Why Context matters

The problem with "Context" is that you never know that you are lacking it until you get it, and then it becomes obvious.

You are all probably wondering what the heck I am talking about. Let me try and unpack my opening sentence and make some sense of it. If you are judging an employee's capabilities and performance, you are doing so in the context of other employees that you have seen doing a similar job in similar circumstances. This becomes your context for evaluating someone as an "A' player or as a "C" player. If in your career, you have only worked with a limited set of similar employees; your context will be limited. What appears to be an "A" player to you (the best you have seen in your limited exposure), may be viewed by me as a "B minus" player because I have a context where I have seen hundreds of employees performing a similar role in similar circumstances. Until you experience one of my "A" players, it is very difficult for you to accept that your "A" player is really a "B minus".

Context isn't a phase that I invented. In fact, I stole it from Howard Gwin of OMERS Venture. Howard says the biggest issue in tech in Canada is lack of context.

Unfortunately, in start-up and small emerging companies, the scenario above plays out all the time. Many founders and successful CEO's of small companies have limited context beyond their one or two areas of broad expertise. I recently met with a company looking to take on their first investment beyond their original "friends and family" round. They have been very successful in establishing and growing their business to a point where they need additional investment to accelerate growth. In their context, they are very successful, so logically and unconsciously it may seem to them that raising money shouldn't be difficult. The company had been referred to me as someone who could help them. Following our discussion, they asked me to propose what I could do to help them raise an investment round. I enlisted a colleague and we put together a proposal to help this company move through what is generally a demanding and draining six month process. Our proposal was split into three phases:

1. Preparation: "Getting Pitch Ready" which included gathering and assessing all the business model, financial model, and due diligence material and identifying any gaps that would inhibit an investor from participating.
2. Working with them to remedy any gaps.
3. On-going Coaching through the pitching process which also included using our connections and networks to create warm introduction to suitable VC's.

We were confident with our network, credibility and experience that we could significantly impact their ability to raise money.

They declined our assistance. What we may have underestimated in developing our proposal was "Context". For a company that has never raised institutional money, I am wondering if our proposal seemed overkill. After all, they had built their company from nothing to cash flow and income positive in just a few years and were posting attractive annual growth numbers.

Are they right and will they get quickly and easily funded without our assistance or do they suffer from not enough context and will get surprised? Only time will tell, but my gut feel is they will exit their fund raising process with a heck of a lot more context about how to raise money, some of which I am afraid will not be good.

Vinod Khosla said this week in TechCruch at  "I Feel Sad Sometimes For Y Combinator Companies That Get So Much Hype".  His message was that some Y Combinator companies exit the process with too large expectations and valuations that chase away the very mentors and investors that they need to make them successful. It is the context that these mentors and investors bring that is required. They look at a start-up's problems and challenges through a different lens than the founders. They often have seen the same problems many times and identify it long before it surfaces to cripple the company. 

I fear too often that Founders ignore this essential element that is a key to their success. More than anything else, mentors and advisors bring context; context in evaluating talent; context in dealing with customer and marketplace challenges, and context in competing for investment.

So if you are a start-up CEO, recognize if you have a shortfall in context and don't miss the opportunity to broaden your perspective whenever and wherever you can. This means attracting not just investors, but the right investors. It also means surrounding yourself with advisors who have done more, seen more, and have a much broader context.