As a kid, I remember a pile of holiday “update” letters on our sideboard during the Holidays. People wrote in depth about their year, positive milestones for their family, and bumps in the road too. These notes were personal, genuine and from a bygone age – before smart phones, texts and even e-mail. Few write these letters now, favoring the short form Minted card with family shots, “Look! our kids are beautiful too.”
I had the pleasure of receiving only two Holiday letters this year – one from an HPVP team member and one from an HPVP investor who runs his own large private equity firm. Two things struck me when I read these notes. The first is how little I know about (ask about?) someone who sits 20 feet from me 8 hours a day. The other is the timeless value of prose in expressing complex experiences and ideas. So, I thought I’d sit down and write a New Year’s letter sharing what is important in my life, and what I’m thinking about. For simplicity, I’ll talk about Family, Profession and Context. Context is the world we live in: economy, politics, city, environment, arts, etc. This last section is probably the most interesting to most, so feel free to jump there. Spoiler alert: this year is dominated by politics and economy.
Family – the people we live with:
Lest you thought I would write this without a family picture because of my earlier swipe, ha! Here it is:
Hawaii sounded great for Christmas, but I’m cheap. So instead we went to Florida and bought matching Hawaiian outfits on sale. Try it sometime. It’s super fun, and, no, I don’t get an affiliate fee.
We’ve entered a new epoch with our daughter, Skye (6), and our son, Winter (5), in the last year. They are increasingly independent and speedily maturing, especially as thinkers and questioners. This has largely shifted the challenges of parenting from meeting banal needs like sleep, feeding and potty to making hard decisions about how we positively influence their character formation and self-management. One experience in 2018 highlighted this for us. One of our children “experimented” (ahem) with taking a toy from their very close friend and then lying about where they got it. In the middle of a Tuesday I received a call from the concerned mom of the friend. I was first annoyed by a call about “XYZ-Branded-Toy-Of-The-Seasons” that I was sure had simply gone missing. But I opened my ears a bit and promised to follow-up with my child. The mom was right, and we the parents of a budding bandit. While this episode is fairly mundane for a developing child, this was the first time Ashley and I really took pause to ask “what type of character and values are we instilling in our children?” The experience was also notable in the tremendous grace and forgiveness we received from the other parents and wronged child – who still remains very close with ours. The child and parents could have gotten upset and gone to the teacher; instead they approached us directly. You can’t ask for a better learning experience, and it highlights that openness to making mistakes and likewise rendering forgiveness are a key part of learning at all ages. It also highlights that child rearing is best done in community.
Notwithstanding the above, Ashley and I couldn’t be more proud of our kids who are truly good people and completely embracing of life and school. Skye has taken to swimming for sport, and Winter has taken to Legos. He also succumbed to peer pressure from Skye to learn how to swim and has become an equivalent waterbug after four years of screaming bloody murder whenever within sight of a pool!
I remain extremely proud and bedazzled by Ashley, our teacher-athlete-mother-wife who did the Chicago Marathon this year (her 14th) at less than 3:15. Wow. Ashley is the best life partner I could have – businesslike when it comes to running a common family and household; loving and thoughtful as a spouse. I also decided this year that the running group Ashley leads was filling up with too many strapping-young-single-20-something-boys vying for her attention, so I ran my first marathon this year to keep up at 3:42.
Profession – the people we work with:
Hyde Park Venture Partners had a tremendous year – which in venture capital is to say that the dollar weighted balance of good and bad tipped heavily to good. We had a number of companies (G2 Crowd, FourKites, Shipbob and others) raise large financings from premier later stage VCs (IVP, Emergence, August, Menlo, Bain and others) at significant markups. But these financings are only smoke from the fire of momentum our partner entrepreneurs are creating in our portfolio. We are truly in awe. These three companies, for example, will each double or triple revenue in 2019 again and likely hire 400 people, just in Chicago. It is a great pleasure for our firm to play a small part in this, and I proudly acknowledge the leadership of two of my partners, Ira and Tim, in the role they play with these three companies in particular. We also had liquidity in both funds, something that feels good for our entrepreneurs, investors and selves alike.
Increasingly, we recognize that good outcomes like those above are the result of well-worn ruts by a consistent team combined with a smidge of process. Ira and I have been working together for ten years, Tim and Greg with us for nearly six, and Jackie for nearly three. As an investing team, we find great joy in our work and each other… and there are sure things to laugh about. We recently implemented an “email of the quarter” designation for craziest e-mail received. It turns out that sleep e-mailing on Ambien is a real thing, and, man, the Ambien e-mail we received was a doozy! Keep ‘em coming, world.
Of course, it’s not all roses. Lots of thorns too – certainly in the portfolio – but sometimes with each other. Just as in a marriage, investing partnerships bring out both the best and worst in people, including myself. In my unadulterated form, I can be questioning and standoffish with those I don’t know or don’t like, charming and caring for those I like, and demanding and wielding of the sharp edge of whit with those I love, including my partners Ira, Tim, Greg and Jackie. We all have our imperfections, but we’ve also developed a safe zone for dissent and disagreement both in our formal investment process and our tacit culture. Indeed, when we first grew the team beyond Ira and me, we talked with a number of top VCs and found that a common feature of their funds’ best venture investments was original disagreement about those startups’ potential. We embrace this reality: in the fog of early stage investing, full agreement only means that everyone is missing something! So, here’s to more fun, success and disagreement in 2019!
