Sunday, January 11, 2009

Lone Wolves

I saw my first wild wolf yesterday. A half hour south of Jackson, WY across the frozen Hoback River. It was a lone wolf, and it had taken advantage of the snow pack to corner 2 elk. The elk sunk deep in the snow, the wolf did not. The wolf was about 25 feet from the elk, waiting. It appeared to have one thing on its mind.

Seeing a wild wolf had been something I thought would take more work. A visit to Yellowstone, for instance. Yet here was one just a hundred yards off the highway. They are beautiful animals. At least from a car- I don't think the elk were appreciative of its beauty. The site made my neck hairs crawl just a bit. To me, who read all of Jack London's stories when I was young, the wolf is the epitome of the wild.

It was surprising, however, that there was only one wolf. How could one wolf take on two elk? Where was the proverbial pack? Was this a scout? Were the other wolves back in the timber, hidden from the highway? Or was this a true "lone wolf"? I don't know. Soon a pickup came up behind me and stopped, and the wolf disappeared into the trees.

Lone wolves are the stuff of myths. The term is used to describe loners (often dangerous or anti-social ones) from software programmers to terrorists. Since this is a blog about business, I will briefly write about a different type of lone wolf.

A lone wolf is an "outlier" (but not one described in Gladwell's new book). Some entrepreneurs (only males, which is actually appropriate) fancy themselves as lone wolves. Outsiders, toiling away against the entrenched economic interests. While iconic, these are not typical. The term can be ironically descriptive, as lone wolves are often the pack's weakest members, and are driven from the pack. Sometimes, they find a mate, and start a new pack. But not always. Their fate is not always a good one. A lot of howling at the moon, so to speak.

Of more interest to me is the lone wolf investor. Usually an angel investor (doesn't business just love its metaphors?) and doggedly independent from other investors since he is smarter/wiser/more experienced/less trusting. Most investors display a pack mentality- they take comfort from seeing others sharing the risk, and often share duties (due diligence, board directorships) to hunt more efficiently. [Note: Please don't infer that I think they view the company as prey. In fact, I think I am being charitable, as some have described investors as having a herd mentality, which implies a different role in the food chain.] These investors see the entrepreneurs they fund as joining their pack, not as their prey (I don't buy the whole "vulture capitalist" theory).

But not the lone wolf. The lone wolf is often a former executive from a related industry, but not necessarily an entrepreneur. Particularly if the entrepreneurial founders are more technically oriented, the lone wolf may be seen as an attractive "business guy" to round out the team. But as with the wolves who wear sheep's clothing, or are the mythic shapeshifting wolves, entrepreneurs will need to be VERY careful. There is a reason this wolf doesn't have a pack, and the story he tells will need a little checking. "What a big set of teeth you have, Mr. Gekko." "All the better to chew up your company, darling."

The value of an investor pack, in terms of their networks, is often very useful in the early days of a company. With a good pack, you get wisdom, connections, and advice far beyond what a single person can provide. And, if it is a healthy pack, there seems to be a social norm that prevents bullying by a single individual (not always). My other concern with the loan wolf is that he will scare off other investors. Investors are familiar with pack rules, but the lone wolf often tries to cut special deals that don't work when a pack comes along. Special anti-dilution rights, or voting rights, or valuations.

While the many myths and legends surrounding wolves may seem unfair when applied to the beautiful animal I saw yesterday, I think they raise good cautionary instincts for entrepreneurs. Pay attention to your neck hairs.

*the picture is not mine, but looks most like the wolf I saw yesterday.

Post a Comment