Building with a Long Term Bias

by Mats Lederhausen, General Partner at Cue Ball

 

I met Tony Tjan as part of the World Economic Forum in 1999. We became fast friends. Our connective tissue was primarily around our passion for purpose and people. Purpose because we both felt that the world of business could be more meaningful, more powerful and more impactful if it somehow managed to think longer and bigger. People because we both, at the time with full time jobs as Corporate Strategists, felt that people and execution, more than strategy, is what matters most. Knowing what to do is far easier than doing it! Or as Brian Chesky, one of AirBnB’s founders, recently said in a great interview: “Building a product is easy. Building a company that keeps delivering that product is hard.”

Over the years, and together with Tony’s old college friend John Hamel, we dreamed about what kind of businesses we could create that would manifest these 2 key core beliefs. We searched for ideas that leveraged our various backgrounds and that would connect with consumers in a powerful way.

One day, Tony and John called me and asked: How about “Starbucking” the nail salon industry? Their idea was a brilliant one. They had been looking for a sector of our retail economy that was ripe for innovation and where no branded, upgraded and elevated offerings existed. They simply wondered why no one had done to nails what Starbucks had done to coffee.

Researching this further, it became apparent that the concept suited our emerging collection of Partners perfectly. A combination of clear strategy buoyed by a designed experience (Tony), significant data and real estate complexity (John) and branded, repeatable multi-unit retail operations (Mats). On top of it we identified what we today call an element of “conscious consumerism.” In this case we saw (and are still seeing) unsafe, overly toxic and unacceptable (and illegal) labor standards. We are very attracted to businesses that have a “purpose bigger than their product” for three reasons. First, they build deeper connections with their customers. Second, they build stronger cultures attracting more passionate people. And finally, they fit our long-term bias and evergreen fund structure as, while it takes longer to think bigger, the returns to all stakeholders are often significantly larger. Quality is worth the wait. Like in wines, music and almost any human endeavor, great quality takes a bit longer!

I passionately believe that too many of our institutions have a short-term bias. It’s understandable in today’s hyper transparent and insta-like-culture. But as I have often said to my partners: short-term thinking is like peeing in your pants in winter time. You get warm and comfortable for a short while, but sooner rather than later you’ll start freezing.

We live in a short-term world with long term problems. Neither business nor politics can serve its constituents by only focusing on the short term. We need better balance. Venture Capital in particular has always been about backing great entrepreneurs that are setting out to do the near impossible – those who try to change things to make our lives and our world better. But Venture Capital has also been infected by a dose of attention deficit disorder and you see too many examples of value “extraction” vs value “creation.” Or as we like to call it: Microwave Capitalism.

We created an evergreen VC fund because we believe that a longer time horizon is the best equalizer and thereby proxy for balancing the returns and rewards of an entrepreneurial endeavor. When your expectation is to own something forever or for a very long time, quality becomes as important as quantity.

We have only just begun. We have much to improve as a team. Nothing is perfect. Except for the fact that we are all passionate about building great businesses that have the chance to do great work for their stakeholders for a very long time.

 

 

January 26th, 2018|