May 7, 2023

Lessons From the Trenches: Six Years of RBF & Alternative Capital

Happy Sunday, friends! If you haven’t already, check out our latest podcast episode with Melissa Bradley, founder of 1863 Ventures, and hear how she is building her RBF firm to help underrepresented founders. Melissa’s story is incredible; her journey from banking regulator to entrepreneur to investor is so inspiring. Over the past six years, I’ve had the privilege of learning from folks like Melissa about what they’re doing and building. I can’t believe it's been six years since I started my alternative capital journey! Six years since I talked to Fin Gourmet at the Kauffman Foundation's Moonshot Meeting, six years since I cooked up the spreadsheet that would be the first version of the underwriting and portfolio model for Novel. It's been an eventful, hard, and rewarding journey so far. Today I thought I'd share a couple lessons with you that seem super obvious in retrospect, but that I think are worth keeping in mind at all times.

Hire great people. Great hires give your business lift. Bad ones cost you time, money, reputation, and sleep. It can take months to recover from a bad hire. Screen carefully for values and skills match, and never compromise on either. Never waver from your hiring process, and never compromise on values match. Hire slow, be deliberative, get it right. Hiring fast is how mistakes are made.

Choose your partner(s) carefully. This is so important, and it extends to your co-founders, your equity partners, your investors, your co-investors, the lenders you work with, the entrepreneurs you support, and on and on. Partnerships are hard. One bad choice can make life tougher than it has to be. I'm lucky I have a great co-founder who challenges me to get better every day, great investors to whom I am grateful, a great lender, great partners across the Novel ecosystem. We've had some near misses though.  I've watched friends struggle on this front and have serious challenges as a result of their choice of partner, whether it is a co-founder or financial partner. Choose carefully. These are make-or-break decisions.

Be prepared for deals going sideways. No seriously, be prepared. Deals go sideways and sometimes you are powerless to help. All you can do is figure out how to recover as much cash as possible. I'd been through it as a VC, and I thought it would be the same as a lender. It's not. As a lender, the stakes are higher, and the experience is totally different. Be prepared for it. Develop your plan and your strategy in advance. You won't cover all possible events, but the exercise will help ensure you've at least developed some framework for decisions and action.

Negotiate with good people. Avoid assholes. There's nothing worse in life, business or negotiation than a person with low integrity. Don't negotiate with people who play low-integrity, short term games. Approach negotiating with a win-win mindset and with a view of the long term. Every once in a while I bump into someone who's just not on the up-and-up. I don't work with those people, and if I find myself in a position where I have to work with them, I get out of that situation as quickly as I can. Trust is everything. For example, if someone routinely presents you with "you have to make a decision right now" scenarios in a negotiation, that person is probably an asshole, and that person might be low-integrity. And they might be both. But either one is sufficient cause for getting away from them quickly. Life is short, work with people you trust.

Sometimes, you have to be hard, and that's one of the hardest things. Lending is hard, as a wise man continues to tell me. I believe that, and I've learned lessons that reinforce it. Being tough in order to protect our position (and our investors' money) is very hard. I thought I already had that gear. It turned out I didn't. It doesn't come to me naturally, as I like to be liked. I've had to find a new gear that allows me to play hardball, to be hard sometimes in order to protect our interests. The ability to simply say "no" and to hold people accountable is a tricky skill to learn, but it is essential.

Entrepreneurship highlights your weaknesses. Surround yourself with people who shore them up. Building something new is hard, and at the earliest stages you have to be able to do it all. There comes a point where that no longer makes sense though. I've come to believe that it doesn't make sense for people to devote huge amounts of effort to get better at stuff they just aren't good at. People are born with certain gifts and certain weaknesses. Lean into the gifts. Identify and manage the weaknesses, but don't expect that you can change who you are. I've tried that. It's frustrating and fruitless, and sometimes it makes you want to throw something out a window. In my experience, it's possible to get a little better at the stuff I'm not good at, but doing so costs me and everyone around me the benefit of leveraging my innate gifts (whatever those are).  Amplify your gifts and bring in people who are strong where you aren't. You'll get way farther that way.

Do something with purpose. One of the things that I treasure most about the past six years is the knowledge that the work I've been a part of has impacted hundreds of lives. That was my goal when I started thinking about RBF and what would become Novel back in 2017: to fund more entrepreneurs and give them the opportunity to thrive. We've funded more than 100 companies across 130 or so deals since then, and each one of those deals allowed a company to make progress toward that entrepreneur's goals. Each one created jobs and revenue. I am so grateful to have worked with the people I've worked with because of the impact we've been able to have. In addition, I've been able to help several investors in the community refine their models and raise capital for their platforms. I've been lucky, and I'm really grateful to you all for being a part of that journey with me.

That last one is so key. If we all get up every day with a sense of purpose, a goal we aspire to achieve, then the grind isn't really such a grind. This journey is hard no matter how we traverse it; aim for something that lights you up inside, that gives you the pride of knowing you're doing some good in the world, and it will be worth the pain, the sweat, the blood, the tears. Aim for impact. That's the reward.

There you have it. Now, go get 'em.