From day one, most startup entrepreneurs look forward to clinching their first investment round as a holy grail. Finally, some runway, a little breathing room, maybe a less cramped office with some snacks. Most importantly, the ability to staff up and spend some time thinking about long-term planning rather than putting out day-to-day fires.
While these may very well be attainable post-investment goals, venture capitalist and entrepreneur Alexa von Tobel has a different perspective, which she shared with Bloomberg Television’s Scarlet Fu during an online talk on Wednesday, October 28, 2020 as part of the Cornell Tech @ Bloomberg Speaker Series.
“After we give you money,” she says, “it’ll be the darkest day of your life.” Why? “Because the better CEOs do their jobs, the harder they get.” As they mature, teams get better at solving small problems, so only the biggest, toughest, most stress-inducing problems are brought before the CEO.
But, there is a glimmer of hope in this tough-love message. “On those days,” von Tobel says, “we will be there for you.” As a former founder, von Tobel knows from experience the “Mo’ money, mo’ problems” aphorism, which gives her the ability to provide support to her stable of entrepreneurs when they need it most.
At 22, von Tobel wrote the business plan for LearnVest, a company that would bring financial planning to the masses. “TurboTax for financial planning,” as she put it. A mere six years later, she sold the startup to Northwestern Mutual for $375 million. When she’s not writing best-selling books like Financially Fearless and Financially Forward, she’s running Inspired Capital, a $200 million venture fund that she co-founded with Penny Pritzker last year in New York City.
The 75-page business plan
When thinking back on her business plan, which ran to 75 pages, von Tobel recognizes its utility as an exercise and as a roadmap.
“It wasn’t a beautifully written document,” she says, describing its value in terms of the deep thought it provoked. She considered what the company would look like, who its customers and competitors would be, and how it would handle various potential roadblocks throughout its lifespan. “You don’t need 75 pages,” von Tobel says, but recommends that founders go through the exercise of thinking about every potential problem the startup could encounter. This way, when those problems inevitably arise, the team already has a game plan in place. She recommends doing this long before launch, when day-to-day issues tend to suck up the founder’s time. Later on, the business plan serves as a guide in difficult situations. “It just gives you a very good map that you can pull out and ask ‘In which direction are we going?’”
LearnVest’s business plan was driven by a simple value proposition. “We were living at the bottom of a recession in 2008 that was earth-shattering for most Americans’ wallets,” says von Tobel, “and I was able to step back and say, “Wow, 74 percent of the country is living paycheck-to-paycheck.” Most people, including von Tobel, did not have access to financial planning. This inaccessibility results in an unfortunate catch-22: in order to attain the level of financial security that professional planning can facilitate, one must already have enough financial security to be able to afford to hire a planner in the first place. She likens this to a system where the best doctors are only available to people in perfect health.
“I’m a very capable person,” she says. “I went to Harvard and Harvard Business School, but I literally have never been educated on my wallet… I have to make financial decisions every day. It makes no sense to me that there isn’t a better framework.”
Knowing when to sell
When Northwestern Mutual came calling, von Tobel wasn’t even thinking about a sale.
“We had north of $50 million in cash on our balance sheet,” she says. “We were starting to generate significant revenue.” But, in order to take the business to the next level, she realized that the company needed to scale by incorporating financial planners. Northwestern had over 150 years of experience providing financial planning to American families — and an established army of planners on call. When CEO John E. Schlifske told von Tobel that his company could bring her product to five million families overnight, she decided to sell, even though she didn’t need to. She estimated that it would have taken her over a decade to reach that pool of potential customers. “I just felt like it was the right thing to do based on our mission,” she says.
Von Tobel spent more than three years at Northwestern Mutual, helping to integrate the LearnVest platform and personnel so that Northwestern could absorb LearnVest’s digital-first approach. She served as the chair of the Investment Committee of Northwestern Mutual Future Ventures, an early-stage VC fund with a focus on fintech, insurtech, digital health, data analytics, and client experience. When her husband told her that she’d do this job for free for the rest of her life if she could, she agreed, and decided to more solidly step into the role of a venture capitalist with her own firm.
Feats of superhuman strength…and superhuman vulnerability
In 2019, von Tobel joined former U.S. Secretary of Commerce Penny Pritzker, her former LearnVest colleague Mark Batsiyan, and Paperless Post co-founder Lucy Deland to form Inspired Capital, a generalist early-stage venture capital firm based in New York City.
She spends her time seeking out and supporting founders she describes as resilient in times of extreme stress; those who can thrive and rally their people while under pressure. “A lot of that is natural,” says von Tobel. “Some founders just have it.”
She looks for people who have the drive she recognizes in herself. In her youth, von Tobel was a competitive gymnast and diver. The training and discipline required to succeed in sports at that level flowed from her internal motivation, allowing her to perform at a high level when it counted.
“Through all of that I learned that it’s the hours of practice and hours of visualization that then come together when you’re performing — it’s almost nothing to do with that day — it’s the hours of work prior, and I think that translates really well to entrepreneurship.”
She likes to ask founders to tell her about a time where they did something “superhuman,” demonstrating the moment where years of learning and doing culminate in a decisive victory under difficult conditions.
But such superhuman feats are only part of the equation for von Tobel. For her, vulnerability is also important as being superhuman. That sometimes manifests itself as a founder hiring people smarter than herself, or owning up to a mistake.
“In the last few years, as a society and a culture, I’ve seen this big shift where we recognize embracing vulnerability and humility. Thank God, because none of us have all the answers. None of us are great at everything.”
The current pandemic has forced workers to display vulnerability in new ways. “You used to be like, ‘briefcase and professionalism.’ You’d show up and your hair’s done perfectly and you’re ready to go. I don’t think that’s how the world works anymore.”
Von Tobel believes that we should embrace this new fluidity between work and home life instead, accepting the vulnerability it brings. Work life doesn’t have to be so perfectly buttoned-up, argues von Tobel, advice that makes as much sense for founders and investors as it does for anyone.
You can watch the entire discussion below: