At Oxford, Avoiding Generalism
For the past nine months I’ve spent most of my time in Oxford, researching social policy and the Internet’s impact on access to higher education. While I’ve technically been working at Penny Black and BOLDstart full time as well, I’ve spent most of my time disconnected; reading, thinking, and wandering through the countryside. Here are a few of the more important takeaways:
- There’s no such thing as a generalist. At least not a useful one. Many people who go into consulting or similar fields believe they can study a bunch of different businesses and solve any problem once they have the right set of tools. While I’m sure they can help bring clarity to many problems, there’s nothing like immersing oneself in a space – enough to intimately understand all of the players, issues, and interests. In the startup world this kind of experience gives entrepreneurs a big leg up against others with a similar idea, and it’s for this reason that venture firms put so much weight on a team’s domain knowledge.
- Detach completely for quality thought. I took for granted the importance of having time/space to think clearly, and didn’t realize how hard this is to do in New York. You get used to being bombarded every few minutes with emails, texts, phone calls, meetings, and other distractions. Living in a big city affects your clarity of thought. Being antisocial every once in a while – perferably in a beautiful place –, and taking the time to think, digest, and reflect, leads to amazing results. Simply reacting all the time to the social stimulus around us makes for dull (and stressed) people.
- Diversity of people = diversity of thought. 99% of the people I hung out with in Oxford did not know what an API was, had not integrated Rapportive into Gmail (yet), and were slightly offended when I told them that Klout could predict how influential they are online. Generally we think of diversity as people of the opposite view, but the best diversity is people who are not even on the same plane of thought. Innovation happens between, not within disciplines, and it’s important to expose yourself to that every so often.
I frequently take up issue with the costs of higher education and the general worthlessness of many degrees. But if for whatever reason you are fortunate enough to have the opportunity to do a one year independent study program, it can be an incredible and valuable experience. If you do have the opportunity, don’t go straight out of undergrad, find a program that lets you explore before diving in, in a beautiful place, and in an environment where you’ll be forced to surround yourself with people much smarter and very different from yourself.
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A Startup for Startups
I’m reminded constantly that Penny Black is very much a startup - that happens to be in the business of investing in startups. We launched on a shoe-string budget, we work all hours of the day and night, and are very, very passionate about offering the best “service” we can, to both our entrepreneurs, and our investors.
I certainly have the entrepreneurial bug, and the constant fear that things might not go as planned, which serves to make me work harder to ensure that we’re making the right investments, and that we’re supporting our CEOs in every way possible. Venture capital is a fun and very rewarding space to be creating a company within, though it is definitely not any easier just because we’re “the ones with the capital.” Of course this isn’t the case for every VC, but given our age and relative experience - the need to prove ourselves - the startup analogy fits perfectly.
And I believe that it works to the benefit of our startup teams as well. We’re in the trenches with them, and are willing to put in that extra effort - burning the candle at both ends - to make sure they’re a success.
We Invest In What We Use
Since I began spending more time outside of the Penny Black office meeting entrepreneurs and investors, I’ve noticed that often the first question I’m asked is what type of company we invest in. Given that we’ve invested in a pretty broad range of startups, I’ve given a pretty broad range of answers. But after a year of doing this, I’ve noticed that the startups I most enjoy working with on an ongoing basis are those that make products and services that I actively use.
A great example of this is Rapportive, which I used (and loved) for a long time before being introduced to Rahul, one of the founders. It’s simply a great idea, that creates an immense amount of value for me on a daily basis. And given my general interest in information overload, I was very excited to be involved.
At first I thought that we had to sit down and divide up sectors of interest and expertise in order to provide the greatest value-add to our startups. What I didn’t consider, however, was that by default you become an expert in what you use simply in the process of selecting the tool. It took me a long time to find the best project management tool to manage my last startup’s team, and once I found it I noticed that I quickly became the expert among my friends in online project management software.
So what do we invest in? Most of what I do on a regular basis involves consuming, producing, and connecting data (and people), so naturally I’m fascinated by anything in that arena. Would we look at a medical device company, or a women’s media platform? Sure. There are tons of amazing startups outside of my immediate “usage sphere,” and I love meeting bright entrepreneurs. But when it comes to investing, I’d much rather focus on what I use.
