Does It Occupy Your Shower Time?
For 3+ years now, I have had the continued pleasure of serving with two luminaries of the VC industry – Bob Kagle of Benchmark Capital and Jim Breyer of Accel Partners – on the Board of Directors of Prosper. Bob is most noted for having served on the boards of eBay and Ariba among many others. Jim is most noted for being on the boards of Facebook and Wal-Mart among many others. Both are great guys who have been as kind as they have been insightful throughout the Prosper experience.
A conversation yesterday reminded me of my first meeting with Bob Kagle just prior to our investment in Prosper. It was January 2006, and Bob happened to be in Boston for a ZipCar board meeting. We decided to have breakfast at the Nine Zero hotel which is right by Boston Common. As we got to know each other over the breakfast, I took the opportunity to ask Bob about his key learnings over what has been and continues to be a very successful venture career. What he said was rather simple. He said that he has learned over time to only invest in what he’s truly passionate about. In his own words, if a company does not occupy his “shower time” – i.e. he can’t stop thinking about it even if he’s in the shower – it’s not the company for him. When a company consumes his thoughts 24×7, that’s when he knows.
With each successive year in this business, I appreciate Bob’s lesson more and more. Earlier in my career, I would sometimes unconsciously support investments in companies that I had only fallen “in like” with. You know, it’s the good company, with the good market, with the good team, with good performance. It’s the good opportunity. I have learned that the odds of success aren’t great for those companies. One of the key disciplines in this business is learning to wait until you see the great one, where you have fallen “in love” with a company. The company that occupies your “shower time” and many other waking moments – those are the investments to make.
The other thing I appreciate about Bob’s lesson is that the shower represents alone time (no snide remarks please). In investments, there are two competing forces at work. You have to want as much quality information, advice, diligence, and external wisdom on a prospective investment as you possibly can get. You need to be relentless about turning over every source of information you can acquire and to listen to as many reputable voices as you can. And, then at some point the switch has to flip. You need to shut everyone else out, hear your own voice, and have complete conviction around that. At the end of the day, if you make decisions based on how other people think, there’s no constancy. Your true north can’t be the moving target of someone else’s point of view – it has to ultimately be informed by others but come from within yourself. And, if it takes a hot shower to figure that out – that’s time well spent.
Thinking About Thinking 
Hey Larry,
I was delighted you shared this insight from Bob Kagle. When it comes to VC chats, my very best ever was with Bob Kagle. Why? Because he has the confidence, experience, and CAPACITY to fall in love with a company. He didn’t seem to obsess about what his partners would think and how his argument would stack up in the Monday AM meeting. He took the time to have what he called “a business mind meld” and genuinely appreciate the business. He can understand brands and how they get built, but also how they get destroyed. He shared very honest insights about successes and failures in his own portfolio. He’s a special breed.
Hey Jules – I agree – Bob is a really special breed. An absolute pleasure to work with.
Sounds like a variant of the question “what keeps you up at night?” except with positive, rather than negative, valence. Put another way, I suppose entrepreneurs & CEOs fret about problems, whereas VC focus on opportunities.
Mike – well, we VCs fret a lot too. I guess that’s a problem in and of itself if the worries of your existing portfolio companies drown out your ability to fall in love with something else. It’s like losing your mojo.
Water makes me think. By the ocean, in the shower, when swimming laps- it’s strangely powerful. There is more to it than being alone.
David – actually now that I think about it – I have to agree. Growing up in San Diego, hanging out by the ocean has that same effect.
What Bob Kagle preaches (and practices) is very much in line with two other thoughts of thinking that have proven positive results for me. Warren Buffet says he only invests in what he knows and understands. No need to elaborate on that one. But second one is “investing with your gut”. I may not be a VC or angel, heck I spent 12 years in startup who were all customer-revenue funded, so we never wanted VC or angel money. But one thing I have learned in my career is that when I invest my human capital into a company, my gut better tell me I am going the right way and I better be so passionate about the venture I would wake up thinking about it. I have compromised on that twice in my career and both times got royally burned.
And if the company does occupy your shower time, I heartily recommend these notebooks:
http://riteintherain.com/
They’re waterproof paper – meant for contractors and such. A 3×5 pad costs about three bucks on Amazon; with one of these and an all-plastic mechanical pencil, you are fully prepped for shower-based brainstorming.
Pretty hilarious Jay – didn’t even know this existed.
Larry, this is off message from your post, but the shower reference reminded me of going to a world-wide, multi-location, simulcast event put on at Harvard Business School by Michael Porter. Porter’s point was about figuring out a narrow niche where your company could have a defensible competitive advantage. (Classic Porter.) One guest — by remote video from his home in the southwest — was Sam Barshop, the founder of La Quinta hotel. The target customer niche that Barshop decide on was business travelers who were traveling in their own cars and who paid their own expense. (That last point was key.) Porter loved it! He was so excited about this precise definition of the target customer. As the evening wore on — and the event went past its scheduled end time and Barshop was obviously up way past his bed time — Porter kept grilling Barshop on “How did you figure out that this was the best, most defensible niche to go after? Did you do focus groups? In depth market research? What?” Finally, after being asked the question one too many times, Barshop had the last line of the night when he said, “No, Micheal. I simply dreamed it up in the shower one morning.” We all got a good laugh, at Porter’s expense.
Des – Priviliged to get two Pieri comments on different posts within a split second of each other. Great story. I guess epiphany is the mother of all invention.