The Greatest VC Alive

When Lightening Strikes: Luck, Timing and Learning Humility

October 17, 2024
By
Morgan Johnson
"It is impossible for a man to learn what he thinks he already knows.”
Epictetus

In March 2012, I quit finance after a painfully drawn-out exit. My boss, who barely spoke to me on a good day, insisted I return for the last two weeks of my gardening leave—not because I was joining a competitor, but because he didn’t want to cancel his holiday.

With my newfound freedom, I took some unforgettable trips—a week in Jeddah with old boarding school friends, followed by a reunion in Zambia for a wedding.

After the initial high of freedom wore off, I redirected my energy to what came next—mainly ventures in the wine world, with a growing interest in early-stage investing.

Another Elon Musk?

Prior to leaving finance, one of my early, ill-fated investments—a 'YouTube for Doctors'—connected me with a founder I was convinced would become a billionaire. Spoiler: he didn’t, though he did end up a tax consultant in Maine.

Finance’s rigid uniformity blurred my ability to see through people outside the mold—like this 'genius' who, in hindsight, was more of a bullshitter.

This founder, ever the connector, insisted I meet another entrepreneur who had supposedly worked on Apple’s podcast team.

On the back of this success, he was now advising and supporting start-ups in the educational space. This Apple-alum turned out to be a very nice chap and I shared many an expensive coffee at the newly opened Arts Club in London, discussing all things technology and investing.

He suggested I connect with two young Spanish entrepreneurs who he thought I could help. The catch? They were in Barcelona and couldn't afford to come to London.

Remember Skype?

So after some email back and forth introducing each other, we set up a Skype Call! Yes you read that correctly - a SKYPE Call - this was 2012. Video calling was pretty nascent - at least for the rank and file like me.

We hit it off immediately—I was sold on their vision, and they were energised by my insights.

Their creation was a digital creative pinboard targeting designers and creative-types. Within the early stage tech-world, the fad at the time was to classify your new business in the terms of “The X meets Y” where X and Y were already established tech businesses and your new creation was a combination of aspects of the two, but better.

The Barcelona-boys had dubbed their vision as “Pinterest meets Evernote”.

The initial mock-ups and landing pages were bold, clear and had the look of something new and innovative. On top of this, they had manufactured scarcity through a “Waitlist” which they had been spreading via their social media and already had a few thousand people signed up and waiting to join the platform on launch.

Where they needed help and where I came in was on the pitch deck, business plan and financial forecasts. They wanted me to support them in crafting a narrative with numbers to enable them to raise outside investment. At this point they had only managed to raise a few small checks from immediate family and friends.

Dreaming Of The Valley

On first inspection their pitch-deck bore all the hallmarks of cutting edge design and youthful optimism - to be expected from two young designers in a cool European city. The problems started when we got to the numbers - their financial forecasts didn't seem to be based on any real thought, but the real howler was that over 50% of the money they hoped to raise was earmarked to pay for them to emigrate from Barcelona to Silicon Valley!

As admirable as this dream might have been, I had to point out that no investor in their right mind would essentially fund their dream-relocation on the basis of a pitch-deck and no real revenue - or customers! (This wasn’t 1999 after all!)

So I got to work, rebuilding the arc of their pitch and helping put together a more realistic financial projection, based on some fairly finger-in-the-air assumptions and most importantly based on the assumption they would remain in Barcelona until at least until there was some traction and some revenue to point to.

My time working with them on this, coupled with their enthusiasm for their vision (and my weakness for amazing design!) meant that I felt confident in committing a small amount of my own money to help get them started.

My two partners in Nucleus were much more skeptical however. They struggled to suppress laughs when I told them I had never actually met these guys in person and that they hadn't launched anything yet. So I was going solo on this one.

To The Moon

The business launched with 10,000 people on the waitlist and quickly grew to 50,000 users in just weeks, saving over a million pieces of content. With that early traction, we helped them refine their pitch and raised a larger round, with Nucleus and our network contributing the bulk.

