Megan Quinn is a General Partner at Spark Capital. She was a previously a partner at Kleiner Perkins Caufield & Byers. Quinn joined KPCB from Square, where she was Director of Products. Before joining Square she spent seven years at Google working on products like Google Maps. Quinn has invested in many businesses, including Clover Health, Handshake, Pendo, Rover, and Slack.
I thought it would be useful and fun to write about Quinn in the context of the work and ideas of Stanford Professor Carol Dweck, who is the creator of the growth mindset mental model. Dweck’s mental model has been summarized in two sentences as follows: “In a growth mindset, people believe that their most basic abilities can be developed through dedication and hard work—brains and talent are just the starting point. This view creates a love of learning and a resilience that is essential for great accomplishment.” People with a growth mindset thrive on new challenges. They actively search for these new challenges understanding that in trying to solve challenges they will grow their capability and skills. In a recent article Dweck wrote about “students,” which I generalize below to “people” in general:
My colleagues and I have found that mindsets—how [people] perceive their abilities—played a key role in their motivation and achievement, and we found that if we changed [people’s] mindsets, we could boost their achievement. More precisely, students who believed their intelligence could be developed (a growth mindset) outperformed those who believed their intelligence was fixed (a fixed mindset). And when [people] learned through a structured program that they could ‘grow their brains’ and increase their intellectual abilities, they did better. Finally, we found that having [people] focus on the process that leads to learning (like hard work or trying new strategies) could foster a growth mindset and its benefits.
1. “I am a relentless advocate for great products. I love product. I test product.”
Quinn once said that she loves maps so much that in the event of a house fire, she would grab the maps first and then exit the house. Maybe she is kidding, or maybe not. That she loves products clearly comes through when you listen to or read what she says in an interview. She reminds me of people I have encountered who are genuinely giddy when they encounter a new product. They get a dreamy look in their eyes as they handle or experience the product. These people take love of a product to obsessive levels, but in a good way. Is great product sense a gift? I do think some people have savant-like qualities when it comes to products. Craig McCaw certainly has savant qualities when it comes to products like mobile phones and services. But I also believe that people who have growth mindset can acquire better product sense. The most successful business people are always learning and in that sense they are always students. When I listen to or read an interview of Quinn, I see a growth mindset. Anyone can grow their brain to become better at skills like developing and investing in new products.
2. “I read as much as humanly possible.”
Quinn is clearly an enthusiastic and avid reader. Successful investors who do not read are rarer than chicken teeth. Change is happening far too quickly for anyone who does not read constantly to keep pace. Charlie Munger has observed over his decades as an investor: “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero.” Reading is clearly a part of how Quinn approaches the growth mindset mental model. For example, Quinn received her degree in Political Science and History from Stanford and yet was a product manager at Google which required that she not only develop technical chops but the business skills. You don’t learn the business and technical side of what she does without reading a lot, having a love of learning and otherwise exhibiting a growth mindset. She exemplifies Dweck’s idea that: “we can grow our brain’s capacity to learn and to solve problems.” Its important to keep in mind what Dweck talks about here: “If you want to demonstrate something over and over, it feels like something static that lives inside of you—whereas if you want to increase your ability, it feels dynamic and malleable.” Business school professor Jeffrey Pfeffer faults businesses for spending too much time in rank-and-yank mode, grading and evaluating people instead of developing their skills. Pfeffer quips: “It’s like the Santa Claus theory of management: who’s naughty and who’s nice.” Businesses that hire only based on IQ tests or credentials are often missing the best employees. Dweck believes:
John Zenger and Joseph Folkman point out that most people when they first become managers enter a period of great learning. They get lots of training and coaching, they are open to ideas, and they think long and hard about how to do their jobs. They are looking to develop. But once they’ve learned the basics, they stop trying to improve. It may seem like too much trouble or they may not see where improvement will take them. They are content to do their jobs rather than making themselves into leaders. Or, as Morgan McCall argues, many organizations believe in natural talent and don’t look for people with the potential to develop. Not only are these organizations missing out on a big pool of possible leaders, but their belief in natural talent might actually squash the very people they think are the naturals.
