Investor Stories 484: Why Selling Too Early Hurts Returns, The Leadership Power of Sleep, and The Costliest Investment Mistakes (Tananbaum, Ries, Demaree)

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0:23Welcome to the podcast about venture capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran, and this is The Full Ratchet.

0:40Welcome back to TFR. On today's special segment, we ask guests to tell the most important lesson that they've learned in their career. Here's a segment called Lessons Learned.

0:55On today's special segment, we have Jim Tannenbaum of Foresight Capital. What is the biggest mistake and or hardest lesson you've learned as an investor? And what's the story behind the lesson? I think there are two sets of lessons. One lesson has to do with the prematurely getting out of winners lesson, because that has by far the biggest impact on a fund. We're getting better at it, but I would say that over the course of 10 years when you have a conservative organization, there's a bias towards seeing the glass not being sort of half full. And then that bias is occasionally towards early distributions or early sales of things that then end up delivering another 5X of performance.

1:36And I say that's the biggest sin and the most painful sin a venture capitalist can make. The other side of it, from time to time, you have entrepreneurs that are zealots. That zealotness leads them to put together stories that are compelling unless you check every single fact. Then the question becomes just how much fact-checking, like, do you want to do when you're in business with somebody? We've definitely had a couple painful lessons. We should have checked every single fact. And in some cases, people, you know, were right at the line, in one case over the line in terms of, you know, what they were telling us and allowing us to do.

2:15Those are the tough ones, and what I think we've learned through the years is how to have that difficult conversation in the lowest energy kind of way so that we can get to the bottom of everything without basically calling questions unnecessarily or doing anything that creates extra energy. But that's definitely an art. It's definitely been a place where I wish we had pushed a little harder in a couple circumstances as well.

2:44Grant Emery joins us today from the Bay Area. He's the CEO and founder of One Brief, the defense company building an operating system for military planning. Can you tell us a story highlighting a critical lesson that has changed how you lead? So Lou Craparata, or Lieutenant General Retired, Lou Craparata, he was a Marine Corps general. He was an advisor to me for a long time before becoming a board member here. In the early days of the company, I was not in good health. There was a year where I traveled over 250 nights. I tried really hard to get a lot of exercise. I tried really hard to make it work out.

3:18But, like, there's only so much of that you can do. And some of that was self-imposed and, in hindsight, not totally necessary. I was about 20 pounds heavier than I am now, which was very unusual compared to, like, my military fitness. And I was pretty sad about it. And I was getting sick, like, twice a month. And it's just very hard. to show up the way you need to at that stage. He was like, how well you sleep is the decider of how good or bad you're going to do in leadership. You must find a way to make yourself sleep. That was actually the whole advice. Eventually problem solve that from, okay, here's how I can make the room cold enough.

4:00Here's how I can get enough exercise. Here's how I can make sure I have zero caffeine except in the early morning. Here's the many other things I can do. Here's how being concerned about these 100 issues immediately before bed is like fundamentally unproductive. But you've got to sleep. And as a early stage founder, if you're like a little proud of, hey, I can fight it out. I know I can succeed. It doesn't matter how little sleep I got. I will stand and deliver and figure this out. Or I will make however many sacrifices I've got to make. I get it. And that's not an attitude that's going to carry you into really effective leadership and saying, no, no, no, this is a top party problem.

4:49You must figure out how to sleep, I think, is the the leadership lesson on being able to show up for the people and make some make some decisions. It's kind of engraved in us to just show up and perform regardless of how much sleep you got or, you know, whatever it is. but that's great simple advice. Everybody can fix that.

5:15Are you still managing expenses with outdated apps and spreadsheets? If so, it's time for Ramp, the leading U.S. spend management platform covering corporate cards, travel, AP, and more. All built to save time and extend runway. We use Ramp at TFR and it's been a game changer. As our preferred partner, they're offering listeners$150 just to take a demo. No need to sign up. Head to ramp.com slash partners slash TFR to claim your$150 before the offer expires. Now back to the interview. On today's special segment, we have Eric Reese, founder of the Long-Term Stock Exchange and author of The Lean Startup and Incorruptible.

5:57Eric, what is the biggest mistake or hardest lesson you've learned as an investor? And what is the story behind that lesson? Opportunity costs are always the highest. Like, you know, it's not the things I've invested in and lost money on. It's the things I could have invested in and didn't. I told a story about Dario coming to meet with me. I didn't even try to invest in the company. I was like, oh, that'd be rude. I don't want to be gauche. Like, he's come to me for help on something substantive. We didn't even discuss it. And you picked the iconic big company of the last 20 years. Like, I could have gone there.

6:26As an employee or as an investor early on, like, I sat with Mark Zuckerberg and Cheryl. And Cheryl gave me the rocket ship speech. And I was like, nah, not that interested. Like, could have gone to Google. I've missed them all. So don't take investment advice from me. Very expensive mistakes. But you can't be in this business. Like, you just can't be in this business and that kind of thing bothers you. It's just going to drive you crazy.

6:50That will conclude this installment of Investor Stories. If you're enjoying the program and would like to see it continue, take a moment and leave a five-star review in iTunes. Okay, that will wrap things up for today. Until next time, overprepare, choose carefully, and invest confidently. Thanks for joining me.