© 2019 by SmartGate Seed Fund I Partners, LLC

Angels of Venture Capital

August 31, 2019

I spent one month during summer shadowing Tim Draper. People hearing about the experience ask me what I learnt. Of course I can’t share technical side of the experience because of the binding confidentiality papers I signed, but I’d like to share 2 biggest learnings. First of those is something I learnt also being a student at Draper University, the second one is a new learning and more comprehensive. However, this doesn’t imply that one is more or less important than the other.

 

The first learning (the reminder) was “getting rich slowly”. It’s not common to hear it nowadays in business, especially from a venture capitalist. The point here is about moving through life (especially in money business) step by step, mastering what you do now, then moving to the next step, mastering it, and so on.

 

The second learning was driven by my hidden agenda to learn about Tim’s principles of decision making, not only as a venture capitalist, but as a person. There was an orientation session planned for me and 2 other "interns" in the beginning of the shadowing experience. During the orientation Tim spent 30 minutes to introduce his approach to venture capital investing, his thoughts and learnings. However, I missed that session because had another commitment in another city and was returning back to the Bay Area only early morning of the next day. What a miss, right?! I had that feeling but hoped it’s not going to affect me dramatically as I’m still here for one month in order to see and learn. So, on the next day I was in the office early in the morning before 9am and Tim was passing by heading to his office. Seeing me, he stated: “Hey, you weren’t there yesterday”.. I murmured something like “Yes, I had a commitment in LA etc”... his response was “I think I have some 30 minutes and can make the presentation for you...” We went to a meeting room, Tim went to his office and came back with his laptop for a 30-mins personal orientation session. I was already blown by the leadership and scale of personal touch before even the session started. Of course, 70-80% of the content was familiar as we try to do business at SmartGate in Draper culture (style), there were some 10-20% of content that we don’t apply at SmartGate because of different investing stages, geography and few other reasons. But there was the last slide that struck me. I felt it was an answer to my hidden agenda: figure out Tim’s decision making principles.

 

A quick note about background, just to understand how important is this learning to me. I have 2 role models in my investing business: Tim Draper and Ray Dalio. I see them as two very extraordinary people keeping their hands on the pulse of the world and riding their industries very successfully. Both of them have very clear mind and built their lives and legacy from zero. Tim started his first fund in 1985 with $8m capital, from which he raised $2m and got $6m loan from the government. He appeared in a watch list of the government, then appeared in its black list and was having hard times with government until one of his investments made 175x return which allowed him to pay back the loan and he appeared on the wall of the same governmental body that was about to sue him as the venture capitalist of the year. Ray Dalio’s history is also interesting, when he grew his hedge fund to 10 people, then the business started doing very poor so he started firing his employees one by one until only one person remained - himself. From that point in the 70s he built the largest hedge fund in the world - Bridgewater Associates, a 1,500 people hedge fund that manages more than $130 billion. Recently, Ray Dalio published a book “Principles”, where he talks about his decision making.

 

So, from those two extraordinary achievers, the principles of the one are public, but Tim’s business is closer to mine, so one can understand how important to me was to learn about them. And now, during this onboarding session Tim approached the last slide and started talking about Angels and Demons of Venture Capital (principles!) for few seconds and we were interrupted as we ran out of time and another meeting was about to start.

 

In those few seconds I tried to take out of the slide as much as I could, and I noticed that Tim used medieval 7 sins/virtues framework to talk about principles. I liked the visuals as those were comics characters introducing pride, greed etc.

 

So, the next few days I was focused on searching in google the pictures I saw on the slide. This wasn’t an easy task but I did it. Then I read more about the framework (great concept for philosophy lovers) and presenting below in my own representation (as I don’t have access to Tim’s original slide).

 

Now, imagine a framework with its angels and demons, good and bad, black and white. Angels are going to help you succeed in venture capital, while demons will be carrying you back and eventually damage your fund. And it’s totally up to you whom you support and work with - Angels or Demons.

 

As the result of my mini-investigation, I tried to couple characters and found the description of angels (those were harder to grasp) in Google Translate.

 * I have edited a bit Chastity. You can find original in Google Translate.

 

Personally, I like the table. I practiced it for a short period and Angels were really helpful :)

 

Of course, I don’t think it’s one-fits-all thing and most probably everyone should come up with his/her own table, however this might be a good starter framework that can be modified further.

 

Enjoy and get rich slowly!