Declaring a Major
An Interview with Lawrence Lenihan
Venture Capital Industry veteran, Lawrence Lenihan, takes us on a journey through his childhood, venture investing & launching his own brands from start to finish. He associates the early days of venture capital investing with Bubba Gump shrimping, explains why you cannot drive the car from the backseat and explains the importance today of "declaring a major."
Lawrence Lenihan is the Co-founder and Co-CEO of Resonance, a venture operating company that invests in early-stage fashion brands. Prior to Resonance, Lawrence founded FirstMark Capital, an early stage venture capital firm whose portfolio investments included early bets on Pinterest, Shopify, Tommy John and other brands and technology-based solutions for retail, fashion and other industries. He is the Chairman of Norisol Ferrari, an ultra high-end luxury brand for women and has been a Professor of Entrepreneurship and NYU’s Stern School of Business.
Kyle Widrick: I'm Kyle Widrick. This is the Creator Series. Today we have Lawrence Lenihan, co-founder of Resonance, formerly founder of FirstMark Capital, investor in companies like Pinterest and Shopify, Tommy John. Thank you Lawrence.
Lawrence Lenihan: Pleasure
Kyle Widrick: I'd like to start off, maybe take it all the way back to pre-university, how you grew up and how this did or did not impact your path, how successful you've obviously been.
Lawrence Lenihan: I was a product of the mean streets of Chappaqua, New York. That rough upbringing, it was like something out of a postcard. Chappaqua wasn't as well known as it is now, but it was a small, peaceful town. I had [inaudible 00:00:49] parents who, I'm the product of a lawyer and an English teacher, and therefore I am a nut about grammar, but other than that, they felt the sun rose and set around me, and-
Kyle Widrick: Were they tough on you? Did they push you to-
Lawrence Lenihan: No, they just were always really supportive. They weren't back then, I think they paid attention a little bit in school, but I always did well enough that they didn't spend much time. I always wanted, I started companies, I started a company when I was building stuff when I was four and five years old, like treehouses and things like that. I started a weeding company when I was seven or eight, so I always had these things. To my parents it was kind of alien, so they just sort of let me be and that was it.
Kyle Widrick: You moved on into your career. And you started working at I believe IBM. Did you have a thought in your mind that you would turn into a venture capitalist? Venture capital is very sexy. People are always asking me, "how do I get there? What's the right path?"
Lawrence Lenihan: When people start asking that question, sometimes leave.
Kyle Widrick: Was it apparent to you early on?
Lawrence Lenihan: No, I had no idea, I'd never heard of venture capital. I was assigned by chance to the retail industry branch. They put me on Macy's, and they're losing the Macy's account. I had a chance to go work in Macy's to show them how much we would study their business and them. They put me on the shop floor, they put me in a distribution center, and I fell in love with the retail industry. At that time, IBM was so screwed up, it was the late 80's, that I was able to develop a product for in-store retail processing, the idea of putting a computer in the stores, which now sounds ridiculous but, believe it or not, they didn't have it, just links back to their mainframes.
The second thing was we developed a kiosk product. That's the whole business, whole standalone, interactive retail kiosk product. I tried to spin it out, they set up a stage and ran with it. They would put me through business school, so I did. Told them I was gonna leave at the end, I did. I had a chance to go to a small merchant bank and then form the predecessor of FirstMark called Pequot, as part of Pequot Capital, which is a larger capital management company.
Kyle Widrick: You went to undergrad for engineering.
Lawrence Lenihan: I was an electrical engineer, yeah.
Kyle Widrick: Were you more technical, or more business oriented?
Lawrence Lenihan: Out of 200 engineers, I think I graduated 195th in my class, but I did enjoy my time at Duke. I did much better at IBM, and I was able to get into Wharton. But, no, I mean it was always a technology orientation. Coming into IBM, you start thinking about solving things, systems approach to solving things. IBM, honestly it was the greatest thing in the world as a place to start. It teaches you how organizations are run, it teaches how people act in a work environment, kind of approaches that you can bring, also a lot of things what not to do, what happens when you're the market leading company and the world shifts from underneath you.
Kyle Widrick: So let's transition from where when founding FirstMark Capital, now to Resonance. I know it's much different. It's not traditional venture, not just investing.
