 million on a PowerPoint. We used that to hire five people in Chicago in July 1995. Six years later we had a $90 million business, all organic growth.
Amazing. I bet those investors were happy.
We needed to go back to them a couple other times.
Which is fine. That’s expected.
Which is fine.
You hit the milestones. You need more money to grow, yeah.
We did. They were very happy. It worked well for all parties involved.
Great. Let’s talk about this great book of yours. I’ve had the pleasure of reading it cover to cover. It’s just fantastic. How did you come up with the title, Second Stage Entrepreneurship?
The original title was How Hard Could It Be, which was not meant to be serious, but that was part of the problem. The editor that I was working with didn’t think that that title was right and thought it might offend people. As we were working with the publisher, which is Palgrave Macmillan, we kicked around a bunch of different ideas. Frankly, the editor at Macmillan gets credit for this. She thought that there was this void between how do you start a business and then how do you get it to the next level. Plenty of books on startups, plenty of books on sales.
But this whole, what we call second stage growth, she thought that there was a void in the market. We reshaped it a bit through the editorial process and made it far more broad-based. Instead of just talking about sales, we talked about all of the things that tend to be important in growing a business from an early stage to what we call the second stage, which is a much bigger business, obviously.
The process of hiring smart people, while it is the most important part of the growth journey for any company, ironically, my view is that it’s the least disciplined.
One of the key things that’s over and over important is hiring smart people, which you talked about in this great book. I know that investors look to that when you’re pitching for money, who’s on your team. Even as you continue to be successful and need higher and higher rounds, one investor told me that the quality of your team has to equally go up. The CEO can’t be the CFO anymore. Can you speak to some of the things you talked about, about the process of hiring smart people? In specific, I love what you wrote when you said intellectual curiosity. Tell me what that means.
So, two parts. Ironically, I think that the process of hiring smart people, while it is the most important part of the growth journey for any company, ironically, my view is that it’s the least disciplined. You think about what’s involved in hiring smart people. In most cases, it’s a million dollar and up decision that somebody is making. Seldom is the rigor applied for that level of decision making. A salesperson, for example. Seems fairly routine. It’s at least a million dollar decision. I tell people, I’ve made it wrong enough times to know that my numbers are right.
That’s great.
In a manager, so if you’re starting a new geography, that’s at least a $15 million decision. I could say the same thing there. I’ve made a mistake enough to know that that number is correct. First, I try ground people in the fact that these numbers are real. If you get the right person, great things happen. If you get the wrong person, bad things happen. The trick is that every role for every company at every stage of growth is different. You can’t just take what you’ve done in the past and apply it to the business that you’re a part of today. It might or might not work. It’s a flip of the coin.
[Tweet “Every role for every company at every stage of growth is different.”]
I teach a class at Kellogg and I was guest lecturing in this class called Digital Innovation. One of the things that the professor teaching that class pointed out, which is true, is that in the technology space, and it’s probably no different anywhere else, the founder hires his or her number two 70% of the time without defining the role and without talking to more than one person.
Really? I can understand that to finding the role because you’re going to do anything. But not talking to more than one person fascinates me.
That would be a lack of intellectual curiosity, would it not?
It would. There we go. We’ve got it defined, and you’ve brought it full circle. I love it.
It’s funny, you talk to people, and this is one of my favorite tricks, is after an interview is almost done, you ask a person, “What are you reading today?” It’s amazing to me how often you get an answer, “I don’t have time to read. Too busy. I don’t really read. I look at some magazines and newspapers but I don’t read any books.” It’s hard for me to imagine how anybody can get the information that they need to do their job correctly without reading. Furthermore, just if you’re curious about life, you ought to be picking up things, even if they’re not business related in reading. Pick up a novel, pick up a political, non-fiction book. Read something.
[Tweet “If you’re curious about life, read something.”]
Right. I couldn’t agree with you more. It’s like what you’re putting into your body for food, what are you putting into your brain through reading to keep yourself growing. One of the things you say in Second Stage Entrepreneurship is, “The cost of hiring the wrong person is higher than leaving the position unfilled.” We’re going to tweet that line out. Can you give us a story around that and around only hiring smart people?
[Tweet “Cost of hiring the wrong person is higher than not hiring a person.”]
One of the things that I learned the hard way again is it’s better to have no one in the role than the wrong person. The theory there is if you have no one, you do something about it. If you just hope that it’s going to get better, guess what? It doesn’t. I encourage all people, if you have somebody who’s not correct in the role, move that person along and then go about finding the new person. You’re going to be far better served, even in the short run.
Dan, how long do you give somebody in a new position to prove themselves? Three months? Six months? A year?
I’d give you the classic consulting answer, it depends.
Let’s say if it’s a new salesperson. Let’s say I’m a founder of a startup. I’ve got somebody who obviously needs some training and come up to speed. How much time do I give them to prove themselves, before I know it’s a wrong choice?
If you’re paying attention, it shouldn’t take very long. Again, you have to be paying attention. It’s not so much that you manage it by numbers per se, because specific numbers can be wildly good or wildly bad based on just luck and timing. But if you’re paying attention and you’re working with that person, you can see the quality of interaction they’re having with others. You can see if they’re doing the right things that are likely to make it work over time. Be a little bit lax in terms of the specific empirical outputs, but be really rigorous about the quality of the interactions and the qualitative aspects that you know will dictate success for that role over time. That’s the critical thing.
[Tweet “Hiring smart people: be really rigorous about the quality, not the numbers.”]
That’s incredibly valuable.
It could be a week, it could be a month, it could be six months. You just have to be paying attention.
I love that, because so many people just look at the numbers. If you don’t meet your quota by this time, boom, you’re out. Like you said, there’s a lot of other circumstances. If the person’s got a good work ethic and is a good culture fit, and like you said, doing what it takes, the number of sales calls, phone calls, emails, whatever it is, to be successful, then focus on that.
Now, let’s dive into this whole section you have in Second Stage Entrepreneurship about the power pitch. I love your whole philosophy that if you ask five sales people to describe what the company does, five other people who are in sales, and then five trusted customers to describe what the company does, sadly, you would probably get a lot of different answers.
You will, and it’s so fundamental and so basic.
You keep talking about the need to be targeted and consistent with your branding.
Think about it. Everybody should be able to answer these questions with complete clarity. What do you do for your customers? What do you do that’s different? What do you do that’s better? And be able to demonstrate or prove it. You should be able to do that in very short periods of time. You might only have, literally, 20 seconds to answer the question on what do you do, you might have 15. They think it’s easy and so they just wing it.
[Tweet “How are you different and better?”]
But to get that nailed down with the level of clarity and rigor that’s necessary, it actually involves a lot of practice and a fair amount of what I call preparation so that you have different versions of that for different audiences. If you’re talking to somebody at a cocktail party, it’s probably different than if you’re talking to a CEO or you have a prearranged meeting and you have that actually ready to go.
Most people think they can just wing it and they are so afraid of sounding robotic or they don’t want to memorize anything. I constantly teach people, Tiger Woods doesn’t wing it. Meryl Streep doesn’t wing it. Everybody who is a professional prepares.
They prepare. The only way that I’ve ever gotten people to take it serious is to film them and then actually show them how bad they are at it.
Yes, you really hear the stumbling and how hard it is to follow what they’re trying to say and how few people really understood what they said and all that stuff.
I go back to my GE days. We did this every day for my entire first year of training. You do these role plays and if you did it badly, they play it back three or four times until everybody in the room was laughing. It was all in good fun. We were with all these people for a year. You actually get it nailed down. This stuff all is hard and it takes practice. That’s where all this started from and it’s how it’s become part of what I use to be a critical path for business success.
