Jason Green is the Founder and General Partner at Emergence Capital, the leading early-stage venture capital firm focused on Enterprise Cloud Leaders. Green is a Founding Board member of Endeavor, which helps entrepreneurs worldwide in developing economies, and has served on that board for 20 years. He led the successful spinout as Founding Chairman of the Kauffman Fellows Program as well.
On one thing early-stage investors are not paying attention to
Early-stage investing is hard work. It’s a trend that may be attracting too many people right now, according to Green.
“Right now, they're paying too much attention. We’re seeing an explosion in early-stage investing. In some ways, there's a lot of folks that are getting into the early-stage venture business either as a hobby or as an extension of another business that they're a core in. There's been a tsunami of interest and activity in the early-stage business. I do think it's a discipline, a profession, and a career. To do well over a long period requires a passion for it and a focus on it. Having seen a few cycles come and go, many folks will get exposed to the business and decide that they love it, they're great at it, and they want to do it regardless of the financial outcomes. Others will be washed out in the next cycle down, as they discover it's not quite as easy as it looks.”
On things early-stage investors should be paying more attention to
Knowing that success isn’t easy and you need courage in your convictions will help you persevere.
“There are so many factors involved in getting it right. Having been in the business for 30 years and studied entrepreneurship deeply, I'm still 50/50 at best. Maybe, a third of the investments I make end up being great investments. It's like hitting a baseball. The best in the world get hits on a third of their at-bats. The difference between world-class and average is just a few percentage points difference.
It's continuing to hone pattern recognition, the desire to make better decisions, and to have the courage of your convictions on making those decisions. If there's one big mistake, it's everybody's attention on what everyone else is doing, as opposed to getting clear on what it is that you feel like you have an unfair advantage. Having the courage of your convictions and then being willing to bet on yourself. There's a lot of noise in the system right now. The ones that get washed away when the cycle changes are the folks that don't have the courage of their convictions. They haven't done first principles thinking to get to an investment decision. They lose that conviction when the tide shifts.”
On the top three first principles for decision making in the venture ecosystem
Green highlighted three crucial first principles for decision making.
“The first would be a focus matters. We advise our CEOs and companies to focus and to be very disciplined about making sure that they're honing in on the thing that matters.
The second thing is to play venture as a team sport. Generally, it's not. Our perspective was that there's a lot you can do to improve your chances of success in the business, but a lot of it is luck. It's tough to determine how good you are in this business for probably a decade or more. You're much better off focusing on the inputs, as opposed to the outputs. Are you sourcing great opportunities? Making good decisions? Doing your homework? Are you adding value to the companies and the partners? Are you treating each other well and with respect? If those inputs are consistent over a long period of time, you have a point of view and a conviction you will get lucky. The whole point of the venture business is playing long enough to get lucky.
The third element is around people. Early-stage investing, fundamentally, is a bet on people. A lot comes into play in terms of having a good product, a good market opportunity, and a catalyst for change in that market. The characteristics of the people that you're betting on are the fundamentals of getting this business right. It's hard because there's no objective measure of what makes a great entrepreneur. However, there are a lot of characteristics that are correlated with that over time.”
On alignment between investors and founders
Founders need to seek out investors that align with their ideals.
“References are the best. In some ways, references on companies that haven't gone as well as you would have expected and how the investor reacted in those situations are even better. It's the character of folks that show up in difficult situations that speak more to the individual than anything.
I look for entrepreneurs that are constantly growing and developing, and learning. I would look for investors that have that same mindset. The investor that comes to you and tells you they know it all is not relevant in the next five years. If they're not growing and developing as an investor and passionate about getting better every day, they're not going to grow with you as an entrepreneur. That's an underappreciated thing.”