Tim Jackson, Managing Partner of Walking Ventures and former Managing Director at the Carlye Group, kicked off Day Two in a conversation with Armando Vera Carvajal, the Accelerator Director at Newchip. Tim talked about his early experiences as a entrepreneur, how a bear market will change investment strategy, why startup CEO replacement happens, as well as critical skills that CEOs need today to succeed.
If you missed it, here are six key takeaways from his keynote talk:
Takeaway #1: The Impact of COVID-19 On the Current Fundraising Cycle
Sentiment, in the investor space, Tim believes it is much more critical than some founders consider. While it is true that, on average, companies do much better when investors get involved at the bottom vs. at the top of the business cycle, he doesn’t think that always factors into investment decisions. When the market is in a boom cycle, the deals and terms are much more favorable to entrepreneurs with uncapped convertibles. Even when VCs say they are still optimistic during a bear market, he expects that terms will not be as favorable as during a bull market.
He sees apparent strategic shifts from offline to online and sees innovation happening in transport and land use. Many industries have found that corporate clients weren’t listening before and are being forced to change due to COVID-19. Overall, Tim says he is more pessimistic over a two-year over markets but is now more optimistic from a 5-10 year view.
Takeaway #2: Why People Is More Important Than Product & Plan
Most investors rely on three things while deciding whether to invest: the people, product & plan. Tim mentioned that he always found it interesting that standard pitches would spend so little time on the team, with only a few words on a slide late into their deck.
In his experience of investing in over 50 companies, Tim has found that people are vital in determining whether the startup succeeds. As an investor, he tried to front-end the due diligence process by taking walks with the startup founders to learn more about them. If you think about it, it makes a lot of sense. The product can be changed as can the plan but people are not so easily changed!
Takeaway #3: Why Having the CEO Coach Is Important
As the saying goes, it’s quite hard to build the airplane in midflight. For CEOs, having someone that they can have a confidential, detailed conversation about the challenges they are facing is much rarer than you might think. Tim says that CEOs get less support than you might expect, with many investors with board seats splitting their time elsewhere. Thus, they don’t have a lot of time with their current portfolio CEOs to grow with the job.
The best VC companies will offer their support in good faith, but the best CEOs know it’s not necessarily the right thing to open up to their investors about their biggest worries. It’s good to take input, advice, and views from investors, but as Tim comments, all of those conversations are investor relations conversations. Conversely, running a startup is a much more niche area than what a typical CEO coach with a psychology background might help with.
Takeaway #4: CEO Replacement
Startups are in a constant state of flux, and startup CEOs do get replaced quite often. Tim talks about a time during one of his Kauffman Fellows meeting with a VC commenting that “we expect to replace 3 out of 4 of every one of the CEOs we invest in”. Why is this number so high?
He thinks it’s because of two things: the skills you need to run a company are very different, depending on the stage you are at & communication with investors.
Tim says that most startup founders need to be daring, a bit of a rebel, and willing to take a risk to start that company. By the time you have gotten to the stage of scaling your company and raising money, you now need something very different. You must persuade and convince several people that your vision is worth it to quit their jobs. Now with 25 people half a year later, your job as CEO is to help manage people’s teams. Because of this, the skills needed to make a CEO successful vary widely, based on stage. He thinks the biggest of these stage changes come from managing individual people to managing managers.
The second element that he believes is the key surrounds communication and time. When you are a CEO, it’s important to maintain enthusiasm for your investors. The effect of that is that CEOs will skate over the setbacks during meetings, and when there is a severe setback, investors are caught by surprise. By avoiding those big surprises and being open about setbacks, he believes that is key for preserving confidence in a CEO. Showing that the CEO is growing in the right direction over time also increases confidence.
When founders keep presenting optimism relentlessly for the future and the metrics over time don’t line up with that, this will cause investors to lose confidence and potentially sour that relationship.
Takeaway #5: Visionary vs. Operator
Tim says he sees the split as 80/20 from investors and boards & CEOs themselves when talking about the split of CEOs who start looking for a replacement. When he spoke of his time as a CEO, he thought of himself more as a caretaker vs. his entire identity being a CEO. Tim concluded that he, as the largest shareholder of his company, would be in a better position to have someone take over to run it better than he could.
He gave us the framework he provides to CEOs to use while considering the things they are responsible for the people who report to them:
- Suitable: Make sure that the person you are managing is ideal for the role they are in. If you made a hiring mistake and it’s not a fair use of resources to support them, then replacing them is essential.
- Coach: Without an unlimited budget, it’s often impossible to find someone who will be perfect for that role you need them to fill. You will need to coach them and ensure that they reliably deliver on what you need them to do.
- Incentives: Not just stock options and compensation, it’s essential to make people feel valued and like they are learning.
- Metrics: It’s valuable to measure what you and your employees are doing. You also need to know what to look out, both roadblocks and success.
Takeaway #6: Key Skills for a CEO
Hiring the right people and knowing when to admit your mistakes are the two he thinks are in scarcest supply. Tim also sees the specifics of how you manage the people who report to you in a 1-1 setting can make a massive difference for company success.
The hardest one he sees is focusing on the right things for CEOs is hugely important. Tim identifies this as a process:
- Start with a brain dump of everything you are trying to accomplish in a list, from David Allen’s book Getting Things Done.
- Taking that list, it’s crucial to identify what needs to be done by the CEO. He references Tim Ferris’s advice to delegate, automate, and eliminate from The Four Hour Workweek while compiling this list.
- Look at the individual big projects you are looking at, try to determine which will have the most significant effect on the outcome, and think how to juggle your time on these projects.
Tim has found that it’s challenging for CEOs to do this by themselves in his experience. Having someone who will listen to the CEO lay this all out and respond with good, prompting questions is often crucial to making this work.
When asked about participating in a Demo Day, Tim says have a successful Demo Day is like the “end of the beginning”. It’s very tempting to believe that everything in your slides will come true and a bias towards optimism. Over the next three to five months, sales will be quite uncertain, but the areas CEOs can execute well on is marketing and new hires. It’s also most helpful to take a deep dive into the sales funnel, so you have more data on what kind of money you’ll need your next round. Those first two quarters he believes are hugely valuable between investors + founders to orient the company in the right direction.
Watch The Full Keynote Here:
Q4 Demo Day – Day 2 Keynote: Tim Jackson, Managing partner of Walking Ventures & CEO coach
Tim Jackson is currently the managing partner of Walking Ventures, a London-based early-stage seed fund. He has been an active early-stage investor since 2000 and an advisor and non-executive director to several private companies. Notably, he served as managing director of a $700m European technology venture fund at the Carlyle Group, a US private equity firm.
No stranger to the startup space, he was the founder and CEO of QXL, which IPOed on the Nasdaq and the London Stock Exchange and sold in 2007 for $1.9 billion. He is currently a mentor at Seedcamp, TechStars, EntrepreneurFirst, and Ignite100.
For seven years, he wrote a weekly technology column for the Financial Times and was a staff writer for The Economist and The Independent. In school, he studied philosophy, politics, and economics at Merton College, Oxford, and is the author of three business books.