Since you’re an expert in sales and managing sales teams and hiring smart people and the right team, one of the things I’d love to have you share with us is how do you get sales people who are so competitive, not only outside of the company but within the company, to start sharing best practices with each other so that the whole company can benefit?
Sales people, they’re competitive with each other but they also like to be part of the gang.
It’s a simple question but probably a complicated answer. Sales people, they’re competitive with each other but they also like to be part of the gang. There’s a fair amount of camaraderie. If everybody hates you and you’re a salesperson, that doesn’t work very well because no one will hang out with you. Effective sales teams that I’ve been part of, while they are competitive, they’re certainly more than willing to talk to their peers about what they do. Many times, they will have the point of view of, “You probably can’t do it as well as I do so I have no risk in telling you what I’m up to.”
I think the sales manager who’s doing his or her job correctly is drawing from the entire group all of the things that can be done that tend to move the meter in work in that particular business. Then bringing the team together so that those best practices are shared amongst the group in a way that they’re digestible or consumable. Most people that I’ve worked with are more than willing to be part of that process.
That’s great. Whether you’re pitching an investor for money or pitching for a new client, it’s all the same, where you have to be able to describe, as you said, what do you do that’s different and better and be able to prove it. The best way I know is through stories. You write about this is Second Stage Entrepreneurship a lot. Where you have a whole process of tell a story about a problem another client had, and be sure to name that client, and how they tried it without success, without your help. Then how you came up with the solution.
Then most importantly, which I think most people forget in these kinds of stories, is what kind of ongoing success does the client have from working with you. Can you tell us how you developed such a smart strategic way to tell a story that helps drive sales?
What’s Your Story
Actually, I read a book. This is called What’s Your Story. It’s written by a University of Chicago Business School professor by the name of Craig Wortmann, called What’s Your Story. Some of that goes back before that. My GE days, one of the things that we would do is we would build stories about where we had done this work for others in the startup world and it became a far bigger necessity for success.
If you have a company that doesn’t have a name brand and you’re trying to sell to a Fortune 500 client, you have to build credibility and trust. You can do a little bit of that by how you behave. In their heart to hearts, they want to also know, who else do you this for and how do I know that I’m not making a career limiting decision by bringing you into my firm?
The stories are a great way to build that credibility and trust, especially if you can make them personal. You name the person that you were working with and you talk about the impact that it had, not just on their business, but on them personally. Because in the end, almost everybody makes a business decision based on the impact to them personally, and then they back into the business rationale for that decision. It’s not always that way, but it almost always is that way. It’s very predictable human nature.
[Tweet “Build credibility and trust through storytelling.”]
I love that. Everyone thinks if we just do the job you’re asking us to do and there’s RFP, we’ll get the business. If you tell a story of somebody else hiring you over a competitor and that person looking so good to their boss that they got promoted, that’s an example of a personal impact.
In fact, throw the RFP away. You’re not going to win it. Unless you helped to write it, it’s a waste of time and effort. Spinning your wheels.
In reading your book, I came across that we have a mutual friend, Paul Rand, who runs his wonderful social media agency in the Midwest in Chicago, my hometown. He said, “Your brand is not what you say about yourself, it’s what your customers say about you.”
[Tweet “Your brand is what your customers say about you.”]
Exactly.
I’d love to have you speak to that, about not just your brand that you’re working for and how important it is to sell the brand of whatever company you’re working for. This whole concept of having a personal brand, I think is really essential as a salesperson. Don’t you?
It’s not only essential as a salesperson but for any role in life. Think of the politicians that are on the news right now. They all have their personal brands, which in some cases is helping them and then some cases it’s not. The other part of this is it takes a lifetime to build a reputation and not very much time at all to wreck it. What Paul talks about, and I’ll actually see him on Friday, is you should live your life as though every day is part of the building of your own personal brand.
[Tweet “It’s not so much what you say. People watch what you do.”]
Again, it’s not so much what you say. It’s people watch what you do. Just living a life where you’re true to your word and if you say you’re going to do something, you do it. If you’re building a business or you’re part of a business, make sure the business behaves in a very similar way. If you say you’re going to get back to somebody on Tuesday morning, get back to them on Tuesday morning. Not Tuesday afternoon.
Dan, you’re singing my song. That lack of integrity drives me crazy. Sometimes, you can set the bar just by doing what you say you’re going to do. If you say you’re going to follow up, follow up. That’s automatically sets you on the top, I don’t know, 10%, sadly, of salespeople who don’t follow up, the 90% that don’t.
It’s probably higher than that.
One of the things you talk about is this written monthly review. A lot of people hate reviews, a lot of people love them if they get good ones. I like this whole concept of doing it monthly instead of quarterly or twice a year. Some of the questions that you think people should be is asking is, how do you feel about last month?
I think that’s really fascinating, is to tap into people’s, do you feel proud, do you feel embarrassed, do you feel frustrated? Then, what didn’t happen that you want? This for me is the number one thing that made me successful is, what are your top ten accounts and your top ten opportunities? If you just focus on that, I think you will, the 80-20 rule kicks in, don’t you agree?
The important part is that the people who are doing really well get really good reinforcement and get the help that they need to do even better.
I would agree, because the ones that are on that top list are probably not going to get done. You think about any executive, it’s similar that they can only really act on the top five things on their list of objectives at any given point and time. If you’re trying to get to them with something that’s not on the list, good luck getting … They might listen but they’re not actually going to take action on it. Same is true with driving sales activity. When I was first told I had to this, this is one of the stories I tell on the book, I said, “You got to be kidding me. Monthly? Seriously?” I pushed back on it and I thought it was just going to be a time consuming bureaucratic process.
But it’s just the opposite. The people have to come in with the knowledge of what they did in the prior months, what they’re going to do in the current months. Probably the important part is that the people who are doing really well get really good reinforcement and get the help that they need to do even better. Sometimes those conversations just don’t happen with the people that are doing well. The people that aren’t doing well is a paper trail that’s built up over time. “Let’s see talked about last month. We’re having the same conversation again. This doesn’t really feel very good to me.
It’s groundhog’s day.
Deja vu all over again, as the saying goes. It doesn’t take very long before you realize that this is not going to work. At that point, then you don’t have to go through the charade of a performance plan. You can just move on the person because the trail is already built. The most important thing is it helps the good people do better because it reinforces the behaviors that they have put in place, that are responsible for their success.
The review forces a conversation that, “Where do you need help?” One of the big jobs of a sales manager is to really help the team, help the individuals that are part of the team be successful. It’s not to manage and control. That’s what people think. That’s not it. It’s being helpful.
One of the things you have on your GrowthPlay website is how to not only find great talent, but keep them. Can you speak to what your secret sauce is there?
It’s probably not changed in 30 years. Really, there’s two things that I think are critically important. One’s the culture of the business. Does the culture and the mission resonate with the people that are part of the team? If they’re engaged in a business that they don’t really like, good luck keeping that person over the long haul. That’s one. Then related to that is who they work for.
Probably the most important person is their direct supervisor. If it’s corrupt or bad at the top, that will engender cynicism and it will end up rotting from the top eventually. Ppeople who won’t put up with that over the long haul. The truth is when people quit, they quit their boss or their bosses first and foremost, and everything else follows.
[Tweet “When people quit, they quit their boss first and foremost.”]
It’s not for the extra X percent of money, is it? It’s about not feeling appreciated a lot.
Or you just work for a jerk. There was a study in HBR, I just read a few weeks ago, was done by some Gallup researchers. This is almost hard to believe. I think it ran last year. They pointed out that American businesses hire the wrong person in the first line managerial role 82% of the time.
Wow. Do you think part of that is if you’re a great sales person, then you get promoted, and suddenly you’re sales manager and it’s a completely different skill set?
