The Potential for Transformation

We are honored to be hosting a discussion with Steve Young, 49er, two time NFL MVP and the MVP of Super Bowl XXIX. He is an incredibly accomplished athlete and businessman as a Managing Director at HGGC, a private equity firm. More importantly, he has demonstrated the ability to transform himself at critical junctures in his life and career, even when he struggled. In his book he writes, “I hear the same negative voice before every game. The moment I put on my helmet, a different voice speaks. You are built for this.”

It’s this spirit of transformation and finding what you’re made of that is one of my favorite parts of youth sports. I often spend time on the sidelines talking with the other parents, most recently, Eric Antonow, Product Marketing leader at both Google and Facebook/Instagram. We talked about his experience managing incredibly talented but often young members of his team. Part of his approach to develop them was to set them up with big challenges — like run Google I/O in nine months — and then coach and provide the resources to help them succeed. He explained how watching these young people earn confidence grounded in taking on extraordinary challenges was a transformative experience for them.

These examples helped me crystallize one of our core values at Costanoa Ventures: we invest in founders who have the potential for transformation — a desire to learn, get better every day, and keep earning the founder role over the life of the company. I’m not sure we know how to judge it yet — or even have the perfect test — but we are certainly trying.

Venture firms used to talk about how start ups weren’t the place for on the job training, but few first time founders are ever ready for the challenge that awaits them. While some are clearly better prepared by deep domain knowledge, functional excellence, or having had great mentors, nothing can prepare someone to be a first time founder. As a result, we can only invest with the expectation that founders will be way better in the future than they are at the time of investment. Our most successful portfolio companies have proven this as their leaders evolve as much as the company does — it’s all about how fast they learn, not about where they start.

It is often tempting to invest in a founder based on their passion, storytelling ability, or grit, but at Costanoa we look for these key factors that are indicators of capacity for transformation:

• Drive. There are some people who simply won’t give up, who will do anything to win, who will fight their own demons to get across the finish line. Evidence of this comes from assessing how they overcome hardships.
• Resilience. Everybody gets knocked down, and it’s about ones ability to stand back up despite inevitable disappointments or failures, and not lose heart. This is evident in mindset and how they navigate their path.
• Intellectual curiosity. Beyond understanding the facts, one must have curiosity to go beyond the obvious to come up with unique insight, see how technology can solve problems, or cleverly assemble (often unknown) pieces to create an innovative solution that penetrates the market.
• Self-awareness. Knowledge of one’s strengths and weaknesses and the willingness to confront them honestly. Force of personality on its own isn’t enough because it doesn’t leave room to get better. The best leaders and the most rapid improvers know their limitations, work to “unblock” themselves and hire great people to complement their own skills, and are willing to show vulnerability.
• Growth mindset. Since reading Carol Dweck’s book (after years of giving it lip service), I’ve come to believe that it is essential for long term success. Adopting a growth mentality is about the ability to embrace what you don’t know as learning opportunity even in the face of fear and anxiety. Be wary of anything smacking of defensiveness that comes from trying to be right all the time.

Founders: get ready to challenge yourself and know you simply can’t know what’s coming. It’s more your capacity to grow quickly no matter what comes at you that determines your success.