Lawrence Lenihan: No, but I think the thing that I always saw about the venture industry is, venture capitalists always talk about disrupting industries, but they never talk about disrupting venture capital. As you see now, it's like the sexy thing to get into, but I got into it in 1996. How many people knew what the hell a venture capitalist was? Which, by the way, was the greatest time in the world was running venture capital. I felt like Forrest Gump in shrimping boats. But, you know, founded two firms, both of which did very well.
When I founded FirstMark, leaving, Pequot was a larger, multi-stage, multi-industry fund, and we changed. FirstMark was completely different, it was all technology, all early-stage, all New York. It was a big bet. It doesn't sound like that big a bet now, but 2007, it was a gigantic bet. But it was just a tectonic change that I'd felt coming. I told my partners about a year before I was gonna leave FirstMark about forming Resonance. What I saw was another tectonic change, it's happening in this industry.
I think the future of investing and building companies is you gotta declare a major, you've gotta know an industry better than somebody else. Right now, we know this industry better than anybody else. We can make something from raw material all the way to customer doorstep. What do we want to build? We want to build 300 brands over the next 10 years, and we're gonna build them that they can outperform a Zara. But this also providing capital, providing operating, it's providing a whole lot [inaudible 00:05:51] adjusting our business. We know that brands are gonna be smaller, and they're gonna be more specific, they're gonna be better, but they're gonna be smaller. So how do we make money, how do we generate returns on something when those dynamics have shifted. Doesn't fit into regular venture capital type of model and therefore we change the model.
Kyle Widrick: So Lawrence is a thought leader in the space of retail meets technology. You've been cited as saying, "we've seen the last of the billion dollar retail fashion brands." Is that accurate and do you still believe that today?
Lawrence Lenihan: It's funny, I wrote that piece in Business of Fashion about three years ago almost, amazing how many people bring it up to me.
Kyle Widrick: It's a great piece, by the way.
Lawrence Lenihan: Thank you, thank you. I still believe it. I think this is a world where it's the more the connected, we are the more disconnected we are. We are tribal, communal beings. We need to feel like we're in a community. What we wear says who we stand in this industry. I have this on, this says where I think I stand. What you're wearing ... And what we're seeing is an ability where you don't settle for just generals. This is why I like the GAPs of the world, J. Crews of the world are dead. Who feels bad, who hates the GAP? Do you really hate the GAP? No, but that's just as bad as not loving the GAP. I mean, you have to be passion ... The best brands are somebody that, if it elicits hate and disgust, it's almost as good, it's not as good obviously, but it's at least elicited something in somebody who just passionately loves it.
But to be right in the middle of the road, this is where things are dying and so, when you're more specialized, when you mean something more, I think it's impossible to be big. Therefore, why try? You can be a $100 million brand, generating $25 million in cash flow every year, are you happy? Should be. Well, unless you raise $500 million, then you're probably not that happy. But if you raised the right amount of money and you're at that level, and you're executing, you are a wealthy, happy person.
Kyle Widrick: For you, you have a lot going on, what drives you to do all this? Is it-
Lawrence Lenihan: Insanity. I love building things.
Kyle Widrick: Is it the passion? Do you love the early stage and kind of the creation?
Lawrence Lenihan: I love doing something that nobody's ever done before. We're doing something which nobody's ever done. We are creating an entire new model for this industry. Maybe people think we're idiots. Some people think we're geniuses. I don't know, the truth lies somewhere in between, but we're doing something that nobody's ever done. At the end of the day, it will leave a mark, hopefully on the industry, not on me. It'll leave a mark and it's important that I love doing what seems really hard.
Kyle Widrick: Look at that. If you hadn't worked at IBM, going the track that you went, where would you be? Can you see a parallel life where you're a normal working guy, or maybe you're a sale, a-
Lawrence Lenihan: For me, in my life, in my upbringing, I always had this opportunity to feel like I could do anything. It was therefore, why not, just fucking try. But I think that mindset is so important.
Kyle Widrick: Do you think that there are things that are not taught at school that should be?