Absolutely. In fact, the better the salesperson you are, the more likely it is that you’re not going to be a good sales manager. In fact, we have the science behind this, only 10% of successful sales people have the innate behavioral DNA to be successful sales leaders.
What’s the solution? Should they go through some training if they want to do that? Or is it just not in their DNA? Doesn’t a sales manager need to have been a sales person to understand what’s required?
As a salesperson, it’s all about yourself. As a sales leader, it’s all about the team.
That is true. In fact, you have to have been a somewhat successful salesperson to be a successful sales leader. But you have to go find the people in your sales organization or who exist elsewhere who both could sell and can lead people. It’s a narrow pool of people you’re looking at, but you got to find them or it’s not going to work. Think about it. As a salesperson, it’s all about yourself. As a sales leader, it’s all about the team. As a sales leader, the job is to facilitate an outcome through collaboration. As a salesperson, you just take charge and get it done. Much like if you think about an athlete versus a coach. It’s the same analogy.
Yes. Got it. Terrific.
If you’re really good, you don’t even realize what you’re doing. You just do it naturally. Can you train other people to do that? Maybe. Some can.
Yes. Or, do you have the patience to train them? That’s the other thing you have to realize. Just because you’re on a certain level of expertise, the junior salespeople probably aren’t. They’re going to need some hand-holding and some patience.
Very true.
Dan, how can people follow you on social media? Obviously, GrowthPlay.com. Tell us the best way to keep track of what you’re doing and how to engage with you.
I’m on Twitter at @danweinfurter. I’m on LinkedIn. I think it’s DanielWeinfurter. I have a personal website, DanWeinfurter.com. We obviously have a company website, GrowthPlay.com. All of those tend to work and work pretty well.
Fantastic. Obviously, besides the Second Stage Entrepreneurship, which we’re going to put the link in the show notes for people to buy, you also mentioned that great book, What Is Your Story. We’ll put both of those in there. Dan, any last words or thoughts to leave with the listeners about how to pitch or how to sell?
Probably the last thing, sales, in my view, is one of the last great frontiers that’s still not viewed as a discipline, like finance or marketing or engineering. Yet half the people that come out of college end up in a sales role and any white collared professional spends a significant portion of his or her time in their occupation of selling.
I think it pays everybody dividends to actually do what you would do with any discipline, which is to study and get good at it, and not just think that you can wing it. There are definite activities and processes that are proven to work in sales, just as they work in other disciplines, and give sales its due and its day in court, because it’s deserving of it.
[Tweet “Give sales its due and its day in court, because it’s deserving of it.”]
Fantastic. Dan, thanks again for being on the show and for talking about hiring smart people. You’ve been a great guest, and everybody, go get this great book, Second Stage Entrepreneurship.
John, thanks for having me on the show. I appreciate it.
Links Mentioned
J Robinett Enterprises
John Livesay Funding Strategist
Dan Weinfurter Website
Growth Play Website
Dan on Twitter
Dan on LinkedIn
Second Stage Entrepreneurship by Daniel J. Weinfurter
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Get VC Funding – Interview Lylan Masterman
Posted by John Livesay in podcast | 0 comments
Listen To The Episode Here
Episode Summary
Lylan Masterman is a Venture Capital Investor at White Star Capital and a Kauffman Fellow. Lylan shares helpful tips for selecting good board members as well as being a good board member yourself. At White Star Capital, Lylan focuses primarily on late Seed and Series A investments, but he does offer advice on how an entrepreneur can successfully navigate between Series A to Series B rounds. Listen in for more!
Get VC Funding – Interview Lylan Masterman
Hi and welcome to The Successful Pitch podcast. Today’s guest is Lylan Masterman, who is a venture capital investor at White Star Capital in New York. He has primarily focused on late seed and series A investments. He’s also a Kauffman Fellow, where he is doing academic research project on the Internet of Things. He previously worked as a software engineer in product management for 15 years. He joined Atlas division of aQuantive in 2004 where he focused on big data. He helped lead the company’s Rich Media advertising technology platform.
He’s also led product organization for 4 early stage companies. Prior to joining that he worked at Microsoft and he’s also worked at Sierra Ventures, which is a San Francisco based VC firm. We’ll be sure to ask him the differences between San Francisco and New York, as I’m sure there’s quite a few. Lylan, welcome to the show.
Thank you, John. It’s a pleasure.
Before we get into all the wonderful things you’re doing at White Star Capital now, would you take us back to your days of being a software developer at IBM and then being a program manager at Microsoft? Did you have a vision that you were eventually going to get into VC? How did you go from that to where you are now?
White Star Capital
I was a computer science geek. I went to the University of Waterloo which, for people who are not familiar with the school, it’s considered the MIT of Canada. For the people in France, it’s the Polytechnique of Canada. From there, my last internship or coop in the ’90s was at Microsoft WebTV in California. My manager at the time, we had discussed career options. There were some people down the hall who were product managers, or by Microsoft parlance, program managers.
We talked and we agreed that that could be a really good path for me because I was getting frustrated spending hours on end, trying to fix a bug in the code that was a missing semicolon. I like the interpersonal aspect while also leveraging my technology background. I went to Microsoft full time in Redmond. I was on the first team to launch a Visual Studio .NET. The first ever .NET team in C#and J#.
Then I went to a company that I’d never heard of that time actually, in Seattle, called Atlas, part of aQuantive. We doubled and tripled the business year over year. It was just fantastic. I ended up having four jobs simultaneously. I was running the Rich Media product, behavioral targeting product, user experience, and internationalization all at the same time. Because that’s what you do when a company is growing quickly. In my last year there, Microsoft acquired us for the $6 billion, which at the time was larger than all of Microsoft’s other acquisitions combined.
That’s quite an exit there.
Yeah. Skype subsequently surpassed us. What was interesting there is that Mike Galgon was one of the co-founders of aQuantive. At one point I approached Mike for a little bit of mentorship. I was considering to go do my MBA. I was already in my 30s, so it was now or never. Mike was a great mentor for me. In the discussions, we talked about the history of aQuantive. The web was different back then, knowledge about Venture Capital is different back then. Your show was not on back then.
That’s true.
Mike, he told me about the history of starting aQuantive, which was then called Avenue A. He told me about how he and his co-founders started it, but also how he raised money from venture capitalists. I didn’t even know what a venture capitalist was. Similar to how my manager at Microsoft in the ’90s urged me think about product, Mike didn’t necessarily urged me to think about venture, quite the opposite. But he did awaken my interest into it, even though he didn’t necessarily think that would be necessarily a best choice of career. Because it’s a dark side and all.
Get VC funding: I would find the one person in the firm who I thought had the most similarities to me and I would email that person.
I started thinking more and more into it. I thought, “I might just absolutely love this.” It was a perfect timing for my career because I was going already to business school. Business school’s a great time to try something new. While at business school, I decided that I was going to try venture capital. I did not know that the economy was going to tank and that I’d be looking for an internship in 2009. What I did is I networked.
For me, what that meant was I looked up every single VC firm I was aware of or could learn about online. I read the bios of every partner in principle in the firm. I would find the one person in the firm who I thought had the most similarities to me or most affinity to me, as some people put it, and I would email that person.
I’ll give you the colloquial version of the email. Of course the email was very formal, but the colloquial version email basically said, “Hey, we have this in common. We both study mathematics, we’re both Canadian, we both work in online advertising, etc. I think what you do for your career is interesting. Do you have 20 minutes? I’d like to pick your brain.”
I love that so much because I’m constantly telling the listeners, you must do your homework on the investors you are fortunate enough to pitch. What you just did was, this is also obviously how you got a job, but it’s that same … Look at the similarities because you want to make sure that who you’re even approaching for money has a lot of things in common with you, whether it’s background, experience, connections. What you just shared is gold. I love it. Keep going.
