As an investor in startup companies, there is always a difficult balance to be maintained, with respect to what are decisions management must make alone and my role as investor, adviser, and often board member. This is due primarily to two constraints, namely my availability for any single company in our portfolio, and the need to limit personal liability. This means while I might be the more experienced in the room, often substantially so in very early stage startups, there are critical planning and essential decisions only management can make, though advised. This of course greatly increases the Risk of our investment not realizing the necessary Return on Investment “ROI” in the required timeframe.
These Return on Investment requirements necessitate management to be highly qualified and capable simply to succeed in business, even more so in the extremely uncertain and high-risk environment of startups. This means we must be exceedingly careful in the selection of the teams we invest in. Emphasis on the startup team leads to one of the most important factors in our investment decisions: the requirement to invest in teams over ideas. This heavy emphasis on team selection, selecting for skills and experience and for intangibles such as the ability to adjust rapidly to market movements, to operate independently, build consensus, and to lead, is true of a startup investment just the same as it is for a Special Operations mission.
The Operational Detachment Alpha “ODA” is the twelve-man element, the startup team, of Special Forces. While these teams are highly diverse, with a broad spectrum of skills and experience internally, each team is specialized in a core capability and mission type, with some teams, such as Direct Action and Sniper/Observer teams, highly focused and specialized. And when tasking an ODA to a specific mission, many tangibles are taken into account, such as the specialty of the team and the composite of sub-specialties contained in the unique background of each member on the team, as well as local language proficiency, and resource availability, among others. As well, the team’s awareness of the battlespace environment, direct experience in the country, as well as relationships with the Country Team and the Host Nation partnered forces, are among many additional considerations.
Intangibles must also be taken into consideration, such as:
- personality of the team, and does this match with the partner force and Country Team and whomever may be in higher command;
- operational tempo of the ODA which both exhausts and destroys families leading to troops mentally not being in the fight;
- whether the mission enhances the skills, capabilities, and reputation of the team, company, and battalion leading to greater capacity;
- does the mission address real or perceived needs, who is determining that need and what is their intent
- should the resources of the team itself and its equipment be applied elsewhere or in another fashion?
These are exact analogs for the considerations I must take into account when deciding whether to invest in a startup team or not. Though with an ODA, unlike a startup team, there is a track record, and a great degree of due diligence on the individuals which I need not invest in, as each has been tested and vetted to Secret and many to Top-Secret clearance levels and more importantly have been tested directly in action.
That teams which require high levels of situational awareness, skills, experience, mental availability, relationships and internal and external cohesion is required of any highly competitive foray into high Risk and high Uncertainty environments, whether military, political, or commercial endeavors, is obvious, and on its own no revelation. That ODA’s function considerably like startup teams, converting that Risk and Uncertainty to assets, is less than intuitive or obvious.
The immediate arguments ensue of course when making such an assertion, as they have in many discussions I have had on the topic with military and government minded individuals, arguments which are not so prevalent when talking with investors and startup leadership teams. Central to these arguments is always the intangible value of military operations, sic, inability to value in monetary terms.
This argument is for the most part put forward by those with no background in accounting or finance valuing assets and modeling ROI. In particular, most in the greater government-military sphere lack any experience at all in monetary valuation of intangibles and lack an understanding of the current sophistication of intangible asset valuation methodologies. This is unlike the startup investor, and ODA who must both model intangible asset values in detail in order to make an informed investment decision.
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