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Cubitt

lines on the record: 77
first: 2020-10-27
most recent: 2020-10-27
sittings or episodes: 1
sources: podcast

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“I don't actually. And so, and the reason is that at the earliest stages, you have to sort of forward look the cap table. In other words, I'm going to raise a seat and I'm going to get 20% dilution typically at the Series A, another 20 to 30% dilution, and so on and so forth. And so the question is, at the end of the day, when you're at Series C and you now own 5% or 6% of the company, or let's say 7 or 8, is that enough to keep you motivated and knocking your head against the wall 18 hours a day and busting through all of the barriers that are presented to you? And it's a question mark. Having said that, if you own 50 or 60% of the company, then you are all in. And so it's that simple forward-looking five-year ahead view that we bring to the table.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“It's a good question. I think we're probably subject to our own biases in our most recent deal, right? So to the extent that I've done 50 or 60 deals in my career, there's been a lot of scars, a lot of learning. It's probably only 10 or 15% of those have exited in a very positive way. And that's the reality of the economics. But the other call it 80% who failed or did poorly presented learnings and lectures that we've taken to heart, right? And so those are the rubrics that you apply. Now, it's not to say that we would never invest in a husband and wife team or four co-founders who decided to split the company four ways. Those are signals to us to really challenge the entrepreneurs to find out what they're really in it for.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, essentially. And there's an agency issue, right? So what we're trying to do is minimize mistakes and thereby maximize opportunity. And so those common ones are minimizable and they're observable right out of the gate.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“There's a lot packed in that question. Let me see if I can tease it apart. You know, some common mistakes early on are expecting that you and your three co-founders, who you've split the company up four ways, 25% each, will scale. And it rarely does, right? So more often than not, one of those co-founders finds something else to do and now they're benefiting because they have 25% of the stock that's not vested. So that's a simple mistake that we look for in capitalization tables before we invest. Following on that, there's the nepotism law, right? So rarely do husband-wife teams work out for a number of reasons, but at least of which, in our view, anyway, you know, let's say that the wife is the CEO and the husband is the CTO or the CFO, you know, their direct reports are rarely going to, you know, not going to go to the CEO and complain about the CFO. There's obvious dynamics there. Those are things that we have learned through hard knocks. And what happens?”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“And part of that naivety is important in building a company, but I think a solid structural plan is also critical. Other failure areas come down to human dynamics, right? So it's the ego needs to be checked at the door problem, where you have overzealous founders that don't communicate with their employees, they don't build a culture of success and winning, they don't communicate with their investing partners. And you can tell that pretty quickly, especially at the early stages, because it's a fairly intimate group of small number of employees. Those are precursors to failure almost every time.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Sure. I mean, the number of reasons for failure probably far outweighs or far outnumbers the reasons for success, for sure. But there are certain patterns. And it surprises me every day, actually, how very basic business fundamentals are lost on entrepreneurs as they're coming up. And things that I simply take for granted having done this for 20 years are still news to founders. For example, building a pro forma financial model that takes into consideration what I'm going to spend and how what my expectations are for revenue in an honest, intellectually honest way, you know, whether it's bottoms up or top down approach, being honest about where customers are going to come from, how you're going to talk to them, et cetera, et cetera, is not something that is natural instinct for a lot of entrepreneurs. Having a clear roadmap inside a business is fundamental and too many companies start out with, you know, sort of grasping at straws and hoping for the best.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think the numbers sort of show that venture-backed companies historically and statistically do better than non-venture-backed companies and not to sort of lower our own horn, but VCs have a lot of experience in pattern matching and they simply have a lot of exposure to things that company founders don't have every day. And so the idea of being a venture-backable company in the first place is a different kind of category of company. And having a good syndicate of VCs around the table who can give you insight into customer behavior trends in the industry, talent that you can attract, et cetera, and the credibility that goes along with being professionally funded gives an edge to those companies. So I'm not going to say refute, but I believe that venture-backed companies tend to do better than non.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“The ecosystem of entrepreneurism, right? And innovation starts at the grassroots with a culture of risk taking. So that's a key piece. And that's followed by education, universities that are doing cutting-edge research in things like artificial intelligence and distributed ledgers and so on. And then you have to have a robust ecosystem of incubators and accelerators and early stage venture firms and angel groups to support them, those students as they come up. And then, of course, you need the other layers of financing to continue funding the best companies all the way through.