Next, we leveraged a connection to an early Pinterest investor, hoping to bring institutional funding on board. Instead, Pinterest came back with an acquisition offer. It was essentially an "acqui-hire," but it gave all investors a liquidity event.

Thanks to our early backing and majority check, we had leverage in the negotiations. Pinterest offered a 2.5x cash return, but we negotiated to roll half of our holdings into Pinterest at its last $4 billion valuation. By the summer of 2014, we had our initial cash outlay back and shares in one of Silicon Valley's rising stars using “house money”. The founders got their dream of moving to the valley.

The Greatest VC In The World!

14 months from first contact to liquidity.

Shares in a high flying unicorn.

First real money in.

Acting as a business mentor to the founders.

Sourcing investment from our network.

Introduction to a potential acquirer.

Leveraging the acquisition negotiation in our favour.

Helping founders fulfill their dream.

I was the GREATEST VC IN THE WORLD.

Or so I thought. I dismissed out of hand the data that said average time to exit from seed stage is 7-10 years.

I laughed in the face of the stat 1 in 10 of your investments gives you a notable return.

I thought I had cracked the code and was destined for home run after home run. Sadly this wasn’t the case.

Without doubt this had been a great investment experience and outcome. The return we would come to realise on Pinterest exceeded even our expectations - it IPO’d @ $10b and peaked out at $49b - although it took way longer to come to market than we had expected.

Process Over Outcome

Our approach and process had been pretty good for novices. Getting to know the founders and their business as intimately as possible. Finding ways of supporting in a smalls ways to build trust and help momentum. Committing a small financial investment, then leaning in as the business gained traction. Leveraging our network to help enhance the business and create opportunities.

But there had also been a massive bucket of luck and timing in the sequence of events. This luck and timing was something I would only come to appreciate as the years progressed and our future investments took different paths.

Shortly after the Pinterest acquisition, Nucleus would go on to make the ill-feted kiteboarding investment, trying to run the same playbook with a much larger investment check.

Ultimately, we learned the harsh truth - that early stage investing is really hard. Most of the investments don’t work out. The 1 in 10 stat is pretty accurate and the time to realisation has only grown in length since we started out.

Barcelona - Is That In Nebraska?

Nowadays, I love telling this story - not because of the money we made, but because of the naivety I had in those early years of angel investing. My belief that I was special and the rules didn’t apply to me.

Very quickly I came to learn that past success counted for very little. As I started to build my network in New York City, nobody had heard of the company from Barcelona, very few people believed that any kind of tech scene existed in Europe and the idea that I had supported a company from Spain through to an acquisition by Pinterest was met with doubtful looks.

What did seem to work however, was continuing to be a connector and supporter of the entrepreneurs I met - even if I wasn't investing. The enormity of the NY tech scene, coupled with my growing impostor syndrome, meant that I often shied away from asking tough questions or allowed the illusion of scarcity to compromise on my efforts to more deeply understand a business and its model.

10 Years On…

A decade on from the Pinterest acquisition, Nucleus is fortunate to have had a number of winners - though far more companies that didn't win. The process and experience around the success-stories typically shared similar attributes, namely the ability to connect with and get to know the founding team. Trust and communication with the team to be able to support and mentor them at challenging points along their journey. A willingness on both sides to think innovatively and with humility about ways in which help can be utilised and a constant commitment to ask and answer the toughest questions.

I spend a lot less time looking at investments nowadays and focus my energies and my learnings supporting founders as a mentor and coach. Rarely do I share with prospective clients that for the briefest of moments I was the greatest VC in the world - but maybe I should!

Looking back, I realize that those early wins were a mix of timing, luck, and a healthy dose of naivety. I may have been "the greatest VC alive" for a brief moment, but the lessons learned in humility, patience, and supporting entrepreneurs are what truly shaped my future. And those lessons? They’re what make me a better coach today.

The Challenge

Where in your business, or your life, might you be overlooking luck or timing in something that is happening to you - good or bad. What can you change or adjust for, now that you can see this?