The Leap Of Faith

Our family belongs to a jewish community in lower manhattan called The New Shul. Last night we celebrated our 10th anniversary and the co-founder, Holly Gewandter, gave a great talk about taking Leaps of Faith. The whole history of the community is one big leap of faith. They had no clue how to start a shul. Everything they did was counter to established norms. And yet, ten years later there's this large and growing community that is great to be part of.

Of course, as Holly was talking, I was thinking of different leaps of faith. I'm not much for religion to be honest. It's something I partipate in but not something I believe in.

But I very much believe in leaps of faith. Every investment we make, every person we back, every strategy we concoct in partnership with the entrepreneurs we back is a leap of faith. Wikipedia says that a leap of faith is:

the act of believing in something without, or in spite of, available empircal evidence

I was on a call yesterday with another VC who asked me why we made our investment in Zemanta last summer. There's a blog post I wrote up that explains our thinking at the time, but I did not point him to it. I explained that we had a gut instinct about the technology, market, and team that made us think there was a substantial opportunity in allowing people to "write smarter."

There is no market for tools, beyond spell checkers and grammar checkers, to allow people to write smarter. There's no business model for a tool like Zemanta. There's no established track record of successful internet companies in Slovenia. In short, there was little to no empirical evidence to go on when we made our investment in Zemanta. And nine months later, there still isn't.

So I told the VC I was on the call with that if he was going to invest in Zemanta, it would have to be a leap of faith. Maybe he'll make it and maybe he won't. I still have faith in Zemanta and I still have faith in all of our portfolio companies.

You need a lot of things to be a successful venture capital investor. You need to understand the market you invest in. You need great networking skills. You need to be able to add value to your investments. You need an understanding of financial markets and how companies are valued. Those skills are neccessary but not sufficient. Because most of all you need to be able to make leaps of faith. And the right ones, of course.

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Comments (Archived):

  1. Carl Rahn Griffith

    I’m looking for the next chasm to leap … 😉

    1. fredwilson

      me too

      1. Carl Rahn Griffith

        Just call us ‘Butch and Sundance’ …

        1. fredwilson

          i don’t jump off cliffs into rivers

  2. Dan Lewis

    How do you explain investments such as these to your LPs? (This is a serious question — I apologize if it came out snarky, that is not my intent.)

    1. fredwilson

      great question. the blog post that i linked to is our “investment memo” and we publish it to everyone but a core audience for that is our LPs. so we attempt to articulate the nuggets of insight that lead us to the leap of faith. check out that post and let me know what you think and what you’d think if you were one of our LPs.

      1. Vladimir Vukicevic

        I think the memo is quite compelling but also clearly illustrates the leap of faith that the LPs must make in you, your company, and your decisions.

      2. Dan Lewis

        I like the idea that, as Ales says below and you allude to in the “investment memo”, that Zemanta can do for content what spell checkers did for spelling. And the bridge to revenue via contextual/semantic understanding leading to well-targeted advertisements flows naturally. The leap — or leaps, I guess — are those two premises.But I don’t see what that’s any different than any venture with sufficient innovation behind it. Evangelism is part of the job, as is creating/finding a way to get money flowing in.

  3. Ales Spetic

    Leaps of faith are a part of entrepreneurship too, they are in fact in the core of the process. If entrepreneur doesn’t go into new directions, uncharted territories, no progress or innovation happens.When founding new models or businesses, the team has to decide how much risk the company should take. One can make safe bets that would be easier on the team and their families, but way less fun. And the investors are part of the team in that respect.If people were only rational in their business behavior, machines could replace them. I don’t believe that will happen. We are all in business to create value, experience, making process sustainable and better. And for that, human instinct is crucial.When Zemanta was founded we viewed that people created content every day throughout the history of mankind. 50 years ago, the content started to be stored in an electronic form, 15 years ago it started to be connected by links, 5 years from now content creation will became a flow ubiquitous to us as is spell checking today. We’ll be thinking about the information we want to convey and not the ways we want to convey it.Ales Spetic, Zemanta CEO

    1. Mark Essel

      While I agree with your sharp perspective Ales, I’m uncertain as to how I can contribute towards the changes that are coming besides pointing out trends as a blogger. I imagine a rich and fluid virtual landscape of content development, but it’s hard for me to commit to just one concept and keep pushing for many years (something CEOs/entrepreneurs have to do).At this point my two biggest concerns are social change: guiding folks both young and old to finding work they love to be most productive, and social development improvements: cobbling together a social design tool that will open up varied ways of innovating beyond modern methods of collaboration (google wave may entice me).Besides it’s too much fun having a few hours, a few days a week, to read, write, and comment about developing ideas, fantastic new trends and opportunities. I’m afraid I’d miss out on the wider view, by spearheading one surface boundary of future social tech.

