Broken Isn’t Always Bad

I’m broken. Broken with a capital B. The type of broken that can’t be fixed. Humpty Dumpty had it easy compared to my type of broken. I’m FUBAR broken (look it up) and it’s taken me decades to come to terms that there’s nothing I can do about it.

But instead of starting with the conclusion, I’ll do my best to explain what led me to accept my brokenness by sharing how I discovered I was broken in the first place.

Evidence: School

When I was a kid, it was pretty clear to my parents and teachers that I was pretty bright.  On the smart/not-smart scale, I definitely fell on the smart side of the distribution. In fact, in a variety of subjects, the teachers didn’t know what to do with me because I took it upon myself to learn the subjects on my own (I think I consumed the entire 3rd grade math textbook in about a week which frustrated my teacher). But, I wasn’t uniformly good at school. In fact, there were times it was clear to me that our homework assignments were near impossible and I didn’t understand how my friends were able to cruise by with no problems whatsoever.

For instance, in 7th grade History class, over a series of weeks, continent by continent we had to memorize the names of all the countries and their capitals and be able to write them on a blank map when tested. I can’t even describe the painful hours of study I put in only to wake up the day of the test only to have forgotten everything I thought I had learned the night before. Week after week when a blank map was put in front of me and the teacher said “begin”, my heart started to race and on a good day I would write down about half the required information. If it hadn’t been for a deal I cut with the teacher to do extra-credit work I would have failed the class. Instead, I pulled out a “B”.

Memorizing lists of vocabulary words in 9th grade English – the same.

3 years of French class – even worse. In fact, I wanted to die every time I walked into French class for fear of being called upon to go to the board and show my ineptitude in front of all my friends.

But Math was different. I completed 3 years of calculus and linear algebra before graduating high school and ended up helping the advanced math teacher teach the other students.

And 11th and 12th grade English was also different. We read books and wrote papers and I found myself writing papers at such an advanced level that one of my teachers accused me of plagiarism which turned into a big stink with my dad (he was an English teacher that put 33 years into the school system and turned me into a reader). He backed me of course and chastised the teacher for not doing her job. Yay dad!

Why the differences? At the time I didn’t understand but now it all makes sense.

Evidence: Directions

Anyone who knows me quickly learns that everywhere I go I’m completely lost. And by lost, I mean LOST. Like most teenagers, I went shopping at the local mall, but what amazed my friends was that I’d get very confused when I walked out of a store. I didn’t know which direction we had come from or where the next store that we wanted to go to was in the mall. And it’s not like we only went there occasionally. I worked there for a while selling pianos, keyboards and organs.

I also only knew one way to get from my house to the high school. I only knew one way to get from my house to my best friend’s house. And I couldn’t figure out how to get from the school to my best friend’s house without going back to my house and using it as a starting point. My best friend called me Monopoly Boy because I had to “pass Go” in order to get anywhere. I couldn’t connect the dots.

Evidence: College

Even with all the typical distractions of college somehow I never lost my thirst for reading. In fact, there was a period where I’m pretty certain I read a book every other day for the entire school year (which was possible because I only slept 4 hours a night). My choice in books was always topic driven, and there was one period in particular that I just couldn’t get enough of the beat writers. The beat writers led me from the 50s into the 60s and naturally I found myself reading books about or by Timothy Leary, The Merry Pranksters, Neal Cassidy, Alan Watts and Ken Kesey among others. They described their drug fueled lives and escapades in many ways, but I recall reading a description that stuck with me because it made no sense. Ken Kesey said that he was happiest when he was “living in a waking dream”. And given the amazing things he saw and places he went and experiences he had I couldn’t help but fixate on his description of pure joy. I thought about those five words a lot because it occurred to me that I couldn’t recall the last time I remembered a dream. I knew what dreams were, but I couldn’t recall one. None. This realization actually shattered me and made me want to do something about it.

