20VC Why Great Founders Are Both Visionary & Stubborn, The Investment Mindset Shift From Angel To VC & How To React When The 'S Hits The Fan' with Jesse Middleton, General Partner @ Flybridge Capital Partners

In this episode of the 20 Minutes VC, host Harry Stebbings interviews Jesse Middleton, a new general partner at Flybridge Capital Partners and former WeWork executive. Middleton discusses his journey from co-founding WeWork Labs and handling various roles at WeWork to becoming a prolific angel investor and now transitioning into venture capital. He shares insights on the importance of adaptability, vision, and problem-solving in both entrepreneurship and investing. Middleton emphasizes the long-term nature of venture capital and the need to balance unwavering belief in startups with the fiscal responsibility of managing a fund. He also touches on his approach to problem-solving, the significance of mentorship, and his recent investment in Squire, highlighting the founders' determination and growth. The episode also includes a brief promotion for Eve mattresses, offering listeners a discount.

• Harry Stebbings introduces the podcast with a call for feedback on intros.
• Harry mentions a previous guest, Jeff Busgang from Flybridge, and introduces Jeff's new partner, Jesse Middleton.
• Jesse Middleton's background includes being an early executive at WeWork and an angel investor.
• Harry promotes Eve mattresses before handing over to Jesse.

So starting this one a little bit differently today because intros are hard and they're hard to make fun and different every time.

This quote shows Harry acknowledging the challenge of creating engaging podcast introductions and seeking listener engagement for improvement.

And prior to joining Fly Ridge, Jesse was an early executive at WeWork, one of the fastest growing and most valuable startups in history.

This quote introduces Jesse's background and significance as a guest on the podcast, highlighting his experience at WeWork and as an angel investor.

• Jesse joined WeWork shortly after its formation and helped start WeWork Labs.
• He was involved in various roles at WeWork, including startup investments and product development.
• Jesse transitioned to full-time investing after being an angel investor while at WeWork.
• His experience prepared him for a career in venture capital.

And WeWork was really started... Adam Miguel's vision was always to build a company that was going to be this global professional network of entrepreneurs and small business owners.

This quote explains the original vision behind WeWork and how it aimed to serve entrepreneurs and small business owners globally.

I left WeWork a few months ago to say I'm going to focus full time on investing.

Jesse's quote marks his career shift from operations at WeWork to focusing on venture capital investments.

• Success in venture capital is about backing outliers like Uber or Airbnb.
• Successful operators can focus on specific tasks but are also versatile to handle various roles.
• Jesse's experience at WeWork, where he took on multiple roles, informs his search for adaptable entrepreneurs as a venture capitalist.

The companies that tend to the operators that tend to be the most successful tend to be the ones that are just amazing at putting their heads down, not trying to do everything at one time, but being capable of doing everything at one time.

This quote emphasizes the importance of focus and versatility in successful company operators, which Jesse looks for as an investor.

• Having a hypothesis is crucial to test if a business vision is correct.
• Entrepreneurs need to balance being visionary and stubborn with being self-reflective and adaptable.
• Signals from the market must be heeded to determine if a pivot is necessary.

Well, look, I wish there was a perfect formula for it, but I think that I wrote something, I think it was a couple of years ago now about kind of it being really important to have a hypothesis.

Jesse discusses the importance of having a hypothesis to test a business vision and the need for adaptability in entrepreneurship.## Founder Flexibility and Vision Adaptation

• Founders must be perceptive of market, team, company, and customer dynamics.
• Adapting the company vision can range from minor tweaks to significant pivots.
• Early-stage founders often lack extensive support networks, relying on a few mentors or advisors.

"Sometimes shifted a bit could be a massive shift, like bourbon to Instagram. And in other cases, it's just a little tweak on the model." This quote emphasizes the spectrum of changes a founder might need to consider, from complete business model changes to minor adjustments.

"You don't really have a ton of support early on, right. You don't have big boards or advisor networks for the most part, formally." This quote highlights the isolation and lack of formal support networks that founders often experience in the early stages of their startups.