    2. Vladimir Vukicevic

      It looks like Zemanta has a very unique value-proposition. I can’t wait to see how the company evolves as the Internet continues to evolve and change – i.e. Twitter.

    3. markslater

      i love zemanta Ales – it provides me with the ability to add one-click context to what i am writing about, and in myriad of contextual currencies (pics, articles etc). Can you add this to comments? obviously the blog owner (fred) would probably need to approve this – but a disqus integration would add huge value to some of the longer responses here – by providing a contextual compass to the response.

  4. Jason

    wow Fred. between Ales’s comment, this post, and the blog post you linked to, great insight was gained into why you sometimes may invest. as an internet entrepreneur working to find his way, this is extremely valuable. great post – thank you.

  5. kevinmurphy

    Find a relationship without the Leap and it most likely is in ruins… or a team, or the personality of a business, or the relationship with your teen.. and on and on. Faith and trust are required for success. Pick the aspect of life… And who says there is no “gut feeling”…I have worked in both “back stabbing” and team building environments. The former was prisonlike, the latter exhilarating! Great topic…

  6. Druce Vertes

    Buying bonds is a leap of faith too (always, but particularly now).I still love my portfolio … kind of like I would still love my kids after they blew their tuition in Vegas…

    1. Druce Vertes

      and at the poker table, there’s room for a bet that’s backed by nothing but a hunch – if it’s small relative to your stack, has potential to pay off big, and sends the type of message that might help other bets pay off.

    2. fredwilson

      At least you can sell your bonds

  7. D. Lambert

    I believe there’s more to many “leaps of faith” than just faith. Part of what makes an experienced decision-maker effective is a wealth of experience and the ability to apply this experience to new situations.When you evaluate a complex decision, the problem space is immense. You evaluate visible, important factors explicitly, but I also believe that you take in and evaluate a vast amount of background information that never consciously enters the evaluation, but rather becomes part of your unconscious evaluation. With every bit of information you gather, I believe you assign (at some level) a degree of confidence in that data, as well.Decisions you make aren’t just driven by new facts, of course — you’re also factoring everything you’ve ever learned about subjects related to whatever you’re evaluating, and probably some things you don’t even realize are related. To some extent, you’re aware of this synthesis; you surely compare new investment opportunities to other experiences you’ve had to help assess the new opportunity. But again, I believe that this activity is iceberg-like in nature: much of the synthesis that an effective analyst makes is happening beneath the waves.The sum total of this unconscious decision fabric is greater than any “rational” analysis. We can call this “gut feel” or a “leap of faith”, but I’m certain there’s a foundation in grey matter that makes these decisions better than a roll of the dice.

    1. daryn

      @dlambert – I don’t think anyone is saying to have blind faith; faith is just what helps get you across chasms of doubt or uncertainty. And I’m sure there’s another gut feeling that holds Fred back sometimes, even when all the opportunties and numbers seem to add up. That’s why the team is so important at a startup; even with the the best of ideas, you need to believe that the team can work hard, work smart, and pull it off.

    2. reece

      I was scanning the comments here for something like this, which I agree with entirely. It’s an “instinct” but it’s cultivated by learned instances over time. If there was room, I’d post John Galt’s final speech from Atlas Shrugged…

  8. William Mougayar

    I think it’s about connecting the dots and being a good prognosticator. Peter Drucker once said “I never predict. I just look out the window and see what’s visible – but not yet seen.” So, a good VC in my opinion will see things that others haven’t yet.

  9. marc stoiber

    Just got dialled into your blog by Interesting that you talk about Leaps of Faith. I’m currently at the Sustainable Brands 09 conference in Monterey – and the overriding theme seems to be ‘North Star’ – the concept that companies need to guide themselves by mission, as opposed to simply profit and performance. It is, as you described, a bit of a leap of faith – but it also taps into the gut feel that what you’re doing is right. Exciting concept, especially considering how the ‘tried and true’ concepts of profit and performance have left us a bit short. If you’d like more on this, I did summaries of the conference in our company blog at Love your thoughts.