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“We need to hire bat again. I think it's a combination of all of those things. I think the Canadian market is still nascent. It's early and young. I wouldn't take anything away from the quality of founders that we have here and the quality of ideas, but the entire ecosystem is less mature and it's getting better day by day for sure. But you can't expect to, for a number of systemic reasons, you can't expect to find a unicorn every year in Canada.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, if you look at the sheer, I want to say failure, but I sort of hesitate to use that word. But the reality of venture is that at every subsequent financing, about half the deals fall off. And so to become a unicorn is a one in a thousand proposition. And so the power law basically says that you need to find that one unicorn in your portfolio of 20 or 30 bets of each fund in order to have the kinds of returns that RLPs, our limited partners are expecting. And so those numbers are very hard to find. And unless you're a, I'm going to call it a tier one firm who has a history of getting amazing deal flow from the best founders, it's really tough to live on the power law and expect to get a unicorn in every fund. We have a slightly different model. Ours is especially in a tier two market like Canada, if you will, as opposed to Silicon Valley, there's less unicorns born here. So we are looking for the solid.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“And we have to earn it. That's exactly right. Now, the perverse part of that model is, of course, that we buy a very small chunk of a company at the seed stage as opposed to a regular VC who will buy 15, 20 percent of a company and have a more dominant influence.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“That's the idea. That's right. So they ostensibly they invite us in because we don't necessarily have pro rata rights, which means we don't have the right to invest significant amounts”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“At the seed or series eight? Sure. And the other strategy is what we call spray and prey. So that is a high volume of deals, small check sizes, and then you hope for the power law of venture economics to play their role. So our view is that it's nearly impossible to pick winners at the seed stage. There's a lot of memory, I guess you'd say, and hard-won battles that help guide our decision. But at the end of the day, we are humble enough to know that it's impossible to pick unicorns consistently. So instead, what we do is we curate a portfolio of 15 to 20 companies at the seed stage, invest a small amount of capital, but invest a large amount of time in the ensuing year for the opportunity to get to know that founder, to build rapport, figure out if they're upped for the task. And then even more importantly, figure out if the market deems them worthy and their product worthy to exist at all.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Bring up trusted, which is critical, right? So integrity, trust, rapport, all of those things are really integral to successful relationship. And at the core of all successes are talented people who are trustworthy, et cetera. So rather than pick personality or an entrepreneur from a series of interviews, what we do is we invest upside down. So we invest a small amount at the precede stage and work very, very hard with our entrepreneurs to get to a Series A. And at the Series A, we invest significantly more than we did at the seed stage. And the reason I say that's upside down is that most firms will do one of two things, two other things. One is they develop deep conviction and knowledge around a space. And they pick the best founders to prosecute that space. And the other strategy.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“It's probably true. You know, I say it's the hardest, most impossible job that you'll ever love. And it's the only opportunity that you can have as an individual in business to really create impact in the world. Otherwise, you're an employee part of a big machine. And so it's the most exhilarating, you know, two miles an hour that you can ever go.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, you know, I think some entrepreneurs just like it's like a bohemian group or society that it's cool to be an entrepreneur and the underdog and they, you know, they feel oppressed by society and sort of fought against constantly versus the optimistic entrepreneur who sees the future a different way and eliminates all the barriers to getting there, fundamentally different people.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Before, yeah. I mean, you know, I think entrepreneurism in general is a fairly new phenomenon, ironically. So it used to be an entrepreneur with someone who was between jobs, if you think about it, 20, 30 years ago. And now it's a bona fide vocation, right? They teach it in university. That didn't happen before. But I think the sort of the cachet and persona of an entrepreneur is the Bill Gates, the Zuckerbergs of the world, these world-changing, amazing genius types, Bezos, another good example. And so it's become a very cool thing to be as an entrepreneur. But there's a difference between being an entrepreneur and being born an entrepreneur and sort of having that DNA deep inside.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“I think it's a bit cliche, but it all comes down to people, right? So, my job really is to meet with people and get to know them and decide, you know, who I want to work with. And so we've passed on good founders and we've passed on not so good founders. But at the core of it, it's, you know, does this person have a vision on the future that doesn't exist today that we want to play a role in? And it all starts with my first question with every interview is, tell me about inception. So why do you want to do this so badly that you're willing to break through walls and spend years in the cold as an unknown at the shot for the shot of being a successful entrepreneur? And the answer that you get back is really insightful.