By Renny McPherson, Managing Partner of First In
Special thanks to Capt Jake McGraw, USAF Skillbridge Fellow, for his research
Which founder is capable of building a venture scale business from scratch: one dedicated to vision or one dedicated to reality and execution?
Conventional venture has a clear answer: Vision. Others, particularly over the past few years, would take the opposite bet: Reality and execution.
Our analysis of each founder that we have evaluated and those we have invested in, over the past decade, shows an unexpected answer to this question: Founders need to embrace dichotomies; they need to respect and embrace both vision as well as reality and execution. Forsaking either vision or reality and execution, is problematic for founders looking to achieve venture scale.
Why? Why doesn’t the visionary founder produce venture returns? And what about the reality-first founder? How can neither of these archetypes be successful in our experience?
Over the course of investing in dozens of companies and analyzing and meeting with thousands of founders over the past decade, first as an angel investor and now as a partner at First In, we have found that the value created in our portfolio has come from founders who embrace dichotomies – who focus on vision and reality. The investments that we’ve made in the past in vision-only or reality-only founders have served as painful lessons that a big idea alone or execution ability alone, rarely if ever enables the creation of an enduring venture scale business.
Founders who have this dichotomy trait have driven our firm’s performance. In our qualitative and quantitative after action research of the founders we back, we come up with new questions about what leads to success. During one of these sessions, something that one of our advisors said in passing to me two years ago, came into my head: some of the best executives he worked with, in high intensity environments, succeeded because they embraced dichotomies. It had seemed like a simple thing at the time. That conversation came back to me in a flash, and we set about testing this hypothesis versus the strong pull of conventional wisdom about ‘vision’ founders.
Founders need to be able to embrace contradiction. We began to dig into the question, “how successful are founders who embrace dichotomies – both vision and reality, vs the vision-only founders?” Much conventional wisdom of venture firms is to buy the vision founders. But, conventional firms often do not conduct enough analysis to distinguish between vision-only versus vision and founders. Vision-only founders are compelling storytellers. But, where the vision-only founders fall down is that they underappreciate execution. The ones who are only focused on a far future. In our experience, these founders hand-waved budgets, timing, procurement, and integration hurdles. Many run out of money before the world catches up to their thesis. Often, they suffer from fragile egos and a lack of grounding in how the world is. Unfortunately, many of the companies they found, raise fast, spend much, and burn out.
We invest in founders who are visionary and grounded. They need to articulate how the world is changing in a way that demands their solution and they must also know how to win in today’s world. This balance is extremely rare. But when we find it, the success ratio is much higher than conventional venture.
What about reality-only founders? We love people who are reality-forward. With respect, we would argue that reality-only founders, who have a get-it-done attitude but eschew the value of vision, should consider building without venture capital. Reality-only founders are often capable of building small businesses, but are less often able to scale their companies. They know customer pain, many have lived it first hand,, and they deliver for the here and now. But they struggle to keep the big target in focus; struggle to tell a big enough story to attract top-tier talent, and despite quality metrics, they often fail to scale investor capital. Their ceiling is often far below venture-scale.
We invest in the rare founders who do both: those with a bold, market-expanding vision and the near-term ability to execute relentlessly. Importantly, if you look for it, the founder’s ability to hold this dichotomy is often visible early. Every founder we have backed has conveyed a compelling vision within the first conversation. That initial spark matters. If we do not see it, we do not move forward. But vision alone is not enough. From there, we look for signs of adaptability, clarity in priorities, and an ability to build momentum early with the right team structure. The most successful founders both imagine and paint a picture of market expansion and ground their near-term goals with quantitative, analytical, no nonsense execution.
We strive to get better, to do better, each day, week, month and year, and we want to work with founders who have the same mindset. We track our misses. We revisit companies we passed on to understand what we got right or wrong. The pattern holds: companies we were excited about early, whose founders showed both vision and reality grounded judgment, are the ones that stand out over time. That pattern shapes how we invest.
If you’re looking for a quick mental model, here it is: a founder’s ability to build venture scale businesses will be much greater if they have all of the following attributes:
1) maturity of long term vision, 2) ability and desire to execute in the near term, 3) willingness to learn and adapt quickly, 4) non-fragile ego.
We share this because we want founders to understand what we are looking for and why. We want fellow investors to learn from what we’ve done right and wrong. If you are building a security tech company, reach out to share your vision and how you are executing.