What we learned in 8-hours with our CEOs
Last Thursday, iNovia held its second annual CEO Summit in New York, a full day event with a combination of experienced, thought-provoking speakers and coordinated round-tables. Our objective with this event was to challenge our CEOs with new ideas and facilitate a sharing of lessons learned across our portfolio. Over 35 companies, nearly 80% of our portfolio, were represented from San Francisco, Vancouver, Edmonton, Calgary, Toronto, Waterloo, Ottawa, Montreal and New York.
Recently, iNovia has come to rely on CB Insights as our primary venture capital database. CEO and Co-founder, Anand Sanwal has quickly established himself as a leading expert on trends in the industry, so we asked him to provide us with a plenary talk to help our CEOs understand the context of today’s financing landscape. A lively discussion ensued as we explored some of today’s realities; that while venture as a class has been shrinking for several years, hedge funds, and other private sources have more than made up the gap. Corporate participation in early stage financing has doubled to 40% in recent years. A look at the financing pipeline reminded us all how uncommon it really is for successful startups to make it all the way through to IPO, and while the bar for a successful IPO is higher than ever…
the real “unicorns” are now $4 billion and greater, not a mere $1 billion!
In the morning roundtables, I heard several CEOs contemplating Anand’s observation that acquihires now account for almost 90% of exits… and that those basically only work out for the entrepreneurs who keep their capital under $5M. Almost 45% of the larger successful exits are under $50M. Candid discussions centred on establishing enough confidence in early milestones to close those “soft landing” doors and really shoot for the stars.
Nir Eyal presented his now-famous “Hooked” presentation, relevant not just to consumer Internet companies, but to everyone with a business model requiring, “unprompted user action”. Nir’s worldview is a powerful way of thinking about the 50% of our behaviour that can be chalked up to habit. I heard many repeating his observation that
habits result when “not doing a behaviour causes pain.”
The real A-ha moment in Nir’s talk was when we all understood how, “variability increases engagement”. Everyone recalls how uncertainty of outcome makes an action more compelling — especially when watching our kids get hooked on technology! Discussion quickly turned to the ethical issues around using these powerful insights to build addictive products, as several of our CEO’s shared their experiences in their own product design journeys. This visceral understanding of technology in our lives is something *everyone* needs to get. If you get a chance to participate in one of Nir’s future workshops, don’t miss it.
Our afternoon focused on board effectiveness in early stage companies. Rick Segal, ex-VC-now-founder-CEO of Fixmo gave an eye-opening interview. By eye-opening I mean that he set a new bar for how dysfunctional startup board dynamics can really get! There was lots of head nodding as Rick provided an off-the-cuff conversation about board dynamics, fund raising and growth. His chat, like the rest of the day, was transparent and open – a real look at what it’s like to be inside a growing company.
This candid view was a perfect prelude to a session by Mahendra Ramsinghani based on his popular book, “Startup Boards: Getting the Most Out of Your Board of Directors”, co-authored by Brad Feld of Foundry Group. Mahendra’s exhortation that
alignment of purpose is essential both on the board and between board and management
resonated with everyone in the room. His advice that the best place to look for independent board members is often peer CEOs rather than customer and partners was the source of considerable discussion in our subsequent round table.
Mahendra’s solid, research-based perspective on what makes boards work used multiple case studies to offer practical advice on selecting board members and building a constructive dynamic. I saw lots of note-taking when Mahendra summed up a great CEO’s responsibility to the board is being, “intellectual honesty… and know when to ask for help!”
My partner Geoff Judge then interviewed noted entrepreneur, Jason Finger, which turned out to be a surprise hit of the day as Jason rattled through hilarious experiences that seemed to really hit home. His likening of recruiting to “selling an experience” rather than competing with cash was a particular favourite. And his vignette of Wile E. Coyote running off cliff, ignorant to the effect of gravity until shown the rules by roadrunner hit home for about half the entrepreneurs in the room — while the other half wondered whether they were still naive enough to have that lesson coming!
Finally, Daniel Burstein, Managing Director of Millennium Technology Value Partners gave us the big picture. Millennium has been a successful participant in multiple unicorns, so Dan comes from an impressive perspective. Our CEO’s reflected on the fact that $100Bn in new public company value is created each year, but were sobered by the reality that of 12,000 funded startups each year, only 54 make it to unicorn status. We evidently live in a time when an $800M IPO is considered “underweight” by analysts!
We indeed, as Dan contends, live in a boom of historic nature. A boom driven by technology enabled business innovation, which allows startups to offer improved services at reduced cost. Thanks to the pervasive mobile Internet and the SaaS business model,
we’re in the midst of a once in a lifetime opportunity for new companies to displace large incumbents in massive industries.
In summary, the iNovia CEO Summit is a humbling event; as partners in iNovia, we get to see our leaders — representing their teams numbering thousands of committed and brilliant staff — come together and share cutting edge ideas to further drive their businesses forward.