@BeninJLM Rare Medium posts, hopefully well done.
TL:DR — Being nice often pays tangible dividends when you least expect it, and sooner than you’d think
Raising my first venture capital fund was very hard. I had no track record, and was advancing an investment thesis and a geographic focus that were not obvious. Initially, prospective investors were hard to find and I was pressured to close any “fish” I could get onto a hook.
One such fish was Lou (not his real name). Lou was primarily a (very successful) real estate investor, but extremely knowledgeable about venture capital. He had invested in numerous startups as well as a number of VC funds. We met periodically over a few months and he really got into Jumpspeed’s unique opportunity and thesis.
Things seemed to be coming to a head when we had our third or fourth meeting. We’d covered everything. I was hoping for — expecting — a meaningful commitment.
“Ben, I like what you do. I get it. It’s really interesting.”
“But I’m not going to invest. I’ll tell you why. You’re too nice.” He paused.
“You can’t be a nice guy and succeed in this business.”123
I was quite upset. And I completely disagreed. First, I didn’t agree that I’m “too nice.” And I certainly didn’t agree with the argument that being nice precludes VC success. But he was firm, and our tango was over.
A bunch of funny things happened after that.
Later that year, one of my early picks, Breezometer, was named “Most Promising Startup in the World” by the White House as part of President Obama’s worldwide GEW initiative. I wrote a blog post describing how I’d only had the opportunity to invest because I’d been nice.
I’m now investing out of Jumpspeed’s second fund. A few months ago, I was looking over the list of LPs (limited partners, the investors in the fund), who’ve joined Fund II thus far. I was trying to identify patterns among the participating LPs to see where I was having success, and how I had initially connected with them in order to determine how I could find more LPs like them. I found that I could trace all of my LPs to no more than eight individual initial points of contact or referral.
Then I thought about how I had met or connected with those eight people. I realized that I had connected with all but two of them, through some act of kindness, non-business favor, or other “good deed” that was not an investment pitch. Being unintentional and nice had gotten me to 71% of Jumpspeed’s current LPs, representing close to 80% of the fund’s capital.
- On one of my trips to the US I flew in a day early to make a condolence call to a relative, who’d lost his father. I knew how hard the loss was and just wanted to spend part of Sunday with him, before the US work week started, since we don’t get to see them that often and I hadn’t been at the funeral. While we were just sitting around he tried to deflect the conversation away from his grief. “What are you up to these days ?” he asked. “Investing in startups.” He paused for a minute. “You know, you should talk to my friend Mr. X. He might be interested.” “You know him? I’ve been trying to get to him for a year,” I said. “I’ll email him right now,” he said. Fast forward, and Mr. X is Jumpspeed’s largest individual investor.
- Over 20 years ago when I was a law student, I talked my way into a Securities Analysis course across the street at the business school. I wanted to learn about stock picking though at the time I had no plans to become a professional investor. I developed a nice relationship with the professor, who’d had a successful Wall Street career. After I moved halfway around the world and got involved in startups, we didn’t keep up much, but once I started investing in startups I found myself drawing upon some of the wisdom and insights I had gleaned from him. Even though his lessons were in the context of public stocks I found some themes resonated in very early-stage, pre-product/market fit startup investing. I hadn’t spoken to him in around fifteen years, but I reached out to him prior to a US visit, just to get together and let him know how valuable those lessons now were to me, and how grateful I was to him for letting me into the course and spending time with me over two decades earlier. I know that many teachers never get that kind of feedback from former students and I thought it would be cool for him to hear that so long after, and so far away, and in such a different context, his lessons on evaluating risk were so valuable to me. I swear I had no intention of pitching him — to the best of my knowledge his sole focus was public market trading. He responded kindly to my note and said it would be a pleasure to catch up. We blocked an hour between my other meetings. An hour and a half into our meeting we were deep into Jumpspeed’s opportunity, thesis and portfolio. He was fascinated. We were both really late for our next meetings. He leaned forward and said: “Let me ask you something. How would you feel if I put some money into your fund?” Goosebumps. My professor and mentor investing in my fund? “I thought you don’t do this kind of thing,” I said. “And I promise that’s not why I wanted to meet with you.” “I know,” he said. “But if I do invest, it’s not to do you a favor. I like what you’re doing and I want to make money with you. Send me the documents.” A week later he become one of the largest investors in my fund.
- I often speak to groups passing through Jerusalem. These can be student groups, elder hostels, business executives or others who are making their way through Israel to get a taste of the “Startup Nation” vibe. I’ll host them at my office for an hour to tell them the unique story of Jerusalem’s startup renaissance — it’s an inspirational, underdog story about resilience, entrepreneurship, diversity, opportunity and breaking stereotypes. I get asked to make this presentation often. I swear I do it just because I enjoy “evangelizing” about Jerusalem’s poorly-understood ecosystem. There’s no way I can expect any direct benefit for Jumpspeed from these presentations. Sure, every once in a while, as a group leaves our office on to their next stop to see the Western Wall or Yad Vashem, someone will ask me for my card, but I never hear from them again and don’t expect to. Until Brad showed up.
Brad was in the corner of the room accompanying an MBA group from a Colorado university. As the group filed out after my presentation, Brad pulled me aside and asked me for my card. He introduced himself as an investor assisting with the MBA program and traveling with the group. “Your story and investment approach is interesting,” he said. I replied that I thought I had focused more on the ecosystem than my fund, but OK, I appreciated it. He was interested in my fund. “I want to check you out — if you’re for real I’d like to invest.” I figured he was probably caught up in the moment but sure enough he emailed me a week later from Colorado. He grilled me over the phone. He spoke to founders I’d invested in. He spoke to founders I’d rejected. He spoke to lots of people. I kept giving him anything he asked for. Finally he said: “I’m in, And I’m recommending you to all of my friends.” Turns out he has a lot of friends — Brad’s group represented almost half of my new fund’s initial close.
These people aren’t just investors in my fund. They are the largest investors in my fund. And there are more of these stories; these are just the most significant ones. I would not have a fund today, without these stories.
I would not have a fund today, if I hadn’t been nice.
I’m not saying that I’m always nice — though I try to be. But it’s pretty clear to me by now that when I have been nice, it has in many cases paid tangible dividends, often very quickly, and in all of those cases, specifically when I had no ulterior motive, or expectation of reward. It just happened. I “paid it forward” — and to my great surprise I got paid back.
As I thought further about these stories and the lesson learned, I dug up Lou’s contact information and emailed him. With the utmost and most sincere respect for his business experience and acumen, I wrote, I just wanted to remind him of me, and our final conversation, and update him about what had happened to me and Jumpspeed as a result of my being “nice.”
I just wanted to share the lesson with him, though I guessed that if he did respond to me at all, it most likely would be another off-putting dismissal. I was prepared for that, and resolved in advance to use it as further motivation.
I got a ping back right away. The fastest response I’d ever received from him.
Hey, he wrote, nice to hear from you. We’ve actually been following your progress from afar and have heard things are going well. We’d like to take another look at Jumpspeed towards the end of the year……
I swear I didn’t reach out to him in order to..…..you get the gist.
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