One of the investors I reached out to is a New York investor, Geoff Judge. In my conversation with him at the end of the call, he said, “Hey, Lylan. I like you. I think you have some good potential. There’s no space at my firm to take on an intern, but let me introduce you to somebody.” He introduced me to his friend, Mark Fernandez.
Mark’s admin wrote me back and said, “Mark would be happy to have a call.” I did what you’re trained to do. Lie. “I very much would appreciate a call but I happened to actually be going to the Bay Area in a few weeks. Is Mark available to meet in person?” She said, “Yes.” Then I booked my plane ticket.
I met Mark in person. Mark made it very clear to me at the beginning of the meeting, they had never hired an intern before, they had no desire too. What I subsequently learned also is that the head of Sierra Ventures, the founder of Sierra Ventures, is Peter Wendell, who actually teaches venture capital at Stanford GSB. One can reason that if Sierra were to bring on an MBA intern, it would be from someone from GSB.
[Tweet “Get VC funding: Tenacity and persuasion is required to get someone to say yes.”]
By the end of the in-person meeting, Mark seemed interested. I think my technical background combined with fact that I was already in my 30s, didn’t need to be overly coached, had an impact. He knew that he could bring me on and I could run independently. I just owe so much to Mark for giving me that break. It was an absolute joy. From there, I had a great experience at Sierra, and then I applied for the Kauffman Fellows program.
Let me just ask you to pause because there’s another gem there. The objections you got at Sierra. Most people would just say, “Oh well.” Lying is not something we ever propose people do, but you were willing to go the extra mile, put your own money and spend your own money, your own dime, to get yourself there for that interview that didn’t look promising. But you still were willing to do it.
That’s that extra mile that a lot of people, “I’m not going to do that unless I really think I have a good shot.” You still went. You get there. All you do is hear a bunch of objections about why they never do it, and if they do it, it’s going to be from somebody from someplace else, and then you are able to turn that around. That’s the kind of tenacity and persuasive selling skills or storytelling that’s required to get someone like you now to say yes.
Get VC funding: Show that you researched me and you didn’t just simply do a copy and paste.
Very much so. The idea of what you said earlier, of researching somebody, of understanding their background, understanding your commonalities if there are some. You don’t need to have some but at least show that you researched me and you didn’t just simply do a copy and paste. Maybe we’re drastically different about something and you want to talk about that. That’s fine. Just show me that you didn’t do a copy and paste and that you’re willing to do a little bit of effort just the way I continue to do.
It can even be somewhat playful. “I see you speak French, I eat French fries, does that count?”
I haven’t received that one but, yeah. At least it would show some level of research.
And some playfulness. If you want to stand up from the crowd, sometimes you have to do something a little out there like that. You’re doing well there. Tell us about the Kauffman experience.
At Kellogg, Azeus Jelani was a year ahead of me. He’d been selected for the Kauffman Fellows program. I learned a little bit about it from him. I looked up the list of Kauffman Fellows through the history of the program. There are many fellows who are part of the who’s who of venture capital. The program is a two-year program where we meet once a quarter for three or four consecutive days. In the times that we meet once a quarter, there is a fixed curriculum.
Get VC funding: The curriculum is specifically on how to make us a better technology investor.
The curriculum is specifically on how to make us a better technology investor. The curriculum doesn’t relate to term sheets and financial terms. It’s assumed that we learn that on the job or we’ve already learned it. If we don’t then we can just ask. Let me give you two of my favorite examples of the curriculum. One example was how to be a better board member. What Kauffman did is that they invited internationally recognized VC’s who are known as being exceptional board members.
Is this advisory board members or a board member of directors?
The board of directors, because generally as a venture capitalist, that’s …
You’re on the board.
Absolutely. That training was outstanding.
Do you have one or two takeaways on what makes a great or how can you become a better board of director?
Everything that happens in Kauffman is Kauffman confidential.
Sorry, okay.
No, no. What I can say, because a friend of mine actually recently published this and so he leaked the information first, if you will.
Fair enough.
In addition to having great board members come in and speak to us, we had an entrepreneur come in and speak to us. A well-recognized CEO. At one point, the question was asked of him about his board and his level of appreciation for the board. There were many of his board members who he felt did not contribute as much as they’re capable of, they were not as helpful. He thought that all those individuals had the networks, had the skills, had the intelligence, had all the attributes required to be helpful, but just had never invested enough time and effort and mental energy.
[Tweet “Get VC funding: Time, effort and mental energy.”]
When we asked him which of these people would you want in your board. Again, the answer was surprising or was disappointingly low. The key takeaways there were often about some of the simple stuff, John. Simple. Read the deck, as a board member, read the deck a week in advance. Assuming the CEO sends it to you a week in advance. If you have questions, start asking those questions in advance so that you’re not stalling the board meeting unnecessarily.
Those are the three key elements to be successful in anything, whether it’s pitching for funding, being a good board member. It’s all, like you said, simple things. Put in your time, put in the effort. Not just effort of being busy, but mental energy. I love that. That’s such a great line.
If you just do what intuitively feels like the right thing and you make your portfolio become your priority, that should naturally occur. There’s a lot of the small things too. Your behavior in the board meeting. How often are you checking your cell phone or email? Are you writing down notes for yourself about what’s been discussed and about your follow up and your action about how to be helpful. That’s important stuff.
Sure. It shows you care.
Get VC funding: It takes an attentive board member to recognize a seminal moment and to make a certain recommendation.
It does. We should care because our job is on the line, our personal income is on the line, our reputation is on the line. In the life of most companies out there, the CEO is driving the company. But there can be one or two seminal moments where an outsider, as in a board member, will observe something that the operational team, the CEO, the C-levels, the VP’s, will not observe because they’re stuck in the wheats. It takes an attentive board member to recognize a seminal moment and to make a certain recommendation. Or to even ask the intelligent question that allows the CEO or the team to reach a certain conclusion.
I love that. That’s so great, because it works both ways, doesn’t it? When you’re pitching someone like you to get funding, you better be sure your phones turned off. You better be sure you’re listening to what you say and maybe even taking a note during the pitch meeting. You show that you’re engaged.
Absolutely. It’s fine to have your laptop open the whole time if it’s clear that you’re taking notes and you’re not overly multitasking. Or if there is something urgent in your life going on and you’re expecting a certain phone call, just say so.
Get VC funding: When I know I have another meeting, instead of being the guy who is always checking the time, I set myself an alarm.
One little thing that I try to do, and I think I do more often than not, is when I do have a meeting with someone and I know I have another meeting coming up thereafter, instead of being the guy who is always checking his cellphone for the time or checking his watch, I set myself an alarm. That way there, I’m not rudely checking the time. I trust that my alarm will notify me when it’s time to start wrapping up the meeting.
Nice. That’s very helpful. You’re meeting once a quarter. Obviously it’s a huge commitment. How to learn to be a better board member. Is there anything else you can share from those confidential quarterly meetings of what you’ve learned or no?
There was another session on how to best define your personal brand and your firm’s brand. You can imagine that the VCs that we invited to speak on the branding side were different than the board member side. Some people are much better at one than the other. For us to be able to pick and choose and learn from the best at each part of the curriculum is key to Kauffman.
On the branding, it’s all the normal stuff that we talk about, just applied to venture. Branding is especially difficult for VCs who are considered generalist. A generalist is defined as a VC who invest in many different categories.
You don’t specialize. “We only do medical or we only do fintech,” then people will say, “Okay, that’s your brand.” There’s still so much branding that can be defined. I can’t wait to talk about White Star’s branding in a second. Please keep going about, I’m really curious about what they might have told you about how important it is to have your own personal brand.