Areas of Interest
I’ve noticed that most VCs apply a “thematic” or sector-focused approach to their investing, because in theory it allows for deeper knowledge of a given space, and by extension an ability to pick the winners in that space with greater accuracy. I don’t have decades of experience in any specific field (except perhaps in causing headaches for teachers and my parents), so defining an area of focus for myself is difficult, and at the moment entirely dependent on where my network is strongest.
Given a desire to begin to specialize in new areas of interest, I’ve recently been thinking about four interlocking themes that I’d like to spend some time getting to know better:
1. True Mobility. Today many of us take for granted the fact that most of the data we use and manipulate on a daily basis now fits in our pocket. As time goes on, the amount of data we’re able to interact with on the go will exponentially increase, reducing the need for stationary and physical hardware. Your phone (/pocket device) will soon be the conduit for just about everything: medical records, virtual currency, your office, etc. You’ll be able to wirelessly link your phone to any machine to provide a secure conduit to access the cloud or other local apps. Many of these technologies already exist in one form or another today, but their distribution and functionality will continue to expand as startups attempt to meet a growing demand for mobile consumption.
2. Information Overload. A significant chuck of my day is spent sorting, sifting, reading, and deleting data, whether that be emails, blog articles, advertisements, or market reports. It’s distracting at best, and a serious drain on productivity and efficiency at worst. And the amount of data I will continue to consume on a daily basis is certainly not decreasing. Solutions like OtherInbox and Gist are beginning to address this growing problem, but significant innovation in this space is going to be necessary in the coming years to help us deal with the increasing openness and speed of data flow.
3. Security in the Cloud. As a rapidly expanding amount of our data is stored in central locations in the cloud, innovation on methods of protecting that data from deletion and theft are going to be increasingly important. Security companies are disadvantaged in that they must be reactive and attempt to “guard the fort” from creative adversaries who in many cases have nothing to lose. Startups are needed to create new methods of processing and storing data that, among other things, decentralize the data and make it more difficult to target.
4. Technology Exchange. There are many technologies we use every day that would greatly improve the lives of those in third world countries, who are dependent on less stable infrastructure, and there are many innovations that have been created specifically for those countries that could greatly benefit us. Examples include the recent advances in mobile communications networks, mobile banking, drug delivery, and renewable, low-cost energy production. I’m very interested in seeing what this space has to offer over the next few years.
In The End It’s All Guesswork
…So investors generally work with people they like. (A great comment from Naval on Venture Hacks.)
The past year at Penny Black, a new venture capital firm in New York, has been a fantastic and eye-opening experience. As I learn more and more about the VC side of the table, however, one thing that continues to nag at me is the difficulty in learning what makes a good startup investment in a sea of great ideas and great entrepreneurs.
It doesn’t help that the traditional exit horizon (when you learn if you have succeeded or failed) for a venture capital investment is generally 3 to 5, or even 7 to 9 years, making it very difficult to quickly learn from your mistakes. My only consolation is that it seems like this issue plagues much of the venture capital world, as evidenced by the poor returns the industry has faced over the past decade.
I can see many reasons for this: 
a broader asymmetry of information in young companies, a lack of data in new markets, and the fact that there are too many variables and not enough hard numbers in startup companies. I’m not complaining though - if you were able to make a science out of venture capital, the profession largely wouldn’t exist, at least not in its current form.
Though lately I feel like due diligence on a startup is similar to trying to define pi – you keep getting endlessly closer to an answer with more and more data and research, until finally you’re forced to make a simple gut decision.
Given this, if you want to be funded I’m convinced that it’s most important to just be a generally nice and friendly person. Everything else is simply signaling.
Juventas Fugit is designed and written by Justin Wohlstadter, who, when not writing in the third person, can be found in a coffee shop talking about startups, thinking about the future of education, and generally procrastinating something important.
- Passions: startups that positively affect the world, education innovation, good design, learning, and meeting those with an equally insatiable curiosity.
- Play: director of product design at Enterproid and partner at BOLDstart Ventures.
- Previously: built the early-stage venture arm of Penny Black. And many other crazy, less successful ventures involving fire extinguishers, measuring philanthropic impact, and creative spaces.
- Pedantry: most of the important stuff I taught myself or learned from friends, but I’m fortunate to have (barely received) degrees from Harvard and Oxford. At Oxford I wrote my dissertation on how internet innovation will disrupt access to higher education.
- Procrastination: can be found on Twitter, Linkedin, AngelList and other web spaces, and be reached via email at my first name at this domain.