Broken is Broken

The above stories might be amusing to you (especially those of you who know me well) but they made my childhood difficult. I can truly say that I obsessed over my situation until I finally figured out what was wrong with me. The epiphany came late in my college career with the help of one of my Professors (an AI teacher) who pointed me in the right direction and helped me come to grips with what I discovered. What I figured out was that I definitively have a condition called aphantasia (it was only named recently which made my research tricky). Simply put, if you have aphantasia you don’t possess a functioning mind’s eye and cannot voluntarily visualize imagery. It’s been around and described in psychological texts and journals for quite some time (it was first described by Francis Galton in 1880) but it’s been mostly ignored for the past 100+ years until Professor Adam Zeman renewed interest in the topic with a series of scientific studies that are still ongoing today. In 2005, Professor Adam Zeman developed a test that he named the Vividness of Visual Imagery Questionnaire (VVIQ) which has since become the most commonly used evaluation tool regarding a person’s quality of mental imagery. The questionnaire invites the test taker to visualize a series of images and rank how vivid the images are, from “Perfectly clear and lively as real seeing” (5 points) to “No image at all, you only know that you are thinking of the object” (1 point). A person is categorized as having aphantasia if they total 30 or fewer points after being asked 16 questions. I’ve taken the test twice and scored precisely 16 each time. Basically, I’m visual-memory blind as a bat.

And to make matters worse, while some people with aphantasia can “see” involuntary imagery in their mind’s eye (i.e. – dreams), I can’t. I don’t recall ever having a dream in my life, so I’m dream blind as well. Joy to the world!

It explains my schoolhood failures because they all required visualization skills that I didn’t possess. When I close my eyes I see blackness. The big nothing. But for most people memorization is a visual act. And recall is highly visual as well so even when I jammed something into my memory, getting it out wasn’t a trivial act. I don’t have a map in my head. I can’t close my eyes and just “see” or “replay” something from my past. And I can’t count sheep to go to sleep unless they’re black sheep covered in ink swimming in oil in the middle of the night with no stars in the sky.

So why am I telling this story about myself and how does it relate to building businesses? I’m telling my personal story because I don’t think most Investors realize that sometimes there are aspects of people that are broken and can’t be fixed. I can’t tell you how many times I was told “study harder” or “you’re not paying attention”. And I did study harder and I did pay attention more and it didn’t make a difference.

Many of the Founders we invest in are highly functioning broken people (I’m one) and the last thing we should do as investors is insist on some form of “try harder”. Instead, we should focus on figuring out their strengths and surrounding them with people who can expertly fill in their gaps. If a Founder is brilliant on certain dimensions but falls short on others, the first thing that you as a coach and mentor need to determine is whether or not the Founder has the ability to fix his or her shortcomings. I’m of the personal belief that it’s OK for the answer to be “no”. It might be possible to help them improve a little or a lot, but there are times when there is a true inability to change. And in these cases, the worst thing to do is to insist on change that won’t manifest no matter the effort. There’s no reason to declare the Founder incompetent without finding other people who can be complementary and create a collective win.

It’s also critical to realize that when you give feedback to a Founder all you’re trying to do is turn them into you. You project yourself into their shoes and through feedback outline what you would have done if you had been faced with the situations that they had encountered in the past. But you aren’t them and they aren’t you. And if they’re fundamentally broken on a dimension then your feedback might be inactionable. Don’t try to turn them into you. Instead, help them become the best version of themselves that they can be. But doing this requires putting in the time and effort needed to build a strong relationship grounded in trust. It requires being empathic to others’ shortcomings. And above all it requires believing that it will all be worth it in the end.

I’m a highly functioning broken person because I have GPS in my car and on my phone. For what it’s worth, I’d make a lousy tour guide and an even worse crime scene witness. But fortunately I have people around me who understand my short comings and aren’t asking me to change. I’m broken but haven’t lost sight of the fact that things have worked out just fine for me (even though dreaming sounds fun……)


What’s My Favorite Color?

Apologies for being so delinquent in posting but it’s been a busy start to the year.  In addition to working on time intensive projects with a few of our portfolio companies, QED formalized a very exciting relationship with Fifth Third Bancorp.  You might or might not have read about it (Fifth Third Bancorp Partners With QED Investors), but hopefully it explains why I’ve been a little light on the content recently.  More on this relationship soon.  With this said, back to the Blog!

Every once in a while I feel like I’m experiencing what I think of as “Advisory Deja Vu” (ADV).  It’s when I’ve had the same thematic conversation on multiple occasions over a short window of time but with different founders.  And more than once it’s become a theme for a Blog post, this being the case in point.  So, to convey my current ADV theme, I thought it would be best to start with a simple story.

A behavioral psychologist, a data scientist and a five year old walk into a bar.  All three belly up to the bar and order drinks (and in case you’re wondering, the five year old ordered milk – don’t hate on me!).  After a few minutes of complete silence, the bartender addresses the group.