[Tweet “Get VC funding: Have a personal brand that is memorable.”]
Your personal brand and your firm brand need to be very complimentary. I certainly hope so. At the same time, we are each individuals. We each have our own way of being memorable within the firm. That’s how it is, I hope, with all firms. Be it that you organize events, be it that you wear some kind of peacock, to use a term.
At the end of the day, those are great hooks into what is the core of you and your firm. It’s fine to have that little memorable thing that gives someone a reason to remember you. Then they also have to remember you for the key two things, which are being really, really nice and being incredibly helpful or useful. Because a nice person who’s not helpful is just not all that valuable.
We’re going to tweet that out. “You must be nice and helpful, not just nice.”
[Tweet “Get VC funding: Be nice and helpful.”]
It’s absolutely critical. There are some people out there who are known as the nice guys or the nice women. It’s important to be nice, but the buck does not stop there.
I also like this concept of your personal brand is defined by what can you do to be memorable. That’s another great tweet. It’s so important. Is it something you wear, a certain hairstyle, colored socks, or you’re known as the go-to guy for events or you’re known as a go-to guy for being able to help people with their pitch or whatever it is.
That stuff is a little bit kitschy but it works, as long as it’s done effectively. Then there’s just the core fundamental parts of branding. One of the firms that I admire the most in the whole wide world is Emergence Capital. Emergence is truly a top firm, a fantastic portfolio. The people I know there, I can’t speak highly enough of.
[Tweet “Get VC funding: People know you for something important.”]
At Emergence, they defined themselves early on as the firm that invests in SaaS, before people even knew what a SaaS was. They use a couple of other terms around SaaS. Because they started investing in SaaS before the term SaaS I think was even defined. They invested early on in SalesForce.com. That’s a strong form of branding. All the other stuff helps.
First, on capital. What do they invest in? There’s something nice about either by your name or just how you define yourself externally that people know you for something important and as applicable to many entrepreneurs.
Let’s talk about the branding of White Star Capital. Before the show started, you told me a little story about how they came up with that name, White Star, for the VC.
White Star fundamentally, we are a transatlantic firm. We have investments in many parts of Western Europe including London, Paris, Berlin, Stockholm, and also in North America including New York, Montreal, Toronto, Ottawa. We even have some investments in LA and San Francisco. Looking at the history of what brings both sides of the Atlantic together, White Star Cruise Line, I may not have the exact details straight here, but it’s effectively the first cruise line, commercial cruise line, to cross the Atlantic.
Perfect. That said it all, right there. Even the little logo has a white star obviously. It instantly brands you as a place that is international and cutting edge, you being the first and all that other great stuff. In your bio, I talked that you lived San Francisco as a VC and now you’re in New York as a VC. I rarely get the chance to talk to people who’ve done both coasts and they’re so different. What would you say are some of the differences about being a VC based in New York versus San Francisco?
The differences are shrinking, I must say that, because New York is becoming very much more focused on all the industries of technology. It’s no longer so strongly focused on ad tech and fintech and fashion media and so on. That being said, the competitive dynamics in the west coast historically in the last few years, even though it is slowing down a little bit now, are different. The time it takes to make an investment at the Bay Area has shrunk because of the competitive situation.
Get VC funding: The time it takes to make an investment at the Bay Area has shrunk because of the competitive situation.
My friends who are Bay Area investors, in order to make the best investments, some of them have learned to be more proactive at creating investment theses or mini theses, if you will. Identifying some sub sector of tech and researching it in advance so that when it comes time to actually speak with a certain company that’s trying to raise the amount of money that you generally invest, that you already have your market knowledge, and so you don’t need to do catch up.
The reliance that a lot of VCs have an investing in companies that’s introduced to them, that’s decreasing. It still exist, it’s still very strong. But the proactive investors who go out there and say, “Here’s what we invest in. Here’s what we’ve established in thought leadership. Here’s where we have strong knowledge.” That allows you to make investment decisions a lot more quickly.
Now, one of the pride and glories of your portfolio is the Dollar Shave Club, which is such a success story. Can you share with us where you got involved? Was it seed into series A or how did you get involved with the Dollar Shave Club?
We are investors in a company called Science. Science is also located in LA, as is Dollar Shave Club. Science is effectively a startup incubator. They call themselves a studio. That’s what really what they are, is a startup studio. One of the startup studio companies that came out of Science was Dollar Shave Club.
By being an investor in Science, the head of Science is very good at letting his investors know when there’s something good coming from his program, from his studio. That’s when we learned about Dollar Shave Club. This was before the video came out. It was very good timing.
Get VC funding: We learned about Dollar Shave Club before the video came out. It was very good timing.
A funny story with Dollar Shave Club. I was having coffee with a friend of mine in venture capital a couple of months ago. He had taken a deep look at Dollar Shave Club, but he ended up passing. His reasons were very sound at the time. No product, no traction. They say they’re creating some video that’s going to go viral. Yeah, right. Then of course, they do the video, it goes viral. All his friends who didn’t even know that he had even looked at Dollar Shave Club are now sending him the video.
It kind of like rubbing it in your face. You can’t predict what’s going to viral or not. That’s for sure.
They didn’t know that they were rubbing it in his face, as you put it. He was like, “Darn it.” Looking back at his notes, his logic was sound.
Somehow you still did get involved with that, and it’s been a huge success.
It worked out really, really well. The most recent round of financing was quite large. The number of products that the company now has, it’s a lot more than just shaving products.
I know. I’m a customer. Everything, from what to wipe your butt with. It’s hilarious branding, but it stays consistent. It’s all funny.
It is.
It’s great. Talk about disruptive. I just love it. Now, can you share with our audience, since it’s called The Successful Pitch, what you think makes a good pitch?
Ultimately, giving a good pitch, I liken it to the word “story”. I assume some other VCs have told you the same thing. It has to be a story that gets an investor excited. Now, don’t get me wrong. Some of the best stories for me are really unsexy, boring businesses. But at the end of the day, money is sexy.
That can be misinterpreted by some people. But people who understand, the crux of what I’m saying, the genesis of what I’m saying, is that you can be doing a startup on improving database, server, something. You tell your friends, your non-geek friends, about improving something with database. Or you tell your parents, if your parents are not technically inclined, about improving something on database stuff. That doesn’t sound all that glamorous in a way.
[Tweet “Get VC funding: At the end of the day, money is sexy”]
It’s not like working on a social media startup. But still, a company that’s working on massively improving a database in some form or doing some artificial intelligence product for the enterprise, those can often also be really compelling businesses. They’ll generate meaningful revenue and meaningful recurring revenue.
It’s great. Do you often have people come to you at seed and then you’re there for their second rounds? Is that a common experience?
Yeah. There are times where we are the first institutional investor. Sometimes, that’s often a seed round. There are times where there are already great seed investors and it’s time for the company to raise an A. Those seed investors, they don’t have the capital, the check size gets too big for them. We’re there for the A. Ultimately, that’s a core part of the White Star strategy, is to do the late seed and the series A, and then help our companies get to the B. That’s very important, to the help and get to that next step.
What would you say, besides growth and traction and hitting the milestones, are some of the things that are so important to help somebody get from series A to series B?
The quality of the team.
[Tweet “Get VC funding: Quality of team is more important the more money you raise.”]
Just the same as the seed. It’s amazing how that never goes away, does it?
Yeah, but you know, suddenly when you’re trying to raise your … For every round, every subsequent round, there are higher expectations on the team. One of my colleagues, Christian Hernandez, out of London, one of the founders of White Star, he blogged about this recently. How it’s important to be leading a company that is today’s company, not yesterday’s company. Today’s company, the CEO may have been also historically doing most of the finance or heading up product.
