Kind of Blue

Forgive me (my few but loyal readers) for I have been busy.  It’s been 3 months since my last post which is the longest period of inactivity since I started blogging a few years back.  The excuses are many but in the grand scheme of things not important.  What matters is that it’s time to get back on the wagon and write!

But before I jump into my “thought du jour”, I did want to point out some fun things that have happened since my last post.

First, QED and QED’s companies were well represented at this year’s LendIt Conference.  Both Zopa and ApplePie Capital won awards — Zopa for Top Consumer Lending Platform and ApplePie Capital for Emerging Small Business Lending Platform.  And the QED team must have said or done something right because we won the Top Fintech Equity Investor award.  Silly judges!

Second and also at the LendIt Conference, QED put forth a new conceptual framework that seems to be gathering a little steam.  We’ve creatively called it the “QED Matrix” and you can see Nigel’s presentation and learn more about it at www.qedmatrix.com.

Third, my wife’s business (www.nestiny.com) is about to cross 100,000 registered members.  I’m ultra-proud of her and am thrilled to have an entrepreneur in the family.  But, as great as this accomplishment is, our “claim to fame” moment came a month or so ago when photos from our wedding were picked up by the press and went viral due to the presence of a “unicorn”.  Glamour, The Knot, People, House Beautiful, Yahoo, etc.  We blew up the internet for a few minutes and it was fun to watch.  Just google “Frank and Jody’s Unicorn Wedding” if you want to see some pics.

Now back to our regularly scheduled programming…

If startups were a style of music, it’s very clear to me that they most closely represent Jazz.  Building a business requires a master plan, but most entrepreneurs will tell you that what happens day-to-day has an element of improvisation and spontaneity that’s a reaction to what they’re experiencing in the moment.  Decisions are typically made with incredible speed and adjustments are made equally fast.  An entrepreneur needs to be hyper-alert to signals and feedback coming from all directions and as a result their plans and teams need to be fluid and malleable.

A byproduct of improvisation is that it isn’t flawless.  In fact, “mistakes” are made with regularity.  To quote the immortal Miles Davis:

“When you hit a wrong note, it’s the next note that you play that determines if it’s good or bad.”

Resolution is what matters.  Dissonance moving to consonance.  Drama and agitation builds when resolution is delayed.  Calmness and tranquility result from resolution.

The analogy applies perfectly to many aspects of business building so I won’t spend any more time hammering the metaphor home.  Instead, I’ll share a real world example that hopefully you’ll find interesting.

About a week ago we brought a very early stage company in to present to the QED team.  It was a company that I had been actively following and doing my best to help for the better part of a year.  They had made amazing progress over this period of time growing their early client base, shipping code and building out critical functionality.

And, the meeting with the Partnership went well…..mostly.  The Founder was convincing in his articulation of the problem and pain points his business was tackling.  The addressable TAM was compelling.  The unit economics resembled those of a great SaaS business.  The “fit” with the QED team was obvious.  But, to put it bluntly, the long-term P&L forecast that was presented described a crappy business.  Dissonance became tangible.

One of the QED Partners pointed this out and offered to help re-forecast the business.  In fact, multiple QED team members offered to help frame various pieces of the puzzle.  And what did the Founder do?

Thing 1: He recognized and admitted that he hit a wrong note.  Zero ego.  Zero defensiveness.

Thing 2: He offered an explanation for the disconnect but more as an apology than as an excuse.

Thing 3: He embraced our feedback, re-worked the model with his team, and quickly set up follow-up meetings with various members of the QED team to drill into the revised model/make additional revisions.

And while the new model is still a work-in-progress, I can definitely say that dissonance has changed to consonance.  What’s even more important is that it gave us a chance to see how the Founder problem-solved his way out of what could have been a sticky situation.  By hitting a wrong note and resolving the disconnect quickly, the Founder became more liked by the team rather than less liked for the error.  It’s what’s so great about jazz.  Dissonance to Resolution to Consonance.

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