• Investors play a dual role as financial backers and advisors, offering critical feedback.
• Angel investing is personal, with individual capital at stake, allowing for more flexibility.
• Venture investing involves fiduciary duties and a focus on the success of the fund as a whole.

"My goal should be to try to help you to be the most successful you could be." Jesse Middleton expresses his desire to support founders in achieving their maximum potential, indicating the supportive aspect of the investor-founder relationship.

"Giving hard or critical feedback in a friendly and helpful way is definitely an acquired skill." Jesse acknowledges the challenge and necessity of providing constructive criticism to founders, a skill he has developed over time.

• The transition involves a mindset shift from personal investment to managing a fund with fiduciary responsibilities.
• Venture investors seek companies with the potential to return the entire fund.
• The business aspect of venture investment requires viewing the fund as a holistic vehicle.

"It's a business of kind of outliers." Jesse notes the venture capital industry's focus on finding outlier companies that can deliver outsized returns.

"I had to view it as kind of a whole vehicle." This quote reflects Jesse's realization that as a venture investor, he must consider the fund's overall performance and not just individual investments.

• Listening and learning from experienced partners and industry data is crucial.
• Analyzing past investments and deal flow data helps in understanding investment decisions.
• Recognizing patterns comes with experience, as one gets exposed to numerous companies.

"The next six to probably nine months will be spent predominantly listening." Jesse plans to focus on absorbing information from various sources to develop his investment acumen.

"We have documented over 19,000 companies that we've looked at." Jesse references the extensive database of companies his firm has evaluated, which serves as a resource for developing pattern recognition.

• The venture experience can be different from initial expectations.
• The excitement of being on the investor side of the table is a driving force for new venture capitalists.

"I didn't know exactly what to expect sitting on this side of the table." Jesse admits that transitioning to the role of a venture investor involved entering somewhat unknown territory.

"I am extraordinarily excited to be doing this thing that I believe I really enjoy doing." This quote conveys Jesse's enthusiasm for his new role in venture capital, despite any uncertainties about the industry.## Venture Capital Business Dynamics

• Venture capital (VC) operates on a different timescale compared to other businesses.
• Decisions made in VC take years to see their outcomes, unlike immediate results in other sectors.
• Board meetings in VC occur quarterly, and decisions are not immediately evident.
• Jesse is adjusting to the slower pace of change in the venture world compared to his previous experiences.

"And that change is that you go from a business where every decision you make every single day could affect change in the following day... In the venture world, it is a slow moving business."

This quote highlights the contrast between the immediate impact of decisions in a business like WeWork and the long-term nature of venture capital investment outcomes.

• Some investors are very active with their portfolio companies, while others are less involved.
• Jesse's experience spans from being an operator to now being a venture capitalist.
• He has the opportunity to be actively involved with companies at the seed stage.
• Jesse contemplates if he will miss being involved in major decisions as companies grow beyond early stages.

"The question that I sort of ask myself is, as a company grows and it becomes more successful, big question for me is whether or not not playing an active role in those major decisions post series A or series B becomes something that I miss."

Jesse is reflecting on his potential future longing for active involvement in the companies he invests in as they mature and whether this will be a point of nostalgia or satisfaction for him.

• Problem-solving is a critical skill in both operating roles and venture capital.
• Jesse scored highly in problem-solving in an aptitude test during childhood.
• The ability to learn quickly and break down challenges is essential.
• Jesse applies his problem-solving skills from his operational experience to his role in venture capital.

"Being a great problem solver entails kind of, I think two things. One is being able to learn rapidly about almost any subject... The second component is then being able to sort of break down this challenge into small enough chunks."

This quote outlines Jesse's perspective on what constitutes effective problem-solving: rapid learning and the ability to dissect problems into manageable parts.

• Jesse's approach to significant problems includes recognizing the potential for a situation to be worse and looking for opportunities within the problem.
• He shares an anecdote about a power outage at WeWork and how it led to learning about customer understanding and resilience.

"I try to kind of look at what the problem is at face value, and I try and say, this could be worse... But the other thing is, the question is, what kind of an opportunity arises when you have that problem?"