Lawrence Lenihan: Yeah, I think our educational system has completely failed us, especially higher education. Well, first of all, lower education, we don't train anybody to have skills. I think the biggest problem in this world right now is that jobs are being eliminated left and right and so, rather than training somebody to be an office worker, well guess what, doesn't exist anymore. What are you doing? We're developing technology that's gonna be [inaudible 00:09:49] straight through processing for manufacturing. You're not gonna have people touching, you're gonna have integrated value change. It's gonna be massive, massive amounts of people who are going. Does that mean there's nobody else here in the world that works? No, there are lots of things that do. Whether or not you're a hand craftsman, whether or not there's some other technical skill you can do, you gotta be trained for that, and there always gonna be changing. We're not setting that up when you set this expectation that everybody has to go through college. I mean, college is useless for most people, and doesn't set them up for what they're going to be doing in the future.
Kyle Widrick: I was gonna ask, because you were very well-educated, is that-
Lawrence Lenihan: I went to a good school, I'm not sure I ended up being well-educated.
Kyle Widrick: Is that still a logical path for someone that can do it, or do you think it's completely changed based on where things are today? We should focus more on learning how to launch an e-commerce business yourself, or really get [inaudible 00:10:45] about if you have particular skills.
Lawrence Lenihan: I think college is great for people and college is not great for other people. I think my biggest problem with college is that you kind of have these majors that sit right in the middle of everything, they're neither interesting, nor practical to be able to generate a living. What I would do is I would make somebody be a computer science major and philosophy major, or French renaissance art and math. Some people worry you get a chance to stretch your mind, to change and develop as a person. If you're not doing something like that, it's useless. Meaning being, I don't think there are a lot [crosstalk 00:11:24] of majors, yeah, and it's not setting you up for life. If you can afford it, it's great, but I think there are other ways of doing it. I'm also a big believer that you shouldn't go straight from high school to college. You should take a year off and you should find out who you are and what you are.
Kyle Widrick: Best investment, for you?
Lawrence Lenihan: Well, there have been a lot of investments that were lucrative. Best investment-
Kyle Widrick: Next question's your favorite. This is the best.
Lawrence Lenihan: Okay, oh the best. Well, as a firm, it was in my investment interests, obviously, an amazing investment. We started back in the bubble years. We had some investments in a company [inaudible 00:12:04] integrity that was more than a 100x sycamore, more than 100x. We've done really well, Shopify. If you're gonna ask me my favorite investment, I'll then tell you whether this is my favorite investment, I think it may end up being the one we made the most, which is a company called TraceLink, which is pharmaceutical supply chain, which I don't have a passion or interest in at all. But I have such a passion and interest in this team, in this CEO that I've known for 16, 17 years and is building I think the future of enterprise software, meaning that the future of enterprise software is network. In the future, enterprise software giants look more like LinkedIn and Facebook, and they do like salesforce. As an investor, you either have to sit in the back seat and watch where you're being driven, or you have to drive. You can't grab the damn steering wheel from the back seat.
Kyle Widrick: Obviously you're busy, you travel, you do speaking events, you're building 10 companies here. When did you realize, how do you get away? Places you go, things you do.
Lawrence Lenihan: I love traveling. I don't get enough time to travel. I would say that would be it, but I really don't get a chance to do it nearly as much as I do [inaudible 00:13:31]. My fiancee is an entrepreneur as well, so it's hard to get away. My escape is exercise, I love to box. That is what clears my-
Kyle Widrick: At home, or in a studio?
Lawrence Lenihan: At a gym. I don't spar much anymore. The old guy cant get around so [inaudible 00:13:51]
Kyle Widrick: Any hobbies that you mix in?
Lawrence Lenihan: Love to cook, love to garden. Big organic garden at home that we use. My son and I wanted to make Lenihan pepper sauce. We're the process of fermenting our hot sauce after our gigantic pepper garden-
Kyle Widrick: Could be the next big business.
Lawrence Lenihan: Oh, I'm sure this'll be gigantic, hot pepper sauce.
Kyle Widrick: A quote that I stole actually from Lawrence, "creators take chances, they see what we can't see and manifest it from the imagination and skill to deliver an experience that surprises and delights us." I love that. The Creator Series loves that. Thank you so much for being here.
Lawrence Lenihan: No, thank you.