3. “99.9% of the time, certainly in my case, unless they’re talking about maps, founders know a lot more about what they’re talking about than I ever will. I’m there to learn and listen and then pass judgment, and because I will never be the subject matter expert in whatever it is that they’re focused on, the empathy and experience that I have gained by building and helping mature startups over time is really useful to those entrepreneurs.”
The best venture capitalists have a “learn it all” instead of a “know it all” attitude when they are talking with entrepreneurs. They have the ability to create what Zen Buddhists call Beginners Mind which “refers to having an attitude of openness, eagerness, and lack of preconceptions when studying a subject, even when studying at an advanced level, just as a beginner in that subject would.” Some people refer to this attitude or approach as: “strong ideas weakly held.” Strong ideas should come from knowing the subject very well based on research that has examined all side of the issue. By keeping any strong ideas “weakly held” a person can adapt more easily as new information and ideas arrive. In the 2006 WESCO meeting Charlie Munger said:
The ability to destroy your ideas rapidly instead of slowly when the occasion is right is one of the most valuable things. You have to work hard on it. Ask yourself what are the arguments on the other side. It’s bad to have an opinion you’re proud of if you can’t state the arguments for the other side better than your opponents. This is a great mental discipline.
4. “Curiosity is a requirement for identifying great entrepreneurs and companies. Read obsessively across many industries–technology, business, science, education, and so on. Find smart people in the verticals you’re interested in and follow what they’re reading, writing, saying, and even tweeting to develop your own point of view. An important part of tech investing is developing a strong point of view on emerging technologies and trends–curiosity is critical.”
Reid Hoffman said in an interview recently: “Curiosity is a key to surviving in the modern age.” Don Valentine believes: “Venture capital is reducible to a few words. You have to be interested in managing change, and you have to believe that change is necessary.” If you are not curious enough to seek out what is changing you are going to be too late to the party. Piling on to an area to invest in is not a sound strategy in venture capital. When poseur venture capitalists arrive to invest in a sector, the great venture capitalists are already looking at new opportunities. Dweck wrote about Thomas Edison in her book Growth Mindset:
Young Tom was taken with experiments and mechanical things (perhaps more avidly than most), but machines and technology were part of the ordinary midwestern boy’s experience. What eventually set him apart was his mindset and drive. He never stopped being the curious, tinkering boy looking for new challenges.
Walter Isaacson wrote this recently, which is similar to the ideas of Dweck: “Leonardo Da Vinci was a very human genius. He was not the recipient of supernatural intellect in the manner of, for example, Newton or Einstein, whose minds had such unfathomable processing power that we can merely marvel at them. His genius came from being wildly imaginative, quirkily curious and willfully observant.”
The best venture capitalists I know are always asking questions. Why is this true? What can we learn from this? How can we do this better? When will this technology arrive? Who is the best person to help us solve this problem? Who is the expert on this? What is he or she like? The questions one can ask are endless because there is always more to learn. Dweck says: “it’s not always the people who start out the smartest who end up the smartest.”
5. “A lot of the pitches and the products that I see across my desk are iterations on existing products and services. The entrepreneur has taken a great existing product or service and made one or two tweaks to make it more compelling. It probably does make it a better product but it’s not enough for a venture-level investment, per se. You really need to have a vision for the future that demands your product or service exist.” “As much as I wish we could just invest in really, really great products, we need to spend time investing in products that actually have an underlying business or business opportunity.”
People have a tendency to underestimate how much better a new product must be to succeed. Tweaks in existing products aren’t enough to cause people to switch for a number of reasons, not the least of which is status quo bias. People in general need significant motivation to change what they have been buying. Incumbents can also copy small iterations quickly. How do you create better products? You probably guessed I would say: “have a growth mindset.” What are Lean Startup or Kaizen if they are not about having a growth mindset? I will write more about this soon in a post about the new book The Startup Way by Eric Ries. Ries writes: “Take the learning from each experiment and start the loop over again (build-measure-lean feedback loop).” You can follow the process Ries describes in your life, your career and with products. It represents a growth mindset.
6. “It’s hard to build a very significant business when you don’t have a direct relationship with your customer.”
