Why VC investing & rock climbing are more similar than you think
Perspective, by Simon Goldman
“Do you do that thing the guy does in Free Solo?” The answer to this question – which I get asked all too often – is “no”.
What Alex Honnold does in that film is really, really risky stuff. The vast majority of rock climbers don’t solo 1000m high routes, even when they know all the moves by heart. In fact, most of your time climbing is spent planning the route to reduce the chances of ‘surprises’ (to the extent that you can) and dealing with safety equipment so that if you do fall, you won’t hurt yourself.
“Would you make an investment without doing due diligence?” The answer to this question is also “no”. Venture investors vary in the amount of diligence they conduct before making an investment in early stage companies and projects, but personally I would consider making an investment without detailed analysis to be – you guessed it – really, really risky stuff.
I manage the life-sciences side of the UCL Technology Fund, a partnership between AlbionVC and UCL Business, the tech transfer company of University College London. We support commercialisation of intellectual property from one of the largest and most productive academic institutions in Europe, in terms of translational and global impact. In the last 4 years we’ve invested in over 45 different companies and projects at UCL, so needless to say it’s a full-on job both in terms of the continuing number of new investments as well as ensuring rigorous portfolio management.
My foil to this intensity is that I also spend a very large amount of time rock climbing. While the contrast between these two sets of activities is enormous (it’s quite weird being at my desk of a Monday morning, having not long before been clinging to the side of a mountain), climbing has also taught me a lot of things that I apply every day in my work running the fund.
Protect your route, protect your investment
In the same way that I’d stand at the bottom of a route and plan how I’m going to tackle it, I need to do a proper job of understanding the unmet need being addressed by the project/company, the technical details of the science, the path to market, the team involved, the potential returns and key risks to make sure it’s a sensible investment and to minimise the chances of missing something important. Similarly, just as I try to place solid protection in the rock quickly in order to secure my rope as I progress up the rockface, organising funding into tranches which are contingent on achievement of milestones (within an appropriate governance framework) is crucial for capital efficiency and in order to protect investments as projects and companies progresses towards their commercialisation goals.
Trust is crucial
One of the main reasons I climb rocks of all sizes – whether boulders in the forest of Fontainebleau, windswept crags in North Wales, or the soaring mountains in the Alps– is that doing so takes me to amazing places with amazing people.
It never ceases to surprise me just how considerate and friendly most climbers are. I think this is because honesty, trust and clear communication are such crucial elements in climbing. You quite literally have your partner’s life in your hands. In my mind, the same is true of managing an academic-focused, single-institution venture fund – or indeed any VC fund. Trust is quite literally your business. As an integral part of UCL’s innovation ecosystem, we have a duty to be completely transparent with the academic community who we’re helping, and we manage our fund with multiple layers of independent oversight to ensure decisions are fair and openly communicated.
More adrenaline in a VC fund than on a cliff face
VC as an industry can be quite ‘high adrenaline’ and fast-paced, to the point of being all-consuming, especially in an era of constant contact via smartphones. You can often face the expectation – or indeed have the expectation of yourself – that you’ll miss something important if you’re offline for even a few minutes. I do not, however, climb for the adrenaline, as much as the sport is associated with that idea. Sure, a bit of risk is necessary to make you concentrate , but when you’re climbing near to your physical and mental limit you’re forced into a state of ‘psychological flow’ where the only things that exist are you and the rock. It’s an utterly wonderful place to be and, frankly, I want to spend the largest percentage possible of my life in that zone. I simply cannot think about my next investment committee when I’m halfway up a cliff, a few metres above the last place I secured the rope and much of the time there’s no phone signal anyway. Climbing gives me a great sense of perspective and, when I do get back to work I feel positively rejuvenated, even if I was away only for a weekend.
Climbing is also an excellent teacher: you get instant, moment-to-moment feedback as to how you’re going; sometimes good, sometimes bad – but you’ll know right away. On the one hand it constantly slaps me into humility about what I’m able to achieve, and simultaneously incentivises training and preparation – all of which are hugely important in running a VC fund. On the other hand, I’ll often look at route and think “I can’t do that” and it’s a great feeling when I am actually able to achieve things that I thought I couldn’t. Nothing is straightforward in early stage VC investment and I often have to engage my climbing mindset when the odds seem stacked against me.
Do amazing things, safely
I run an early stage VC fund because I want to make a positive difference in the world. It’s that same positivity that drives me to scale snow-capped peaks: life is short and there’s a big, big world out there to explore. But climbing’s taught me a lot about the most important things in venture: managing risk, building trust and having honest and open communication are critical in both worlds. I’m continually amazed by the parallels in how we go about doing those things in a constructive and safe way.
This article was originally published in the Business Insider – Jan 2020
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