"We should not, like sheep, follow the herd of creatures in front of us, making our way where others go, not where we ought to go. Yet there is nothing that brings us into greater trouble than the fact that we adapt ourselves to rumor, thinking that what has won widespread approval must be best, and that, as we have so many to follow, we live by example, not by reason. The result of this is that we are piled up and perish in a heap."
De Vita Beata - Seneca
As I stood on the edge of the shore at Head Island, looking out over Pleasure Bay in Boston’s south bay, the wind whipped against my face, sending a chill down my spine which belied the warmth of the sunny day. A kite-boarder came racing towards me across the slightly choppy water, before taking off over my head and sailing through the sky before landing back on the surface of the bay 30 ft behind me. I was visiting a company we had recently invested in and the kite-boarders doing tricks over my head were the founding team of that company. Little did I know that this aerial display foreshadowed a pattern of flashy distractions that would lead to one of the most expensive lessons in my investing career.
In early 2014, just three months after moving to New York City, an entrepreneur friend invited me and my investing partner to ski in Jackson Hole. Having never skied the Grand Tetons and loving my closer proximity to the amazing options of North American skiing, we took him up on the offer.
Our friend neglected to mention that he wouldn't be at the house when we arrived (he would join later) and that we would be sharing the house with a few other friends who would also be there. This being the pre-uber days and with the map functions on the iphone in their infancy, it took us a little time and effort to find the house and then figure out how to actually get in.
That evening, two guys stumbled in, flushed from a long day on the slopes. They wasted no time setting up their laptops, plugging in a tangled mess of wires to review their data and GoPro footage. They were the CEO and CTO of a hardware start-up, developing a tracking device for skiing and snowboarding. They had an ambitious vision, and we were intrigued.
Over the next few days of skiing we got to learn more about what they were trying to build and their vision for the company. They had started with kiteboarding, claiming that “the intersection of entrepreneurship and kite boarding is so rich and diverse”, with plans to build eventually into snow sports.
Their respective technical knowledge, coupled with their confidence and enthusiasm, appeared to demonstrate their ability to tackle the challenges of building hardware and developing a platform.
A few months later, the opportunity to invest in the company arose. After a period of diligence and leaning heavily on “crowdsourced research” via our network, which was a feature of our early investing style, we agreed to lead a syndicate of investment in the latest funding round.
Shortly after the investment was made, I also agreed to act as an official advisor to the company, helping them think about business metrics and developing effective partnerships.
The spoiler alert here is that this business failed. After multiple “bridge” rounds of financing, investment rounds labeled as Series A and Series A extension, with investments from angels, angel networks and HNWI’s. Our collective SPV loss was around $500,000.
We made so many mistakes during our time as investors in this company. Where we pushed for detailed financial projections and granularity on past financials, the company came back with headline grabbing potential partnership conversations and gimmicky marketing achievements.
One of the flashiest distractions came when the CEO was 'invited' to Necker Island, Richard Branson's famed retreat. The CEO sent us a video of Branson kiteboarding off the roof of the island's main house—a stunt that seemed more about spectacle than substance. This was a warning sign we should have heeded, but we were too caught up in the glamour.
The video no longer appears to be on his blog but here’s a picture the CEO sent me to share his excitement (I’ve blocked the CEO’s face!)
Shortly after taking my advisory role, I set-up a call with an executive at ESPN who oversaw the X-games. Myself and my investing partners had used our network and called in favours to make this happen. The founder of the kiteboarding company was late to the call, was low energy and almost seemed to be expecting the ESPN executive to pitch him. The call ended in less than the allotted time, after the founder aggressively accused ESPN of not being creative enough in their thinking, their use of data and their plans to engage their audience.
In hindsight, the red flags were glaring. There were missed meetings, half-hearted pitches, and promises of partnerships that never materialized. The CEO’s charisma had us chasing a dream, while our instincts warned us something wasn’t right. I am dismayed to say that our syndicate succumbed to a further investment, as the promise of entering the snow market felt too big to pass up, and we convinced ourselves that success was just around the corner.
