Investor Stories 484: Why Selling Too Early Hurts Returns, The Leadership Power of Sleep, and The Costliest Investment Mistakes (Tananbaum, Ries, Demaree)

**SPEAKER_1** (0:00)
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Now on to the episode.

**SPEAKER_2** (0:24)
Welcome to the podcast about Venture Capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran and this is The Full Ratchet.

**Nick Moran** (0:40)
Welcome back to TFR.

**Nick Moran** (0:42)
On today's special segment, we ask guests to tell the most important lesson that they've learned in their career.

**Nick Moran** (0:48)
Here's the segment called Lessons Learned.

**Nick Moran** (0:56)
On today's special segment, we have Jim Tananbaum of Foresite Capital. What is the biggest mistake and or hardest lesson you've learned as an investor and what's the story behind the lesson?

**Jim Tananbaum** (1:06)
I think there are two sets of lessons. One lesson has to do with the prematurely getting out of winners lesson because that has by far the biggest impact on a fund. We're getting better at it, but I would say that over the course of 10 years when you have a conservative organization, there's a bias towards seeing the glass not being sort of half full.
And then that bias is occasionally towards early distributions or early sales of things that then end up delivering another 5X of performance. And I say that's the biggest sin and the most painful sin a venture capitalist can make. The other side of it, from time to time, you have entrepreneurs that are zealots. That zealot-ness leads them to put together stories that are compelling, unless you check every single fact. Then the question becomes just how much fact checking, like, do you want to do when you're in business with somebody? We've definitely had a couple painful lessons. We should have checked every single fact. And in some cases, people, you know, were right at the line, in one case, over the line in terms of, you know, what they were telling us and allowing us to do. No, those are the tough ones. And what I think we've learned for the years is how to have that difficult conversation in the, you know, in the lowest-energy kind of way so that we can, you know, we can get to the bottom of everything without basically calling questions necessarily or doing anything that creates extra energy. But that's definitely an art. It's definitely been a place where I wish we had, we pushed a little harder in a couple of circumstances as well.

**Nick Moran** (2:44)
Grant Demaree joins us today from the Bay Area. He's the CEO and founder of Onebrief, the defense company building operating system for military planning. Can you tell us a story highlighting a critical lesson that has changed how you lead?

**Eric Ries** (2:57)
So Lou Crapperada, or Lieutenant General retired, Lou Crapperada, he was a Marine Corps General. He was an advisor to me for a long time before becoming a board member here. In the early days of the company, I was not in good health. There was a year where I traveled over 250 nights. I tried really hard to get a lot of exercise. I tried really hard to make it work out. But like, there's only so much of that you can do. And if some of that was self-imposed, and in hindsight, not totally necessary.
I was about 20 pounds heavier than I am now, which was very unusual compared to like my military fitness. And I was pretty sad about it. And I was getting sick like twice a month. And it's just very hard to show up the way you need to at that stage. He was like, how well you sleep is the decider of how good or bad you're going to do in leadership. You must find a way to make yourself sleep. That was actually the whole advice. Eventually, problem-solve that from, okay, here's how I can make the room cold enough. Here's how I can get enough exercise. Here's how I can make sure I have zero caffeine except in the early morning. Here's the many other things I can do. Here's how being concerned about these 100 issues immediately before bed is fundamentally unproductive. But you've got to sleep.
As a early stage founder, if you're a little proud of, hey, I can fight it out. I know I can succeed. It doesn't matter how little sleep I got. I will stand and deliver and figure this out, or I will make however many sacrifices I've got to make. I get it. And that's not an attitude that's going to carry you into really effective leadership and saying, no, no, no, this is a top priority problem. You must figure out how to sleep, I think is the leadership lesson on being able to show up for the people and make some decisions.