“I can tell that you’re bored and can use a bit of a challenge to liven things up.  Do you see that woman sitting over there?  Free drinks for a year to whoever tells me her favorite color.”

The challenge is accepted and they agree to meet back in an hour to reveal their guesses.

When they return, the behavioral psychologist answers first.  “I spent the last hour analyzing her every movement and studying her attire and jewelry.  She must like muted colors because of her subtle shade of lipstick and very minimal use of makeup.  Her outfit is comprised of shades of black and gray as is her handbag.  But, lots of women like to wear black and gray so this doesn’t tell me much. What’s interesting is that she went to the bathroom half-an-hour ago and came out wearing a maroon colored hair clip.  It stands out nicely against her black outfit and her confidence increased once it was in place so it must be a color she really adores.  As a result, I can definitively say that her favorite color is Maroon.”

The bartender responds: “Sorry.  That’s not right.  The woman is my wife and I bought her that hair clip a year ago.  She wears it to humor me but I don’t think she likes it very much.”

The data scientist goes next.  “I spent the last hour hacking into her computer and analyzing all her purchase behavior on Amazon and her searches on the web.  I loaded all the data into a machine learning optimizer and using a random forest algorithm determined that her favorite color is Green.”

The bartender responds: “Sorry.  We share a computer so the data you analyzed isn’t quite right.  What’s funny is that you figured out MY favorite color, not hers!”

The five year old goes next: “Blue.”

The bartender responds: “That’s right.  How did you know?”

The five year old: “You’re a silly goose.  All I did was go up to her and ask.”

Why tell this simple story?  A recent string of conversations I’ve had with Founders have all centered around something not being quite right with a business with the Founder trying to diagnose the cause using complex data analysis or econometric trends or “theories”.  I’ve found myself giving the same advice over and over and a few Founders have actually taken my advice and started to report back pretty interesting findings.  The advice?

“Your customers know more about themselves than you do and are more than happy to share their thoughts if you ask.”

This is a simple but profound truth that I find is often neglected by Founders and Executives at small and big companies alike.  If you want to know why customers aren’t buying the high end version of your product — ask them.  If you want to know why customers aren’t making payments on your loans — ask them.   If you want to know why customers use your product once and never come back — ask them.

Don’t get me wrong — data is fantastic and very helpful in many contexts.  I love data and what it can teach a business.  I’m a big fan of tools like Full Story and Google Analytics.  But, when trying to understand why your prospects and customers are behaving a certain way I’d suggest you find a way to talk to them and listen to their answers.  Trust me: Ask and they will tell — Listen and you’ll learn.

Down the Rabbit Hole

As a longtime fan of Alice and her Adventures in Wonderland, I can’t help but draw upon the well-known imagery from time to time.  And it just so happens that I find it appropriate to use for this post so feel free to smile like the Cheshire Cat and read on.

At QED, we pride ourselves on being operators disguised as investors with a keen focus on the FinTech sector.  From time-to-time we’ve found great businesses outside of FinTech that we thought we could guide, and (surprisingly) the entrepreneurs behind these companies seem to be happy with the advice and hands-on help we’ve provided.  Our experiences at building/managing businesses combined with our collective skills that range from customer origination to data analytics to managing complex, annuity oriented businesses have proven to be valuable to our non-FinTech companies.

So while it would be easy to stick to what we know best by taking the “blue pill”, we’ve gained the confidence that branching out into new sectors ripe for disruption was worth considering.  The result?  We’ve taken the “red pill” and started to learn as much as we can about two new verticals that are tangential to the FinTech space.  And what we’ve found is that the more we learn the more we like what we see.  It feels like we’re about to head down the rabbit hole which is scary and exiting at the same time.


The first?  Insurance Tech.  It didn’t take much digging for the QED team to come to believe that the Insurance sector is ripe for innovation much like the banking side of FinTech was ten years ago.  You can check out an interview with my partner Caribou Honig on this topic here.

Insurance stats

And to do our part catalyzing the innovation, we’re pleased to be founding sponsors of an upcoming conference,  It’s designed to bring together entrepreneurs, investors, and leaders from the industry incumbents.  I’ve procured discounted admission, $200 below the early-bird pricing, for the first twenty FinTech Junkie readers who register through this link.  Questions or sponsorship inquiries can be sent to Caribou Honig at:

InsureTech Connect

The second?  I’m going to leave that for another post with additional detail. Those of you who know me probably can guess what my “second addiction” has become, but rest assured that my core focus is still and will always be the FinTech space.  But, once an addict always an addict….so stay tuned.