Get VC funding: As your company continues to scale, you need to bring on leaders in each of those job functions.
At some point, the company should get big enough that the CEO should not have time to do both. You need to bring in a head of finance or the head of product, etc. It’s fine to go dabble a little bit in those areas and to coach on those areas. Ultimately at the end of the day, as your company continues to scale, you need to bring on leaders in each of those job functions.
Including, I would assume, a more impressive board of advisors than you might have at the seed round, correct?
The board of advisors can be helpful. When an entrepreneur tells me that h or she has an extraordinary board of advisors, I look at the names, I look at the titles and all that. Then what matters most to me is, these are great names and all, but what have they done for you lately? How active are they? Are they people that are in the office regularly or are they people that you have a call with one hour a week? Are they people who say, “Call me up, I’ll try to help you,” and at the end of the day, they end up calling you once or twice a year.
Very different levels of involvement.
That’s critical. Because at the end of the day, the people who are working the greatest number of hours on average in the company are often, not always, but often the most influential.
[Tweet “Get VC funding: people working the most hours are often most influential.”]
Interesting. Is there a book that you would recommend founders read about life or funding or anything you just think is important for them to know as people?
I’m going to avoid a lot of the obvious books. I’ll go a little bit off the beaten path. There is one book that I still remember something from even though I read it in 2009. The book is called The Trusted Advisor. In The Trusted Advisor, they talk about the formula for being a trusted advisor. Really, it’s not about being a trusted advisor. It’s the formula for trust.
I love it.
The formula, I call it the CRIS formula, and you’ll see why. To develop trust, you must have a high level of credibility, reliability, intimacy, and then a controlled level of self-interest. CRIS. I try to break this rule. I try to find errors in this. Ultimately, it really did come down to those four. Credibility, reliability, intimacy, and just don’t have too much self-interest.
[Tweet “Get VC funding: Credibility, reliability, intimacy and controlled self-interest.”]
Wow. Control self-interest. That is a really tough one for a lot of people. It all goes back to have a little empathy for your customer and a little empathy for the investor.
Absolutely.
Nice. It’s been such a pleasure having you on, Lylan. Is there a way that people can follow you on social media? What’s your Twitter and all that good stuff?
My twitter handle is @LylanM. I don’t publish much on LinkedIn. Actually, LinkedIn, I think I’m also LyanM. I have a specific blogging strategy that I haven’t launched yet. Stay tuned. Ultimately, through the White Star network. I’ll be publishing through there probably on Medium. Who knows?
That’s great. It’s interesting because I take the podcast and transcribe that to Medium as well. We’ll be able to do that as well for you. Thanks again, it’s been a pleasure. I love this trusted advisor criteria and how important it is for the team to continue to evolve as the funding gets bigger. Those are incredible takeaways.
I appreciate it. Thanks, John.
Links Mentioned
J Robinett Enterprises
John Livesay Funding Strategist
Lylan Masterman Website
Lylan on LinkedIn
Dollar Shave Club Website
The Trusted Advisor by David Maister and Robert M. Galform
Crack The Funding Code!
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Investing Between The Lines – Interview with Laura Rittenhouse
Posted by John Livesay in podcast | 0 comments
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Episode Summary
Laura Rittenhouse is a trust and valuation expert, as well as a financial strategist and innovation coach to fortune 500 and small cap companies. She is also the founder of Rittenhouse Rankings, Inc. and the author of Investing Between the Lines. On this episode, Laura explains the importance of candor within an organization. She believes candor is what makes a company and its team succeed against the toughest of odds.
Investing Between The Lines – Interview with Laura Rittenhouse
Hi and welcome to The Successful Pitch. Today, I’m thrilled to have as my guest, Laura Rittenhouse, who is a trust and valuation expert as well as a financial strategist in innovation codes to Fortune 500 and small cap companies. She’s the founder and CEO of Rittenhouse rankings and the author of an amazing book called Investing between the Lines, How To Make Smarter Decisions By Decoding CEO Communications. I’ve had the opportunity to talk with her before the show. You are all in for a huge treat. Laura, welcome.
Thank you, John. What a pleasure to be with you on this call.
You are not only someone who’s smart and kind and connected, but just so enthusiastic about life. I just love people like you who make the world a better place. Before we get into all the books and your connections to Warren Buffett. Who by the way everybody, Warren Buffett said that you are on the side of the angels. Laura is in fact somebody that you’re going to want to get to know and you must read her books, Investing between the Lines, Buffett Bites. Just such an expert.
How did you become who you are? Take us back a little bit before you started your company and your first early jobs that made you want to get into all this world of investing.
Coming out of college, my first job was being accepted as a Peace Corp volunteer.
I love it.
I worked in an orphanage in Turkey. That was one of the most meaningful. It was a great experience because it was a total failure. It wasn’t a total failure. It was a failure in the sense that we had signed on for a two year commitment. It ended up being one year because the revolutionary fists of a free and democratic Turkey wanted to bang on their heads. It was thought that it would be a good idea for us to leave the country at that point.
I’m going to jump around, but we’ll go back to your background. You were ranked one of the 100 Most Trustworthy People in America by Trust Across America. You’re an expert in candor and trust. You do just wrote this amazing blog, Clowns Without Borders. Now that I know that you were in the Peace Corp, it speaks more to why you have such authenticity around this.
Can you just tell us a little bit about that great blog you wrote, Clowns Without Borders, and how you’re making such a difference in the world by just putting that out there for people?
What an amazing story, John. The story gives us a window into the whole topic of candor. I blog for Forbes. What I’ve wanted to start is the series on Candor Heroes. Who are the Candor Heroes? They’re people who, and as you and I have discussed, are courageous and shining light into dark places. That mission is embodied in the very word.
Investing between the Lines by Laura Rittenhouse
The word candor comes from the Latin candere, which means to illuminate. The word candle of course comes from that same root word. When you think, what does illumination do? It shines light into dark places. Leaders who do that, very impressive and also very courageous.
The blog started out of a webinar I was listening to on a topic very much related to candor, called conversational intelligence. Wonderful work. It links brain neuroscience with the opportunity we have to use conversation in a way to create good things in the world and to avoid creating bad things.
The person who hosted this, a man named Benjamin Croft. At the very end of the blog he said, “Glad that you’re on the call today. By the way, in a few weeks, I’m going to be near the Syrian border with Clowns Without Borders. Wish me luck.” I was stunned. I thought, “Oh my heavens, Clowns Without Borders? I know about doctors, but whoever heard of clowns?” I immediately googled them. It’s a legitimate organization.
I contacted Benjamin. He wrote back to me and we’ve become friends since then. Yes indeed, this story happened after the Paris attacks. He was in Istanbul at the time. He said, “We have to do something. What can we do?”
He used the money that they earned from giving this webinar and they sponsored a tour of Clowns Without Borders. They brought clowns over from the US. They contacted clowns in Turkey. After about a week and a half of training and so on, they actually went to these refugee camps along the border.
Clowns Without Borders
There was one place they went to in Eastern Turkey where only just months before, 20 people had been massacred, on the same stage where they were performing. It was almost like an exorcism there to have this horrible experience, now turned and transformed by the clowns into a place of joy.
I felt so strongly that it was important to get this message out to the world. I’ve gotten terrific response, wonderful emails back from people who were so inspired by it.
It’s just taking a wonderful concept of lighting something in dark places and bringing it to life because it doesn’t get much darker than that. Clowns are such a opposite, you don’t think you have time for laughter and joy when you’re in survival mode. Yet, something like that can remind us all of how we can shift our focus so quickly. Like you said, “Don’t curse the darkness. Light a candle.”
