If Sam Phillips Had Acted Like Today’s VCs, Elvis Would Have Had A Great Career As A Truck Driver

 

A version of this article previously appeared in the Wall Street Journal.

What can the tech community learn about expanding diversity within its ranks from the man who helped launched the careers of Elvis Presley, BB King, Jerry Lee Lewis, Carl Perkins, Howlin’ Wolf, Johnny Cash and Ike Turner?

Open Door, Open Mind

“If you are not doing something different, you are not doing anything at all.” 

Sam Phillips

Sam became known in the American South as someone who would listen to any aspiring artist. His assistant, Marion Keisker described his open-door policy, saying, “He’d just listen to anything they wanted to play.”

He’d allow anyone who wandered through his Memphis studio door a few of minutes of his time, irrespective of their musical pedigree, age or race. If he wasn’t at the studio, his staff was instructed to record anyone and everyone who came in off the street in his absence.

Sam didn’t narrowly focus on one genre of music. Instead, he recorded country, bluegrass, western and blues. In doing so, he helped create an entirely new genre of music, which eventually became known as rock-n-roll.

In his book, Sam Phillips: The Man who Invented Rock’n’Roll, author Peter Guralnick notes that, “… (Phillips knew) there was great art to be discovered in the experience(s) of those who had been marginalized and written off because of their race, their class, or their lack of formal education.”

Sam was willing to do the very heavy lifting of sorting through numerous ambitious and talentless people to identify a handful of individuals who could succeed in the highly competitive music industry.

The Beatles Learn That Love Isn’t All You Need

A decade later, The Beatles strove to achieve a similar ideal, creating Apple Records and encouraging unknown artists to submit their work. The band received thousands of cassette tapes, most of which were never played.

Unlike Mr. Phillips, the Beatles weren’t willing to do the work required to turn their hippie idealism into reality. Instead, the Beatles signed acts referred to them by trusted members of their professional networks, much in the same way venture capitalists historically sourced their deals.

The Network Barrier

A few years ago, if you asked a VC the best way to get their attention, they would probably say, “Get an intro from someone I know and trust.” The basis of this advice was understandable, as it was more efficient for an investor to rely on the vetting of competent, known sources. This same approach was historically utilized by hiring managers and recruiters, who placed a premium on referrals from existing employees.

Though relying on personal networks was expedient, it undeniably contributed to the lack of diversity in tech. If Sam Phillips had only auditioned musicians relayed to him from his circle of contacts, they would have tended to be more homogeneous, as the degree of diversity would have been a function of his contacts’ collective tastes.

Even if Phillips’ network had extraordinarily diverse musical interests, it is implausible that their referrals would have been musically broader than the individuals who randomly walked in off the street. If Mr. Phillips had followed the historical VC referral model, Elvis would probably be a retired truck driver and Jerry Lee Lewis might be playing piano for beer money in a New Orleans dive bar.

The same recursive, uniformity effect occurred (and all too often, still occurs) when a VC relied/relies predominantly on introductions from their fellow alums and colleagues.

Bigger Funnel

Though belated, it is now obvious to investors that they must increase the breadth and diversity of their deal sources. However, as the Beatles realized, it is challenging to scale Sam Phillips’ open door policy.

Although I am an ardent champion of VC funds that are truly open to all (in practice, not just as part of their marketing hype), I am unsure of the mechanics by which every venture that comes in over the transom can be fairly evaluated.

One answer to the initial round of vetting might lie in a crowd-sourced approach, in which the front-end of the process is performed online. Maybe entrepreneurs could post brief videos and only those which receive a certain level of social validation (likes, shares, positive comments, etc.) rise to the level of a hands-on review? To some extent Initial Coin Offerings represented such a crowd-based approach, though they were primarily been applied to cryptocurrency and blockchain oriented ventures.

However, even if you leverage crowdsourced validation, there is no substitute for Mr. Phillips’ approach. An open mind, an open heart and a willingness to give everyone a chance to demonstrate their entrepreneurial abilities, irrespective of their academic pedigree, age, race or gender. When the entire venture community adopts this mindset, the talents of traditionally underserved segments of our society will be unleashed and ventures that might not have received funding under the legacy “referral” model will thrive.

You can follow John on Twitter: @johngreathouse

Image credit: Pixelbay creative commons

 

 

John Greathouse

John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

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