Dinosaurs and Banks

For those of you who have spent time with me, you know that I’m very much a “centrist” when it comes to the Banks vs. Innovators debate.  It’s not difficult to imagine a world in which some Banks find ways to reinvent themselves, some Innovators become household names, and some companies work together in harmony to create a one plus one equals three situation.

So, when my Business Partner (Caribou Honig) wrote a post as a rebuttal to an American Banker article entitled: “Banks vs. FinTech?  No Contest, Banks Win”, I had to link it here.

Caribou’s Article:  Dinosaurs and Banks

The American Banker Article:   Banks vs. Fintech

It’s a funny but fantastic analogy that I hope you’ll like.  Enjoy!

Talk Fluently In The Language of Uncertainty

Jolly Fun Mistakes Made in Pitches – Third Entry

There comes a time in the diligence process when I ask a Founder to review his or her financial plan with me.  It almost never takes place during the first or second meeting because I need to understand the opportunity at a pretty deep level before running through the forecast.  To me it isn’t an exercise in ticking and tying numbers but rather one of the best opportunities to see how the Founder thinks about his or her business and what lies ahead.  Why?  Because at its core a financial plan is a description of how the Founder sees the future playing out.  It’s the perfect excuse to discuss a host of “what if” questions because there’s precisely a zero percent chance that the future will unfold the way it’s crafted in the plan.  Precisely zero.  Zilch.  Which leads me to the next jolly fun mistake made in pitches:

Mistake #3 – Thinking of your financial plan as the only plan

To explain this mistake, I’ve constructed a simplified and exaggerated conversation with a Founder:

Me: “OK.  I have your 2015 and 2016 financial forecast in front of me.  Talk me through what the next six months look like.”

Founder: “As you can see, we plan on making very small improvements in each of our core drivers.  By year-end we plan on increasing the response rates of our direct mail campaigns by 10%, the number of booked loans per sales agent by 8% and our average loan size by 5%.  These are pretty conservative improvements relative to what we’re expecting to happen.”

Me: “Great.  Let’s start with the increase in response rates.  Are the increases due to improving the effectiveness of the direct mail collateral or improving your targeting models?”

Founder: “About half the increase is going to come through an improved response model and half through refining our marketing materials.  We’re already working on the response model and the early results are better than we expected.”

Me: “Fantastic.  Have you looked to see if the lower responding customers that you’re planning on cutting out happen to be your lower risk credit customers?”

Founder: “No.  We can run that analysis for you if you’d like.”

My Inner VoiceShouldn’t he want to run the analysis?  Isn’t he curious what he could learn about his own business?

Me: “Great.  I’d love to know how much additional marketing budget you’d need if you find out you really like these customers and want to keep them.  I have a sneaking suspicion that they’re more profitable than you think.”

Founder: “If that happened we’d find a way to improve our response to hit plan.”

Me: “But you’re already counting on improvements in your marketing materials so what else could you do to make up the difference?”

Founder: “We’re already being conservative in our forecast so I feel confident in our numbers.”

Me: “I get it.  But what if you’re wrong?  How much additional marketing budget would you need if you really like your lower responding customers?”

Founder: “We’re a team that’s really good at managing to our operating plan so the question is irrelevant.  We know what our budget is and we’re going to manage within it.”

Me: “And what if a hundred new competitors entered the market and interest rates spiked by a thousand basis points and the country entered a really really bad recession?  Then what?”

Founder: “We’d manage within our budget.  Do you have any other questions on our response assumptions or should we move on to the next performance driver in the model?”

Me: “Uhhh…..”

I know this example is a wee bit simplistic but hopefully it makes the point.  The best Founders understand that their plans are merely articulations of what they expect to happen and are prone to error.  In fact, ask any Venture Partner and (s)he will tell you that greater than 99% of their early stage companies miss their forecasts.  The best Founders recognize this and are receptive to feedback about their plans as well as flexible enough to adjust the plans as results materialize.  They can live in a world of multiple futures and talk fluently in the language of uncertainty.

And at QED Investors, we like working directly with Founders to build their plans.  Understanding the principles of how the business works and the interactions of the key drivers of success is an important step in the process.  Thinking through how the future is likely to unfold is equally important. To us, realism is much better than naive optimism even if it creates a less valuable business on paper.