  10. ShanaC

    I should put this news up on OnlySimchas! You actually did build a bayit ne’eman b’Yisrael, an extraordinarily difficult accomplishment, even in the likes of Manhattan.As for Leaps of Faith in general: I’m reading Emotional Design by Donald Norman right now. One of the central points of his thesis is that we actually can’t make logical decisions without being emotionally involved. We can actually influence those decisions through design and through the functions of our environment. Which is why art and design can be so reactionary (in positive and negative ways, the way it should be- one his examples is that you want people stressed out to a specific point in a nuclear plant when there is an emergency, so you should design in specific kinds of stressors for emergencies.).Isn’t leaps of faith, the feeling of reaction, of wonder to the world, a great and awe inspiring thing? We actually don’t know fully why we react the way we do- we just do, and it changes over time. But it is the most important part about being human. We actually are paralyzed from decision making and creativity without it. You just know. Because you react to what is within. To be more practiced in that!

  11. kidmercury

    thanks for going all spiritual on us boss, the youngsters will need that if they plan on leaving the world better than they found it

  12. Rathan

    “Writing smarter” is certainly an interesting idea. It’s the exact opposite type of user content that Twitter promotes. It reminds me of a friend’s decision to invest in both a spamming and anti-spamming company! There’s a marketplace for both, so it makes sense.I see Zemanta as a great tool for organizing thoughts better. These types of “recommendations” really improve quality of information sources. Do you see anyone doing good work in improving the organization of information sources based on personal interests? That space is really interesting given the tremendous amount of user-generated content on the web.

    1. William Mougayar

      Rathan, If you’re looking to discover feeds or sets of feeds that others with like-interests are following, I suggest you check the PostRank community. But if you’re looking to put together a personalized collection engine that’s just for you, including social, user-generated, and regular media, please email me.

  13. Joanna Van Vleck

    Fred, Thank you for the post on leaps of faith. It is leaps of faith that lead us to greatness and inspires us young entrepreneurs to not follow the “rules” of an industry. It has left me grinning from ear to ear.

  14. Mike McDerment

    Just wanted to tip my hat and say, one of the reasons I enjoy reading A VC so much is something not too far removed from a leap of faith…perhaps it’s the precursor: conviction. You’ve got it for all your companies and it’s freakin’ beautiful.

  15. Aurelia Masterson

    Isn’t it important to control your leaps of faith? In some cases it’s more like educated faith–investments (hopefully). You don’t know much about it, but you have all of your past experience and accumulated knowledge to help you along, and you at least see SOME positive indicators. In other words, if what you have faith about fits into your vision of the world that you have, your brain will give you the green light. If not, the little light will probably flash red. Faith or other undertakings, as applied to religion, doesn’t undergo the same process. But I could be wrong.

    1. fredwilson

      You are right. We pass on close to a thousand oppty’s for every one we invest in

  16. rod edwards

    Fred, this calls to mind this great article from Fast Company:…In my work, I’m constantly struggling to both institutionalize capital-i Innovation, and still leave room for intuition to flourish – i.e.: leaps of faith.

    1. fredwilson

      Thanks for the link. I’ll check it out

  17. jarid

    It’s not only which leaps of faith to make, but when to make them that’s important too.Since you invest in early stage companies, I’m curious have you ever taken a leap of faith and invested in just an idea? Or do you wait for a prototype? Or for a beta product? etc.What criteria do you use for determining timing?

    1. fredwilson

      We want a service in or past its public beta. We won’t take leaps of faith on ideas unless they come from people we’ve worked with successfully in the past

  18. jengroff

    your name is Wilson. You’re not actually Jewish, BTW.

    1. fredwilson

      Did I say I was?

  19. Tom Krieglstein

    “It’s something I participate in but not something I believe in.”I’m surprised no one has followed up yet on this line about religion. Can you explain more? Why do you do it if you don’t believe in it or don’t have faith in it?

    1. fredwilson

      I owe it to my kids to give them a chance at religion. My mom gets great solace from her faith and I see my wife heading in that direction. We’ve created that possibility for our kids.

      1. Tom Krieglstein

        I figured your response was somewhere in there. I just read Tribes by Seth Godin and he talks a lot about disrupting your own system for future growth and uses Religion as an example as the system of Spirituality that needs a good disruption.I’d love for you, when you have free time ;-), to take the same disruption principles you are applying to School as the system of Education and try it out on Religion as the system for Spirituality.