Context – the world we live in:
To see the context of 2018 (and likely 2019 to come) as not dominated by politics and the economy seems impossible from where I sit. And yet, save for a short post after the 2016 election, I avoid talking about either much professionally. In short form (eg Twitter) the world doesn’t need one more fan on either side of the stadium shouting, and I am generally losing interest in Twitter as a means of communication other than for simple brand advertising for HPVP and me. In long form (eg blog) I’ve often viewed the line between business and politics a distasteful one to cross. Call me simplistic, but I’m happy to do business with anyone regardless of their politics, as long as we share similar values. It is because of this belief, however, that now is an important time to speak about politics in some depth, even to a broad audience of my business network.
The basic job of leaders is to enable their team members and constituents. For 90% of the time at a large company (not a startup), this means maintaining a consistent set of principles (values!), policies and procedures so that individual employees can do their jobs and keep customers happy. 10% of the time it means making really hard decisions to change the direction of a company to iterate a business model or otherwise stay ahead of the competition. This rubric for leadership applies well to government also, and maybe even more in the extreme. In the US, it is supposed to be very hard to change policies and laws so that a consistent political and regulatory environment is maintained to allow a relatively free economy and capitalism to thrive. Then, 10% of the time, strong leadership in the Presidency, House and Senate is needed to, say, elevate our society with respect to civil rights, recast an outdated tax code every 30-50 years, protect an ally in duress, or restructure our laws and policies to reflect a changing national culture and business model (eg, agrarian –> industrial, analog –> digital, etc). Generally, stability in politics matters and is good, creating a healthy environment for business. Just recently, we’ve seen how political instability is starting to undermine our business environment.
There is no one who understands base human instinct more than Trump. He swept into power on the long wavelength rumblings of a quake of discontent that others couldn’t hear. Unfortunately, no one understands the role of government, domestically or internationally, less than Trump. The interview simply doesn’t match the job.
Moreover, politics and government are much like venture capital in that 9 out of 10 times, your greatest worries will come true. Bad things simply happen all the time; so a good President and presidential team has thoughtful principles, policies and procedures in place to make sure the little things and the big things don’t throw the country off track. Over the past six months, we’ve seen any vestige or attempt of such a structure around Trump crumble. With accelerating staff departures and myriad new troubles rising every week, the frenetic spring that is Trump is simply unfettered to bounce around in different directions, introducing shocks and vibrations into both our political and business environment. There is no stability.
Much has been written about Trump’s lack of values… or adherence to the single value of I. It is not without purpose that I use the word “principles” in the framework for leadership and government above, or why the theme of values has been woven so completely through this letter. Without shared values, every interaction is a transaction, not a step in the natural ebb and flow of a continuing and maturing relationship. Faith to a common set of principles is what business and government leaders need to maintain consistency 90% of the time and then garner support to make big leaps 10% of the time. Instead, Trump’s lack of values and self-embracing volatility leave domestic and international institutions confused and reeling.
Sounds awful and scary, right?
Yet, when I look at my kids, I am not discouraged. As much as we and they are learning from mistakes year-by-year to become of stronger character and values, I can feel the country learning from our Trump mistake as well. Our nation is beginning to reject Trump like the body’s protective sack around a splinter, pushed back through the skin. That doesn’t guarantee new leadership in 2020; a lot can happen in two years. At a minimum, however, mean reversion will bring a more competent and stable leader by the time this Presidency can be formational to how my kids see the world and our country. Trump will be history and a footnote for them… and ultimately for all of us. Good riddance. (Aside: Many of you may note that Trump’s impact has a long half-life because of his SCOTUS appointments. Perhaps, but his two choices could easily have been appointed by any Republican president. One’s preference for that or not is within the normal envelope of political discourse. My point here is that Trump, himself, is not.)
The holiday letter from our investor was marked in its ability to tie the current political climate to business. It greatly informed my thinking here and convinced me that business leaders need to speak up when political leadership is in crisis. Except, we reach a slightly different conclusion. For our investor who runs a multi $ billion “distressed” private equity fund, he sees the volatility and impact on asset values as a buying opportunity. I can’t disagree in the short run.
But in the medium and long term – what matters for my kids and our investors in a 10 year venture fund – I am incredibly bullish. On a recent visit with another of our investors to provide an update on HPVP, we sat over coffee at his kitchen table. I looked at his living room to see piles and piles of sweatshirts, the inventory for his high school senior’s e-commerce business! (Of course, I told them they should use Shipbob to manage their inventory.) When I was the age of this budding entrepreneur, 20 years ago, there was neither an easy supply source nor scalable marketing channel for that same business. It would have required far more startup money, more time, and by definition had a much smaller audience. Now on the brink of the 2020s, there has simply never been a better and easier time to build something new. The rabbit is out of the hat, and there is no going back.