In our partial defense, this additional round was led by a renowned angel network, whose members collectively wrote a significant check, took seats on a newly formed board and professed to bring extensive expertise in the governance and guidance of the company. In hindsight, we were wowed by their track-record, the logos of other successful investments on their webpage and the pedigree of the investors taking the board seats.
Despite us challenging these board members on numerous occasions as to the folly of the CEO and the lack of financial transparency from the company, we were told we didn't understand what it took to build a company such as this and that we should allow the CEO to continue with his way of operating things. We were made to feel small and inexperienced, despite genuine concerns about financial discipline and the overall honesty of the founder.
In a particular email exchange around a raise that required me, as an advisor, to sign certain documents, I had requested some basic financial information on past numbers and projections. In return the CEO demanded that we set up time to discuss how difficult I was to work with and that I needed to understand that no other investor had asked for these things, so why was I so hung up on them!
Ultimately, gimmicks such as the Necker Island escapade (and a similar stunt where they travelled to South Africa to jump off a shipwreck with a kite board), were used to distract investors from the challenges the business was facing.
Challenges that are all too common and are more commonly known today with respect to building hardware. The difficulty in finding and holding onto reliable suppliers in China, the challenges of sticking to tight build and delivery timelines when dealing with distant teams, the temptation to spend dollars on glitzy high profile marketing events, activities and partnerships in lieu of building a reliable product and developing deep customer relationships and a solid growth plan.
In the final stages of the company’s life, as the CEO continued to find yet another unsuspecting investor, intoxicated by the richness of the intersection of kiteboarding and entrepreneurship, he actually sold the rights to use the device in the kiteboarding market - the only market they were active in and had achieved a semblance of traction - without even telling the investor base.
The elixir of snow sports was never reached and the last time we heard from the CEO, we heard he had pivoted to focus on Equestrianism.
The lessons we took from this investment experience were both extensive and expensive. We allowed our own knowledge, judgement and instincts to be de-prioritised in place of what we perceived to be more knowledgeable investors and apparently high-profile marketing stunts. We ignored numerous warning signals and red flags, instead believing that change was just around the corner and all would be well.
Perhaps the most expensive lesson was one that we didn't actually reaslise until eight years later. In the aftermath of the experience with the kiteboarding company - our egos bruised, our reputations with our co-investors slightly tarnished and our investing bank accounts thinner than we would have hoped in light of our exuberance in chasing the dream of snow-tracking hardware, I met a fresh-faced entrepreneur who had recently dropped out of Wharton and wanted to change the way short-form videos were made.
I had never met a founder who exuded so much passion, confidence for what he was building and who was able to back it up with the domain knowledge and openness to collaborate. At that point his idea was just a keynote deck on a laptop he shared with me at the Roxy Hotel bar. We ultimately invested in him when he was ready to take money - but our investment size was significantly smaller than our previous checks, as our confidence was so dented.
When he sold his company for 8x the valuation at which we invested, the win felt sweet for us, but tinged with an element of remorse, knowing that we had not exercised the right restraint in our Kiteboarding failure, which had affected our assessment of the following opportunities we encountered.
I was back in Jackson Hole last January and the memories of that ill-fated investment crept back. As one of the more difficult terrains in North America, I knew I had my work cut out for me, especially as I was skiing alone.
This time, though, I was different. The lesson that no amount of shiny marketing can replace trusting your instincts was hard-won, but it had shaped me. Learning to trust my instincts as I navigated the mountain, adjusted for the challenging visibility and my own energy levels has taken years of work and dedication.
In the end, the most expensive ski weekend wasn’t about the money—it was about the cost of ignoring what I knew to be true, the erosion of trust in my own instincts, something that took years to rebuild.
In all aspects of business and life, we must learn to balance optimism with skepticism, and to verify even when we trust. Both in coaching clients and to myself, I often ask 'What's the smallest, most concrete step you can take to test your assumptions?' This simple question often reveals more than any flashy demo or high-profile connection ever could.
The next time you're faced with a decision that excites you, pause. What's your instinct telling you? And more importantly, how can you verify that instinct with tangible evidence? Remember, the most expensive mistakes are often the ones we make when we ignore our inner voice in favor of external hype.