Jesse explains his mindset when faced with major challenges, focusing on the silver lining and opportunities for improvement that arise from difficult situations.## Resilience and Opportunity in Failure

• People are more resilient than initially thought, allowing for testing and iterating in real physical spaces with actual WeWork members.
• Communicating changes and tests to members has improved since the early days.
• Testing includes different styles of conference rooms, workspaces, and digital applications for member connections.
• Failures present opportunities for significant improvements and advancements.
• Embracing opportunities during challenging times can lead to leaps forward in products, businesses, or personal life.

"I learned that there's actually a lot of opportunity in every massive kind of failure or falter."

This quote underlines the idea that within every significant setback lies the potential for discovering valuable opportunities for growth and innovation.

"Whatever change you make now will likely be better than the current situation, because the current situation is, as you said, the shit hits the van situation."

Here, the speaker emphasizes that making changes during a crisis is likely to result in improvements because the baseline situation is already poor.

• Jesse Middleton reads "Leadership and Self-Deception" by the Arbinger Institute annually.
• The book discusses the challenge of overcoming self-deception and encourages self-awareness, particularly useful for entrepreneurs.

"Called leadership and self deception... talks about the fundamental challenge of thinking inside of the box, not really being able to kind of get out of your own way when you're sort of lying to yourself."

This quote highlights the central theme of the book Jesse recommends, which deals with the internal barriers that prevent personal and professional growth.

• Jesse schedules meetings for 25 or 50 minutes to allow time for follow-up tasks.
• He takes notes in 140-character chunks, similar to tweets, which are then emailed to himself.
• This approach helps overcome his self-professed poor note-taking skills.

"I always try to schedule meetings for either 25 or 50 minutes, leaving me the buffer to do whatever the follow up tasks are."

The quote explains Jesse's strategy for managing time effectively by building in buffers for post-meeting tasks.

"I am great at tweeting... I actually send myself the email kind of these very short, 140 to 160 character little blurbs after every conversation I have."

Jesse has adapted his skill at concise communication on Twitter to improve his note-taking by sending himself short summaries via email.

• Jesse reads "The Skim" every morning for a concise update that makes him feel informed.
• He also follows "Purple," a bot from Techstars that provides updates on the election in a personable, conversational manner.
• These resources help him stay informed despite a busy schedule.

"Every morning? I read the skim... The other one that I've more recently started following... called purple."

This quote lists the resources Jesse uses to stay updated on current events efficiently.

• Scott Switzerland, a venture partner at Firstmark and founder of Openx, is a significant mentor to Jesse.
• Their relationship began after a failed VC pitch and evolved through mutual support in various business ventures.
• Jesse values mentor relationships that are reciprocal rather than one-sided.

"Scott and I have been able to bounce ideas off of each other a ton. And I think that's actually what makes for the best mentors, are people who actually gain from both sides as opposed to kind of a one sided relationship."

Jesse describes the dynamic of his mentorship with Scott, emphasizing the importance of mutual benefit in such relationships.

• Jesse invested in Squire, a Y Combinator startup, because of the founders' growth and resilience.
• Squire's business model involves complexities in technology and operations, despite being in a traditionally low-tech industry.
• Jesse prefers not to discuss unannounced investments and instead focuses on concrete examples.

"One of my more recent investments though, is a company called Squire... And these are just two incredible founders, Dave and Song, who have started from zero startup experience to now having built a product that has grown their revenue since I invested only a handful of months ago by 40 x."

Jesse shares his rationale for investing in Squire, citing the founders' impressive growth and determination as key factors.

• Jesse expresses appreciation for being invited to the show.
• Harry Stebbings thanks Jesse for his participation and shares ways for the audience to engage with the show further.
• Harry promotes Eve mattresses, highlighting the benefits of their product and a special offer for listeners.

"Thank you so much for having me."

Jesse thanks the host for the opportunity to be on the show, demonstrating gratitude and professionalism.

"And I want to say a huge thank you to Jesse for coming on the show today."

Harry reciprocates the thanks and takes the opportunity to encourage audience engagement with the show and its sponsors.