A DIET for New Ventures

diet - hand holdingLast month, I had the pleasure of speaking on a SXSW panel about “Impact Investing.”

In preparation for that panel, I framed out some notes to use for my remarks. In advance, to help promote the panel, I also write a post entitled “DIET and Exercise” based on the notes.

However, I recently realized that I never elaborated on what my meaning was behind the words Demand, Idea, Excellence, and Team that make up the acronym DIET in the title. I discussed them during the Southby panel, but forgot to write it up for the blog.

So, here’s the meaning behind the words. Remember: the context is these words were meant to provide easy-to-remember guidance for social venture founders on the attributes that impact investors seek.


Working backwards – most known to least, you might say – the first question is understand if there is demand for the product or service? In lean startup methodology, this is “product/market fit” – have you built a product that anyone wants to use and/or will pay for?

My Austin colleague Josh Baer likes to say that proven “customer traction trumps all.” If you can show a meaningful number of customers using your product or service, then that makes a decision about investing in you the easiest of all.


Continuing to work backwards, if the product or service is still in development, then the next best thing investors will want to know is details about the idea. In lean terms, this is “problem/solution fit” – do you have a problem worth solving and what can you can offer about your product or solution that makes it novel, compelling, and important?

Investors will want to understand your knowledge of the market, your competitors, why you think certain features of your solution produce valuable benefits. They will want to know how well you know your customers and any evidence you can provide that your idea has merit with them.


Short of a minimally viable product or evidence that supports your idea, the next thing investors can look towards is excellence in what I call the small things: these are both tangible and intangible. On the tangible side, how much have you thought about the design values that matter to your idea? What should the experience be like for your users and why? Have you created rough sketches to show UIs, flows, ecosystem interactions, etc.?

On the intangible side, I find it instructive to observe how founding teams communicate, prepare, follow-up and other aspects of their personal style.

  • Do they arrive on-time or are they always late?
  • If late, do they let you know in advance?
  • Do they take notes in meetings?
  • How quickly do they follow-up with you on the notes?
  • What’s their eye contact and how do they show you that they are listening?
  • How do they interact with each other? etc., etc., etc.

Sports analyst and former Dallas Cowboys coach Jimmy Johnson used to get asked why he required his players to hold hands in the huddle. The reason, he said, was because he believed that the “little things” were good indications for how the “bigger things” would turn out.

In the case of his players’ huddles, having them hold hands – even if only each other’s pinky fingers – was a little way of reinforcing the big theme of “team over individuals” before each and every play. The same “little things” thinking goes for startup founders, in my book.


Lastly, if the investor has nothing else to go on – no product, no research results, no track record of interaction with the founders – then they are left only with the team. Some would say (and I’m one of them) that, taking all other things into consideration, the most important element of a startup is the team.

There are two dimensions I’d offer for evaluating the team, especially the founders.

The first is a more experience-based evaluation that I’d call the “it” factor. As an investor, after you’ve met with hundreds of startup founders and prospective entrepreneurs, you begin to get a sense of what you’re looking for in the person across the table from you and if they have “it” – the “it” being the total sum of what it takes to go through the startup process and emerge with a product or service that has the potential to be truly meaningful (which usually means: profitable at scale).

diet - connerThe second dimension for evaluating team members comes from the work of a change expert named Daryl Conner and the research his firm ODR did a couple of decades ago. Conner and ODR observed hundreds of successful people and documented a set of attributes shared among them:

  • positive,
  • proactive,
  • focused,
  • flexible, and
  • organized

Taken together, Conner referred to the people who possessed these attributes as “resilient.” To the ODR list, I’ve personally added a sixth attribute of a moral code. Besides the main reason that working with people who have a moral code matters to me, it also helps me to remember the attributes together as a single exaggerated acronym: PPOOFF!

Which, in my mind, is mental noise that is made in your head if the team lacks the potential to stand up to these attributes. If they don’t, well then “ppooff” …there goes your chances of the venture being a success, as far as the investor is concerned.

So there you have it. That’s my meaning for the words composing the DIET acronym.

Seven amazing business books: Part 2

In my post yesterday, I started my personal list of seven amazing books that I’m betting you’ve probably never read. I offer the list, despite the Steve Jobs-ian claim that no one reads books anymore. With the recent release in February 2010 of Pew Research Center project’s findings, citing the 50% drop in blogging among teens and young adults in just three years, there is certainly evidence out there supporting Jobs’ position.

But, we forge ahead – in the spirit of “great ideas win out,” regardless of the medium – and present the next three in the list of seven. Remember, these are in the order of newer to older. Enjoy.

Managing at the Speed of Change, by Daryl Conner (Villard Books, 1994) – In 2008, I became a big fan of the model described in Influencer, by Kerry Patterson, Joe Grenny, and the VitalSmarts team (McGraw-Hill, 2007). It is the freshest work done in the broad field of change management that I’ve seen in quite some time.

But, until Influencer came along, my opinion is that Conner’s Speed of Change was one of the great, overlooked books on change management. I still ascribe to the resilience model that he promotes, valuing certain key attributes – positive, proactive, flexible, focused, and organized – as the ingredients that make for the ideal, resilient team member.

Corporate Culture and Performance, by John P. Kotter (The Free Press, 1992) – Through the ups and downs of business cycles since the days of President Jimmy Carter, I have found myself in a position of needing to persuade everyone from first-time CEOs to spreadsheet-obsessive CFOs, time and again, about the value of committing to targeted, meaningful culture-building programs in the company’s budget. If you have found yourself in the same position, look no further. This book is “Exhibit A” in the case of why spending on forming and reinforcing corporate culture pays big dividends.

I cite Page 11 (in my copy of the book): “Corporate culture can have a significant impact on a firm’s long-term economic performance. We found that firms with cultures that emphasized all the key managerial constituencies (customers, stockholders, and employees) and leadership from managers at all levels out performed firms that did not have those cultural traits by a huge margin.

Over an eleven-year period [NOTE: I added the bullet points, to make for easier reading]:

  • the former increased revenues by an average of 682 percent, versus 166 percent for the latter;
  • expanded their work forces by 282 percent, versus 36 percent;
  • grew their stock prices by 901 percent, versus 74 percent; and,
  • improved their net incomes by 756 percent, versus 1 percent!” [NOTE: I also added the exclamation point]

I’ll bet that I have faxed that paragraph, e-mailed those words, or shoved that page of the book in front of people at least once a year on average. And every time, even if the budget gets cut somewhat (although sometimes it goes up!), management’s commitment is renewed.

Capitalism and Socialism, A Theological Inquiry, edited by Michael Novak (American Enterprise Institute, 1979) – This book changed my life. In it are essays by American Enterprise Institute fellows like Irving Kristol, Seymour Martin Lipset, Peter Berger, Michael Novak, Muhammad Abdul-Rauf, Ben Wattenburg, and Penn Kemble. Essay titles range from “The Spiritual Roots of Capitalism and Socialism” to “The Islamic Doctrine of Economics and Contemporary Economic Thought.” Just read it. Whether you agree with it or not, the book deals with God and Mammon like none I’ve ever read.

Tomorrow, the last of my seven amazing business books. Let me hear your favorite unknowns!