We live in the age of the connected customer. A business that does not have telemetry data from its customers is operating in the dark. The earlier and more often that data is obtained. the more the supplier can make the product better. Feedback loops that result in better products are shortened and made more robust when a customer is connected and suppling the supplier with data. Improvements in artificial intelligence make this telemetry more important as each day passes. If a competitor has customer telemetry any competing business that isn’t connected to its customers is in big trouble.
Many business in many different industries that have had another company between it and the end customer have been deciding to abandon an indirect distribution model to regain the critical customer data. As an example, you can see this in Netflix wanting to get to a point where they own 50% of what they offer and in the fact that they will not share much of the data they generate with third party content owners. A content producer like Disney increasingly realizes this and is as a result moving to stream its content directly to end users. Ben Thompson describes this idea beautifully when he wrote this week: “the end of gatekeepers is inevitable: the Internet provides abundance, not scarcity, and power flows from discovery, not distribution. We can regret the change or relish it, but we cannot halt it: best to get on with making it work for far more people than gatekeepers ever helped — or harassed.”
7. “Every investor will include these four things in their lineup, but will change the order. For me it is products, entrepreneur, markets, business model. If they are not all stellar, it is not a good fit for me.”
A venture capitalist like Don Valentine puts markets first of the for attributes. Other VCs like Pitch Johnson put entrepreneur/team first. That these different points of view exist is healthy since there are different teams with different early strengths and weaknesses (and different sources of outperformance). Even with a given venture capital firm the relative priorities between the four attributes can vary.
Can a company have a growth mindset and if so what would it look like? A Harvard Business Review article explores this topic and concludes:
“In broad strokes, we learned that in each company, there was a real consensus about the mindset,” Growth-mindset organizations are likely to hire from within their ranks, while fixed-mindset organizations reflexively look for outsiders. And whereas fixed-mindset organizations typically emphasize applicants’ credentials and past accomplishments, growth-mindset firms value potential, capacity, and a passion for learning. “Focusing on pedigree…is not as effective as looking for people who love challenges, who want to grow, and who want to collaborate.”
8. “Founders should have a basic level of financial literacy in order to run their startup. The good news is that there’s a proliferation of VCs, like myself, who share a ton of content online, every day, all the time, more than anyone could ever possible want to read, about the fundamentals of startup businesses.”
It is sometimes hard to get founders interested in learning about financial issues. They love products not term sheets. A founder’s willingness to learn about financial topics can change when a transaction is actually happening since at that time they have skin on the game. But by the time the transaction is happening it is often too late at that point to get fully up to speed and they have a business to run. Too often the founders must go through a bad experience in order to learn hard lessons about things like important deal terms. For example, founders can focus too much on share price of a financing and not enough on terms. This is more than unfortunate. It is a good idea for founders to spend some time reading about financial topics that will impact their business including fund raising before they are about to face the issue. Founders are natural learners, so a reticence to learn about financial topics is unfortunate. Dweck has written this on the learning process generally:
“What on earth would make someone a non-learner? Everyone is born with an intense drive to learn. Infants stretch their skills daily. Not just ordinary skills, but the most difficult tasks of a lifetime, like learning to walk and talk. They never decide it’s too hard or not worth the effort. Babies don’t worry about making mistakes or humiliating themselves. They walk, they fall, they get up. They just barge forward. What could put an end to this exuberant learning? The fixed mindset. As soon as children become able to evaluate themselves, some of them become afraid of challenges. They become afraid of not being smart. I have studied thousands of people from preschoolers on, and it’s breathtaking how many reject an opportunity to learn.”
9. “The major difference [between being a VC working for a business and directly creating products] is that I am helping their dreams come true.”
Being able to enjoy the success of other people in achieving their dreams is a common attribute of successful venture capitalists. What Quinn is talking about is another example of having a growth mindset. The best venture capitalists I know, or at least the ones who are the most fun to be around, are natural teachers. As Dweck says: “Don’t judge. Teach. It’s a learning process.” It can be valuable content marketing for a venture capitalist to teach people about technology, products business and life via blog and speaking, but it is also the right thing to do. Teaching helps the teacher grow their intellect and their ability to be empathic. As an example, I have found it interesting to watch Ray Dalio promote his book Principles, especially when he says that his motivation is passing along what he knows, before he passes on. This blog started really when two partners at Benchmark told me about a new service called Twitter and said: “It is perfect for you.” They knew me well from the days when I would commute to their office regularly. As is the case in life one thing resulted in another. My experience on Twitter caused me to think I should do more of what Dalio is talking about and for the same reason. This caused the pace of writing on my blog to pick up speed. I have written a post every Saturday for ~250 weeks in a row now.
