The Locker Room Theory
(Warning: May contain traces of sports analogies applied to business)
For this, my first and long overdue post on the BBPF Blog, please allow me to momentarily and respectfully step aside from the excitement surrounding the launch of BlackBerry App World and the ever expanding smart phone eco-system, to briefly focus on one controversial aspect of our role as VCs.
Perhaps the most important aspect of our jobs is selecting the teams of individuals we want to back with our investments, and then working with them to build the best management team; a team that can take a fledgling tech start-up to the Promised Land of 10X returns and $100M+ exits. In my career, I have built, backed, led, and been part of some of these teams, and of many more that never quite reached the Promised Land, despite showing great potential. After a while, grey hair starts to appear and you also start to notice patterns in what works and what doesn’t.
So I would like to quickly share with you my Locker Room Theory. As mentioned, this can be seen as controversial. So many management teams today are dispersed. R&D team and the CFO in Montreal. CEO in Sillicon Valley. VP Sales in NYC (“oh yeah, all the big decision makers are there!”) with three sales people located in different cities in the US and working from their home office.
Of course, we live in a world where we are always connected and available. That’s expected from us. Always on. We all have love our BlackBerry, iPhone and the silly Bluetooth earpiece that makes sure we don’t even have to take them out of our pocket to take your call. We’re always only one quick Skype, high definition, surround sound video-call away from one another, right? We can e-mail, IM, SMS, blog, tweet… you name it. It is exactly as if we are constantly sitting right next to each other, right? Plus, how many times have we heard the following statement: “we don’t care where you live because you will travel 50%, no, 80% of the time”. Or: “Oh, I’m based in San Diego but I travel to our Toronto HQ at least 2 times a month. That’s more than enough”.
I’m sorry, but I don’t buy that at all. As far as I am concerned, business is all about people. Building a winning tech company is mostly about people and having a strong team dedicated to a strategy and executing it together. Being a hockey fan, I will use a hockey team as the analogy for a portfolio company. Being on the road is like being on the ice. That’s where you score goals. That’s where you win that big contract. That’s where you build momentum; grow a sales pipeline, forge partnerships, hurt your opponent, drop the gloves if needed, etc.
But, when players are not on the ice, they are in the locker room. The locker room is where it’s hot and where it stinks of hard work and empty cups of coffee. It’s where you regroup in between periods, look your teammates in the eyes, listen to your coach and team captain, get ice for that bloody bruise, adjust your strategy and tactics. It’s also where you celebrate after a game. Open that case of cold beers every Friday at 4PM. Get back to the whiteboard to figure out what went wrong on that goal against or sale lost to a competitor.
When not grinding away on the road, your executives need to be at Headquarters. You want them to live within driving distance of HQ. Until the company has reached a critical mass and absolutely needs to branch out new locker rooms (new teams), the executives and the sales team should all be under one roof. You don’t build team spirit and a company culture through e-mails, video-calls and IM. It is all about people working together and making things happen. It’s about staying late when needed, or coming in on a week-end when the servers give up. It’s about the water cooler conversations and finding out that your sysadmin’s favourite uncle has a golf buddy who is CIO at that large corporation you’ve been trying partner with. It’s about decisions made in the restroom. It’s about knowing all the details about key prospects in the pipeline because you ask your salespeople for an update 3 times a week while looking them in the eye. It’s about buying all of them lunch to celebrate a big win. I could go on.
Of course there are exceptions of dispersed teams that did very well. But, while this is not a religion at our firm (not yet!), by experience it is a principle I have grown very strongly attached to, and on which I will always vigorously challenge our CEOs or my partners when they think they can do without it.
If you follow hockey at all, how many times have we seen a team that didn’t look like much on paper get to the playoffs and suddenly play like bulldozers and unshaved gods and go on to win the Stanley Cup? Ask them about the locker room.