        1. fredwilson

          I haven’t thought much about disrupting religion but if we could, we might just end up with peace on earth

  20. howardlindzon

    great post old man

    1. fredwilson

      Old man??? I’m just getting started

  21. Aris Samad-Yahaya

    I remember when my fellow co-founders of our start-up had to sign the agreement for our first VC deal, certain potentially onerous terms in the agreement caused us worry and doubt. Our advisor Ashraf Iqbal emailed us co-founders and the subject line said it all:Signing of agreements and a leap of faithOnce you’ve had all the discussions, played out all the scenarios in your head, done the due diligence, then there’s only one step left to make, and that’s the leap of faith.

    1. fredwilson


  22. Jose Vargas

    Hello Fred, I am going to be in Croatia in 2 weeks with my wife, she is from there. We are driving to Venice and passing thru Ljubliana. Please let me know if you want me to say hello to the Zemanta guys. Also, if you guys are looking to raise a bit more let me know. regards.

  23. Morgan Warstler

    Zemanta’s got to be psyched about Google Wave.The other data I think they’d be smart to provide to bloggers is “common posts” – something that while you are typing is showing you other blogs that have touched the same subject. Maybe they could work a deal to repackage and VAR Buzz Logic at a retail level.Could Disqus use Zemanta?

    1. fredwilson

      Zemanta does recommend related posts to me while I am writing. That’s a big piece of the value prop. I guess I left that out

  24. ravisohal

    I think some (fresh) entrepreneurs may misinterpret this and carry it over into their startup – “if we just believe and go on guts it will happen.” Steve Blank has a post about faith based entrepreneurship and fact based execution, well worth the read. For me it reads “jump with your eyes closed, but land with them wide open.”Here’s the link:

    1. fredwilson

      Good point.

  25. ashish

    Great one Fred, esp. the fact that this is coming from an investor makes the article more interesting.Somewhere one starts trusting the team so deeply that it makes the entire process (of taking the plunge) easier..

  26. Donna Brewington White

    This is actually quite moving. I don’t know if you intended it to be. I was just thinking of writing to ask you to consider writing a blog post on what you think it takes to be a successful venture capitalist…and, voila, here is this eloquent summation. Maybe venture capital is your “religion.” It certainly requires a lot of faith.

    1. fredwilson

      My religion are the things I love and venture capital is certainly one of them

  27. Prokofy

    “New Shul” — what a great name! like “The New School” university in spirit.Your essay reminds me of Hebrews:”Now faith is the substance of things hoped for, the evidence of things not seen.” (Hebrews 11:1).

    1. fredwilson

      its open to all who would like to join!

  28. ivanhoff

    The difference between leaps of faith and gambling is called experience.There was a small, 5’5 woman, named Jessica, who bet $1000 to her friends that she will make 10 out of 10 3 pointers in the local basketball court. The two friends had PhD in Statistics and they quickly calculated, that the probability of Jessica making 10 out of 10 was very slim. They figured out this could be easy money and accepted the challenge. 5 minutes later, they were shocked to see Jessica scoring 10 out of 10. They thought that this is one in a million event and cursed their luck. What they didn’t know was that for the past 10 year, Jessica practiced her 3 points shooters every day for at least two hours. What seemed like a low probability event in the eyes of her friends, was actually a good investment with high expectancy for Jessica.

    1. fredwilson

      Great story

  29. paramendra

    I am a huge fan of Zemanta. Good work.

  30. paramendra

    Zemanta’s business model is that it is going to be bought by Google for Blogger/Gmail for a huge sum of money. That would be a fair exit strategy.

    1. fredwilson

      When exactly will that happen? 😉

      1. paramendra

        Well, Fred, I did my part:… As to when, your guess is probably better than mine. On the other hand, Zemanta could stick it out as a stand alone application and be on my platforms, why only Google’s? Or it could get bought by Google and still be on many platforms. It is capable of generating revenue, but this company feels custom made to be eaten by a bigger fish. My two cents.

      2. paramendra

        Fred, now you owe me one. :-)…Now you got the Google people paying attention.

        1. fredwilson

          thanks. great post. i forwarded it to the team at zemanta.

  31. tomc22

    I think all of “it” ultimately is built on a “leap of faith”. It took a singular vision for an inventor or entreprenuer to leap in hopes of making something better. And, most of the time, it took teams to take subsequent “leaps” along the way.