10. “Venture capital is a very specific type of funding vehicle for a very specific type of company. It is not broadly applicable, and there is no reason to have shame or to be disappointed if venture capital is not the right funding vehicle for you. The United States is built on small businesses that do not take venture capital.”
Very few business in the United States or elsewhere raise a series A investment from a venture capital firm, let alone an additional financing round. Quinn is making a critical point that most businesses do not need venture capital and should not try to raise it. Every nation depend on business getting stared without raising venture capital. As context for this point, depending on your definition, only 800 to 1,200 series A rounds occurred in the US in 2016. This a relatively small number of business. Overall business creation numbers are far larger. For example, in 2015, 679,072 new businesses were established in the United States. These businesses created 3 million jobs, with the average business creating roughly 4.5 employees. Entrepreneurship and the formation of new businesses has declined. For example, in 1978, there were 12 new businesses created for each existing business, while in 2011 there were only 6.2 new firms created for each established business. The number of new businesses created is quite concentrated unfortunately. From 2010-2014, half of new startups created were located in just 20 counties. Every country needs to have a base of businesses that are able to grow by using sources of capital like savings, bank loans and internally generated cash flow.
11. “The absolute best way to get into venture capital is to go work at a startup.” “There’s no better way to help entrepreneurs build companies than to have done it yourself. You need to experience the daily highs and lows to understand the grit and fortitude required to go from customer one to 1 million. Great investors draw from their own personal experience and it’s hard to be a coach if you’ve never been a player.”
Quinn has worked at operating businesses like Google and Square. The broad experiences she encountered during those periods serve her well as a venture capitalist. For example, one key leaning from working in an operating business is the idea that you can learn from failure, Dweck puts it this way:
“If you react to a setback defensively, wanting to hide it, wanting to make up excuses for it, you’re in a fixed mindset. And instead, ask what can I learn from this experience that can help me go forward next time?”
“Why waste time proving over and over how great you are, when you could be getting better? Why hide deficiencies instead of overcoming them? Why look for friends or partners who will just shore up your self-esteem instead of ones who will also challenge you to grow? And why seek out the tried and true, instead of experiences that will stretch you? The passion for stretching yourself and sticking to it, even (or especially) when it’s not going well, is the hallmark of the growth mindset. This is the mindset that allows people to thrive during some of the most challenging times in their lives.”
The best way to learn is by actually doing what you are trying to learn. Nothing beats the real world of business as a classroom.
12. “The most important thing for someone to do starting in the tech industry is [to find] mentors. I think it’s very important for folks who are starting out in the industry [because they] can give them advice and time and be mentors and role models for them. It’s not necessarily even having to find lots of mentors or people who are going to spend hours a week or hours a month with you. It’s about finding people who you look up to.” “I observe who has achieved success but had done so in a way that was thoughtful, collaborative and more in tune with how I wanted to develop.”
I have a half-written draft blog post written on mentors that I will finish soon. Quinn’s ideas on mentoring marry well with something that Sheryl Sandberg has said about careers today:
“The traditional metaphor for careers is a ladder, but I no longer think that metaphor holds. It doesn’t make sense in a less hierarchical world. … Build your skills, not your resume. Evaluate what you can do, not the title they’re going to give you. Do real work. Take a sales quota, a line role, an ops job, don’t plan too much, and don’t expect a direct climb. If I had mapped out my career when I was sitting where you are, I would have missed my career.”
Quinn’s point about finding people you look up to in addition to what people would traditionally think of as mentors is an excellent point. Just having the ability to watch great people operate is like going to school. You can also learn from anti-mentors what not to do. Dweck writes: “Think about your hero. Do you think of this person as someone with extraordinary abilities who achieved with little effort? Now go find out the truth. Find out the tremendous effort that went into their accomplishment—and admire them more.” My heroes include my parents and Bill Gates Sr., who I have written about previously on this blog.