Absolutely. I love what Benjamin said too when he said, “There are lots of things. We could’ve brought them stuff. Stuff can be stolen, stuff is used.” We wanted to bring something that couldn’t be stolen, that could last forever. A memory like this, how could you not love it?
That’s so wonderful. Making a difference. You were at Lehman Brothers for ten years, being involved with corporate finance. Now, you’re running Rittenhouse Rankings. You really have become an expert in being able to cut to the chase, as it were. Really cut through the clutter and get to what’s going on. Tell us about Candor Investment Fund and what you do there.
Leaving Lehman Brothers, and you asked earlier, how did I get to do the things I’m doing today. I loved being in Lehman Brothers. This was the time when Wall Street was still very much guided by the value of making sure that clients were taken care of and serving them and coming up with brilliant ideas on how they could run their businesses better.
I reached a point in my life where I felt that … I think a lot of people, if you’re lucky, you get to the point you say, “Who’s life am I living? Am I living the life I should live or the life that I truly was born to live?” I decided I wanted to take some time out, to figure out what that was.
[Tweet “If you’re lucky, you get to the point you say, who’s life am I living?”]
I spent a year travelling, talking to people. A lot of the CEOs that I had worked with on Wall Street called me and they said, “We still want to work with you. What can we do?” We began to set up investor relations programs, which at that time was a new thing to do.
In doing that, it became clear that the reputation of the CEO was a major factor in the stock price valuation. If my CEO clients could become truly effective, authentic communicators and build trust because, without candor there is no trust. Then this would be a very powerful way to enhance the valuation of their company. Trust is the foundation of a corporate culture in a business.
You’ve got people operating in all cylinders, wanting to work together. They’re aligned in a mission, aligned in a strategy and you’re going to be generating better results than your competitors who don’t have high levels of trust.
[Tweet “Without candor, there is no trust.”]
We’re going to tweet that out, “Without candor, there is no trust.” That is so insightful. What do you think caused you to be ranked as 100 Most Trustworthy People of Business? You’re clearly an expert in this. I’d love to have you define what makes people trustworthy as they have to be candor and transparent. I believe that’s one of the things you’ve talked about before.
I have a client that, when he introduces me to people he likes to say, “I’d like to meet LJ Rittenhouse. She spots bullshit faster than any …” I consider that a great tribute.
That’s great. It is. One of your key expertises is looking at the shareholder’s letter and a stock report and being able to not even have to read anything else to determine whether that’s a good investment or not, right?
In order to be effective with your investors, you have to have a very compelling story and it had to be real.
That’s exactly right, John. That is what has led to creating the first ever Candor Investment Fund. In that work I was doing with CEOs, working with them on their strategies. In order to be effective with your investors, you have to have a very compelling story and it had to be real. Again, the basis of conversation intelligence is that nothing happens outside of conversation, nothing. Conversation is the special sauce that creates things in the world.
It’s not emails, it’s not your proposals, it’s not your business plan, it’s conversation, right?
It’s conversations about the business plan. It’s emails that stimulate conversation. Again, person to person is still more powerful ultimately than digital to digital. Although, I don’t like to take anything away from digital. We’ve seen that it can have a lot of power too.
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In my experience, moving things forward in the world, especially new things, something like candor. It’s funny. People are afraid of candor. When I say the word, they get nervous because they think that I’m judging them as to whether they’re lying or telling the truth.
I think more importantly, what people miss is the element of authenticity. Mark Twain wrote so many wonderful things about candor and truth and lying. He said, “Tell the truth and then you don’t have to remember what you said.”
There you go. It is so important when you’re pitching for an investor too, that you are authentic. Because you can’t lie. It’ll come out during due diligence and then the whole deal will fall apart.
There goes the trust. You’re asking about the shareholder letters. As I was advising my CEO clients, I read lots and lots of shareholder letters. I read my clients letters and then I read letters of their competitors or their peer companies.
Over time, I began to see patterns. That’s the first step in creating a model of reality. That’s the first step in creating a taxonomy so that you could begin to find the similarities and the differences and the ability to compare and contrast. That does make sense to you?
It does. I think it’s fascinating that you can measure something like candor into structure and then make predictions based on that.
The book, Invest between the Lines, which I never expected this. It was more than a dream come true. This book was recommended by Warren Buffett in his shareholder letter. The granddaddy, the gold standard of all shareholder letters. Warren, throughout the years, has been very supportive of our work.
Warren Buffett. The granddaddy, the gold standard of all shareholder letters. Warren, throughout the years, has been very supportive of our work.
What the analysis, when investors, portfolio managers, I’ve talked with them over the years and I’ll give them my conclusions about the value proposition, the investing value proposition in a company. It’s almost ludicrous.
They’ll say, “Yup, we understand. We agree with that. Yup, we agree with your assessment on management. Spot on. Yes, this is a strategic vulnerability they have. Yes, they’re doing great. They make great products.”
So much agreement. At the end, I’ll sit back and I’ll say, “It’s just great that we see so much of the same thing. But let me just observe something. Number one, you spend hours and hours running, spreadsheets, talking to management, talking to employees, visiting customers, talking to competitors, going to industry conferences. You’re doing all this effort.” All I did was read the shareholder letter and we came out with basically the same conclusions.
Crazy. It’s a huge amount of time and money you’re saving people if they just use your expertise. What advise would you have Laura, for someone who is a founder? Maybe they’re public, maybe they’re not.
They have to communicate in whatever form that’s going to be, whether it’s a pitch or a shareholders letter, to people so that you can get a sense of who they are. Is it the candor that we’ve had some troubles and we’ve addressed it versus trying to just gloss over things? What is it you really look for when you’re looking at those letters?
There’s something called a strategic balance. All the topics we were coding and scoring for could be organized into a seven system model.
There’s something called a strategic balance. I described this in my book. After all the years of reading these letters and creating this taxonomy, it became clear that all the topics we were coding and scoring for could be organized into a seven system model.
Those seven systems are, strategy supported by accountability systems. That’s two. Vision supported by strong leadership. The back bone of a company are the stakeholder relationships, the quality of those relationships.
In the center of a business is the commitment to capital stewardship. After all, it’s a profit making company. If you’re not focused on how smartly you’re allocating the capital, you’re probably wasting it and you won’t be meeting your investors’ expectations and you could go out of business. Capital stewardship is the key principle. Something to observe. Most importantly is candor. That’s the seventh system in this business.
As we’ve said, candor supports the quality of those stakeholder relationships and builds trust. Now, you asked how do we make assessments of companies. We have seen over time that companies that are balanced, which have high scores, high linguistic scores, content scores.
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They’re not all strategy, but they have good balance between strategy and accountability systems. Good balance between vision. It’s not over 50% vision and then very little on the other systems. Companies that are very well balanced, you think about it, that gives them a solid foundation to deal with whatever, the economy, their competitors. Whatever gets thrown at them.
That’s one factor. Another factor is the BS and the truth telling. That’s a very important factor. Those are the rankings that we publish every year. We rank order 100 companies based on how much candor, positive candor truth telling they have and how much obfuscation or BS they show in their communication.
When we correlate these top ranked companies and the bottom ranked companies, we’ve found over the past decade, that the top ranked companies outperform the bottom ranked and also outperform the market over this period.
Let’s talk about the connection between candor and vision, which is one of your other strategy systems that you talked about. I’d love to hear that connection and how important it is to balance your vision and your candor.
Let me ask you, what do you think of when you think of vision?
I think it’s important for a founder to have a vision that they can communicate to the employees about where they see the company going. What the mission statement is? What the big picture is? Then turn around and communicate that to anybody who is going to invest. Whether it’s an Angel investor or stockholder, eventually. Having that vision and if that vision needs to change, being able to communicate that with candor.