So look in the mirror and say to yourself: “Only the past is known.  The future has yet to be written.  And as much as it hurts to admit it, there isn’t a chance that my 2,000 row spreadsheet connects the dots.”

Jolly Fun Mistakes Made in Pitches – Second Entry

Before launching into the heart of this entry, I wanted to give a shout out to Caribou Honig, a fellow Partner at QED Investors who happens to have a passion for data-driven marketing.  My last entry attempted to make a point about the woes of undifferentiated marketing channels (i.e. – fishing in the open waters of the internet) and while Caribou was in agreement with the points made in the post, he was also kind enough to write a post that provides a counter-perspective that’s worth internalizing.  His logic is very sound and he includes great examples that prove the points he makes in the post.  For those who are interested, his post can be found here:

With that said, it’s time to move on to “Part II” of the Jolly Fun Mistakes theme.  Hope you enjoy!

Mistake #2 – Inability to Clearly Explain Your Business

Have you ever started to read a book and realized that you were 50 pages in and had no idea what was going on?  Believe it or not, there are pitches that feel the same way.  For instance, I was on a sixty minute call this week that literally played out like this:

10:00–10:05am – Formalities and Background on QED/myself.

10:06–10:20am – Background of the Founder’s previous jobs and what led him to his current business idea.

10:21-10:40am – A walk-through of the first 3 pages of a 20 page investor deck.  Confusion ensues.   Multiple times I ask: “Can you explain a typical use case?  What problem is your business solving?”  Multiple times the Founder tries to answer my questions to no avail.

10:41-10:42am – I finally connect the dots and understand what the business is designed to accomplish.  In 90 seconds I spit back a very cleanly articulated description of the problem being addressed by the business and how his business is attacking it.  In 30 seconds I posit a theoretical example that demonstrates how his business works.  Founder confirms that I “get it” and is thrilled.  He proclaims that we’re the first VC firm to understand his business and that we’re the experts he’s been looking for.   

10:43-10:59am – Additional questions asked of the Founder that demonstrate my understanding of what he’s trying to build and confirm his lack of the necessary communication skills to be a true leader.

11:00am – Call ends.  Deep breath.  Relief.

What’s interesting is that the Founder came away impressed by my ability to simplify his business and articulate it back to him while he should have realized that it was his responsibility to provide me with this view.  It took far too much effort and mental gymnastics on my part to get to a basic understanding of the business which bodes poorly for so many critical deliverables/responsibilities of the Founder.  These tasks include:

  • Painting a razor sharp “True North” vision for his team
  • Selling the dream to future hires
  • Explaining the business to future investors
  • Shaping the marketing message used to attract customers
  • Creating the brand identity/promise of the company

The list goes on and on and on.

With this in mind, here are a few recommendations that if followed will go a long way to helping you avoid this obvious “Jolly Fun Mistake”:

  • Think about your intro as having three parts: “About you”, “About the business” and “A typical use case”.
  • Make sure that you have a 2 minute and a 5 minute version of the “About you” pitch. If you need more than 5 minutes to explain your background you need to sharpen your pencil.  And always be prepared to deliver the 2 minute version when time is tight.  Your background is important but the focus should be on your business, not on your past accomplishments.
  • Develop a very clean description of a typical use case for the product/service you’re offering. Practice explaining the use case in story form assuming that the audience knows a minimal amount about the business you’re building and the problem you’re solving.  Weave into the story the problem and the solution.  Some businesses are more complex than others, but challenge yourself to be able to deliver the story in no more than 5 minutes with the mantra that shorter is better.  You know you have it right when your audience could repeat your story back after hearing it once.
  • Use the story you’ve developed to pull out the key pain points your business is solving and how it’s solving them. Once you’ve done this, you should be able to string the problem/solution key messages together in such a way that you can deliver a 2 minute “About the business” section.
  • Practice stringing the sections together such that you can seamlessly move from start to finish in fewer than 10 minutes (you, business, use case). Expect interruptions/questions from your audience during your pitch (i.e. – don’t get thrown off your rhythm).
  • Design the rest of your investor pitch around the next layer of detail. If you can absolutely nail the intro then you’ll have earned the opportunity to take the audience on any journey you’d like from there.

Practice.  Refine.  Crush it!