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's critical, right? It's critical in a couple of ways. One, it's the operations person who fulfills on the CEO's vision and dreams and goal, but it's also the right hand person to the CEO, right? So it's the counterbalance of all that enthusiasm and drive. It's the level-headed sort of practical, pragmatic co-founder role, in my view.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it was interesting because I'm not a very good number two. This is a personal thing. It's difficult for me. I question decisions constantly whether they're minor or somebody else's. But even before university or while in university, I've started five of my own companies. Two of them venture backed. So no stranger to being an entrepreneur, I guess you'd say, and creating things from scratch. And so as a COO, it was, I call it the chief other officer, right? So I cleaned up after the CEO, who was a genius in his own right, but really difficult to work with. So basically he would make promises left and right, and I would fulfill those promises as best I could. And it was a good thing we sold when we did, otherwise it would have exploded.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“So I was an RF engineer, so radio frequency designer, high frequency circuits, 10 gigabit optical links, sort of deep tech hard stuff.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“And decided that was it for me. And so within weeks, I went back and happened to have a fortuitous meeting with the CEO of Siena. And they ultimately hired me as an analyst in their new venture program. So I cut my teeth as an analyst. And then I moved to California, where I came up through the ranks associate principal partner at multiple firms and had a fairly successful start. I finished at Motorola Ventures. I was running their West Coast program in California, which was great because the business card got me into deals that I wouldn't have normally gotten into with my good looks and charm. And so, but Motorola canned the program effectively during the 08 crash. And so I ended up leaving and going to a startup that I had funded and joined them as the COO. And we grew that business for a couple years and sold it successfully. And then I took a sabbatical and sailed around the world for a year and then moved to Canada to start a venture program of my own.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Sure, I graduated university in the late 90s, 96, I think, and immediately went to IBM. So I did an engineering degree in undergrad. And IBM was sort of the pinnacle of what I thought the world could be, and so I accepted a job. I spent two years at IBM and really didn't like any of it, partly because I was very junior and there was a lot of very senior skilled engineers there. So you ended up getting relegated to all the menial stuff. So on the heels of that, I moved from Toronto, Canada to Baltimore, Maryland. So I moved to the US to a startup called Siena. And that afforded me a lot more opportunity as a startup to be a designer and build real world things and have my hand in it. In that process got an MBA and in my MBA class, I met my first VC. I'd never even heard of the asset class, didn't know anything about finance before that. When I heard what venture capital was about at the time, I fell in love.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“I think the biggest thing was that life is hard on your own and an academic degree and some schooling is a big help. And I just sort of got over the issue of that particular girl and renewed my commitment to success and moving forward.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“Academic probation, right? So I went back for the spring semester. I did not do better. It turned out I didn't have things locked in. And so they asked me to leave permanently. The good news is the story has a happy ending. I did take a year off and the following spring I sent a letter and said, you know, this real world stuff is really hard with half a degree. I feel incomplete. And can I please have another chance? And so they agreed. I'm grateful for that to this day. And the readmittance letter said, okay, you're on probation again. And by the way, this is your last comma, last chance. So on the happy ending part, I graduated with honors top of my class. It was a sort of a turnaround story. I had everything lined up and it was a good ending.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“What a great starting point. Not my finest moment. Actually, it's a love story. So we'll start off our interview here with a love story. So it was a love story gone wrong. Third year university, my girlfriend of two years broke up with me. It was brutal, to say the least. And I spent an entire semester, fall semester, sort of working it out. And that meant ditching classes and exams and just generally doing poorly. So at the end of that semester, of course, if you don't succeed well enough, they ask you to take some time off, which they did. And I couldn't contemplate that. So I sent a letter saying, hey, can I have another chance? I'm really sorry I screwed up, but I think I've got my head on straight. And they agreed and they said, okay, but you're on probation for the spring semester and, you know, hope you do better.”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT
“This is what separates really good entrepreneurs from the rest of the pack. They have that crystal ball that they can see. And more importantly, they have the ability to articulate it and convince not only co-founders and employees to join, but also investors and customers to see that vision with them”
2020-10-27 · The Knowledge Project with Shane Parrish · #95 Code Cubitt: Coachability Is Critical · IDENTIFIED FROM THE TRANSCRIPT