actually start a meaningful business. The risks aren’t really in the technology, but in some unique insight the person has. And often it’s a market insight.
MM: These companies like Facebook that are among the most valuable in the world are getting started in five years and doing what used to take 15 years or 50 years. So not only is technology getting democratized, but once that winning recipe is discovered, the ability of the ecosystem to allow that innovation to scale at great speed has changed.
AMK: If you have democratization on the entrepreneurship side, there is something about capital that is being more commoditized. Even though people talk a lot about the gap between angels and VCs, in my opinion it wasn’t a capital gap, it was actually a gap in understanding how to get entrepreneurs to go from an idea to a scalable business that can actually then become a truly groundbreaking company in the future. Our fundamental insight was that it’s not just the capital, it’s our actual ability to shepherd our companies through learning and discovery.
MM: You may have heard of this guy Commander John Boyd. His nickname was “Forty-Second Boyd.” He could defeat anybody in a simulated dogfight in 40 seconds or less. He coined the phrase “Observe, Orient, Decide, Act,” or the OODA Loop. His philosophy was that the winning fighter is the more agile fighter. This was in a time when the Russians had more military might. You weren’t going to beat them by outscaling them. Instead you get inside their decision-making loop and you disorient them. The F-16 was designed not to be faster than a Russian MIG or to have more thrust but to change direction more quickly. It was designed to be an agile fighting machine.
What’s important about an F-16? The plane itself is important, but the mindset of the pilot and how they fight is important too. When we think about funding startups, we are trying to apply some of that thinking to the early learning and discovery process of a startup. We know when we invest in a company that the first strategy is almost always going to be wrong. We say, let’s just take that as a given, and the idea is to discover the winning strategy as quickly and at the lowest cost we can. How do we pick these companies? Part of what we look for is the entrepreneur who thinks like an F-16 pilot.
X: What attracts each of you to working with early-stage entrepreneurs?
AMK: I think it’s a personal choice. I invested before I went back to get my PhD; I was working as an analyst at Charles River Ventures. It was a great learning environment for me, and I had the opportunity to see how that kind of Series A investing is done. But when I was thinking through what I loved most, I was tainted by the fact that I had been teaching at Stanford, and I had these graduate students who had these fresh, amazing ideas. I had one guy send me four math papers instead of a business plan. I couldn’t think of anything else I would rather be working on than that type of entrepreneurship, where someone has this nugget of an idea and if you could just see that past all the haziness, there was something truly brilliant in what they were talking about . You see that time and time again—students who aren’t jaded, who are still inspired by their initial idea, and just want a little help to get to the next level. So this feels like an extension of teaching to me.
MM: Our personalities are aligned with this stage of investing, but for different reasons. Ann has taught classes and she gets excited by helping these young people translate their ideas into real companies. And a lot of people in these classes are young and inexperienced and don’t know how to run a business—they can describe their idea but they can’t describe what business they’re in. I came from the more visceral, entrepreneurial side. I think I have an appreciation for the frameworks and some of the processes that occur in entrepreneurship. But I am also a little bit of an improviser. I make stuff I up as I go along. We complement each other that way.
X: Is there a general way to describe the kinds of business ideas that attract you?
AMK: The thing we are fundamentally looking for is a unique insight that you have, whether it’s a market insight or a technology. And the way we characterize that is, it has to be non-consensus but right. There are tons of ideas that we find every day that are consensus and right. The Groupon model—everybody agrees that that is a lucrative model, so you see tons of startups creating Groupon for a