I’m so glad you asked me that question because it gives me a chance to focus on something that I’ve been spending a lot more time thinking about. You’re absolutely right. When people think of vision, they often think of what’s our mission. I think the word that kind of relates to that but I think is more powerful is, what is our purpose?
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There we go.
What is our purpose? I’ve been watching this video of Richard Leider, who does a lot of focus on this. He likes to say, “What are the two most important days in your life? We can look on this as both a business and as one’s own individual life. Is it the day you’re born and the day you die? No,” he says. The two most important days are the day you’re born and then the day you learn why you were born. Purpose.
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Nice, I love that. We’re going to tweet that out, “The day you were born and the day you learn why you were born.” Great.
That is no different from a company. If you are in a company where you feel that this company is bringing something meaningful into the world, doing it with integrity, you can see what a difference it’s making, boy, that gets you up in the morning. That gets you up. It’s like Warren Buffett likes to say, “I tap dance to work every day.”
What a great image that is. Because there’s a purpose behind what he’s doing. It’s not just to make money.
It is about making money because it’s a score card to tell who’s winning, right?
Right, but if not just about that.
For him, it’s how he’s making that money that’s important.
With integrity.
It’s how can we analyze companies better than others more smartly? Here’s the really important distinction. How can we do it for the long term? What we have is the cancer in our financial system. Here’s a tweet for you. The cancer in our financial system is this focus on short termism.
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Yes, that is a cancer. That’s what causes turnover. That’s what causes in morale. That causes fear. When you’re just focused on short term vision of, “Oh, if you don’t hit this number for the quarter, you’re all fired.” Or, “We’re totally changing our purpose and our mission statement and shutting down factories,” as opposed to seen the big picture of what this could be.
Exactly.
What are some of the other quotes that you like from Warren Buffett? Because he has so many and I just want to hear what some of your favorites are since you’re so connected to him.
The one we shared that comes from his owner’s manual. It’s so interesting. Berkshire Hathaway is the only company that has published an owner’s manual. Just like if you’re buying an appliance and you get in the instructions here, “This is what you can expect from using this.”
He wrote the owner’s manual. If you buy the stock, this is what you can expect from us, the owners. The reason that candor is one of the principles that he follows and promises to investors is because he says at the end, “The CEO who misleads others in public will eventually mislead himself in private.”
There we go. That’s it. There’s the gem. If you lie to other people, you’re eventually going to lie to yourself.
Exactly right. Thank you for saying that because that gets us into the topic of Candor Boot Camp. I have worked with corporations on how to bring more candor into the organization. That means working with teams. What’s most successful is when I worked with multi-level teams. Anywhere from presidents down to factory workers.
It’s so powerful to get the people who don’t normally get to communicate with each other have conversations with each other.
It’s so powerful to get the people who don’t normally get to communicate with each other have conversations with each other, to stimulate that. There’s so much learning that goes on. It requires a certain humility. You’re bringing a humility to that and an openness that leads to innovation and creativity.
Candor Boot Camp, when you think about it John, this is what we’re developing now, Candor Boot Camp needs to be taught in three modules. First, and it’s what we’ve just mentioned in relation to the Buffett quote. First is intrapersonal candor. Bringing people together and helping each other suddenly confront the BS in their own lives. What am I lying to myself about? What is special? What’s my purpose? What is my purpose? If I don’t know what it is, how can I find that out?
There’s that whole piece. People come out of that session and it’s almost like I don’t want to say they’ve been to church because that has a certain connotation these days. It’s very freeing. However, once people have experienced what it means to live candidly, to go back into the workplace and work with other people that haven’t had this experience can be very hard.
The next module is to bring teams together and practice, have skills and exercise where people can practice team-based behavior.
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Because that allows everybody be speaking the same language when you do that.
Exactly, and feel safe. The whole point about candor is that you create an environment where people feel safe to say what they really think and what they really mean.
Laura, it’s so interesting you said that because to me, that’s the highest compliment anybody can ever give me. Is, “I feel safe when I’m with you to be myself.” It’s also the highest compliment I can give anybody. “I can take my mask down, I can be a little bit vulnerable with you.”
When you said earlier about humility is one of the keys to innovation, that’s such an important takeaway for our listeners. When you’re pitching for funding for your company, you have to come across confident and humble at the same time.
In other words, you have to be coachable because that’s where the innovation comes. You can’t know everything. Nobody wants to invest in somebody who thinks they know everything. They want somebody who has a vision, with candor and humility.
Beautifully said. That gets us to the third module, which is creating the candid enterprise.
What’s a candid enterprise? Tell us about that.
We’re inventing that even as we speak.
Love it.
What it means is you start from the individual. The individual works in teams. Then there is a business, an enterprise, a corporation, whatever, that has a set of principles, a set of goals and strategies. That if these are not based on candor, then your teams are not going to be able to be supported in their efforts to candidly co-create and work together and achieve greatness.
There needs to be a design work to make sure that the enterprise itself has principles and expectations built into it. Getting back to our prior comment, that make it safe for people to experience candor on the job.
It goes back again to what you said. If you have a purpose of doing greatness, then everyone’s focused on that as opposed to necessarily trying to claim all the glory for a big idea or something.
Exactly.
Not only do you have to create a great team to get investors to want to invest in you, but then you also have to keep them working well together. It seems to me that this Candor Boot Camp is the secret sauce to keeping a team on the right track. Because you can get somebody who wants competitiveness, “I want to get promoted over you and want credit for this,” you’re way off purpose. It happens all the time.
That’s right. That’s why those three levels, intrapersonal, team-based and enterprise, are absolutely essential to be viewed together. Because if you have one and not the others, you can’t support people in this candid enterprise.
How did you come up with the title, Investing between the Lines? I love the title so much. It implies a little bit of intuition. I would love to hear how you came up with that title.
It’s a play on words. In fact, a lot of people say to me, “I love your book. Reading between the lines.” I have to say, “No, it’s Investing between the Lines.” Of course, that’s the phrase that most people are familiar with.
What does reading between the lines mean? It means that you intuit, that you’re taking signals on what’s obvious, the surface.
What does reading between the lines means, to your point, it means that you intuit, that you’re taking signals on what’s obvious, the surface. You’re getting deeper meaning from it. Similarly, investing between the lines means, “Okay, I’m reading this and I’m intuiting ideas and I’m analyzing, I’m processing information that allows me to make a better smarter investment decision.”
So great. I love it. Laura, how can people find out more about you, Investing between the Lines, the Candor Boot Camp, Twitter, all that good stuff?
First of all, you go to our website. Secondly, visit my blog, or see my articles on Forbes.
Did you have any last thoughts for our listeners about how we can all have a bigger purpose, make a bigger difference in the world from what you’re doing? Is there something that you would like to leave us with that’s inspirational?
Here’s a very, very important concept. People often say, “We need more trust in the world. We need more candor in the world.” That’s only going to happen if everybody makes a commitment to be trustworthy. If everybody makes a commitment, “Okay, I will say what I really think, what I really mean. I’ll say it in a way not to attack people, not to be a jerk, not to beat around the bush. But because I’m committed. My purpose here, I’m committed to work creatively with other people to make a positive difference.”
What’s so great about you is not only do you put that out there, but you also show people how they can do that and make money at the same time. Most people think it’s one or the other. You’re a living example of how to put something positive into the world and be strategic and still make a great return on your investments. Laura, I can’t thank you enough for being on the show today.
John, thank you for having me. Thank you for the work you’re doing.
Thanks.
Links Mentioned
J Robinett Enterprises
John Livesay Funding Strategist
Rittenhouse Rankings Website
Investing Between the Lines by Laura Rittenhouse
Clowns Without Borders Website
Crack The Funding Code!
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Author John Livesay at NewsChannel 5
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