what goes around

Someday, and that day may never come, I'll call upon you to do a service for me. But uh, until that day - accept this justice as a gift on my daughter's wedding day. - Vito Corleone, The Godfather

I come from the East Coast - from the tri-state area.

I grew up working back of the house in restaurants.

Perhaps this is why I believe that doing favors (and being owed favors in return) is a fundamental part of doing business. The problem I find is that in the start-up tech world the rules of this sort of exchange are poorly understood. And this is a big issue - not just for me but for the ecosystem as a whole. Exchange of favors is a fundamental part of a healthy business ecosystem and is perhaps the most powerful form of currency available.

For this exchange to work, however, all parties need to understand the rules. Now... the system is resilient and allows for adjustment for parties not following the rules - but only by excluding those parties from the system. And for the system to be truly effective it needs scale.

Over the last 15 years, I've come to realize that young entrepreneurs often fail to understand the rules of this game - and are as a result shut out from the system -- without understanding why this is bad or why it happened. Learning how this system works and taking advantage of it can create enormous advantages for both an entrepreneur's career and company. This is especially true when working with VCs.

So let me try and illustrate the rules for you all.

• favors are always freely given
• once valuable favors have been given, a return is assumed
• there are no second chances
• relationships must balance over time
• favors have different values
• everything is unstated and implicit

Favors are freely given

A true favor is never extorted or demanded. But favors are never given grudgingly. Favors can be asked for - but this accrues increased obligations. Favors are most commonly simply offered.

Favors do not, however, have to be accepted. Turning down a proffered favor accrues no obligation.

Example: years ago I helped a friend get 3 jobs over the course of roughly 5 years. In the first 2 cases, I simply offered. In the 3rd case, they asked me. That third time I was incredibly busy and had little to no time to help them find a job -- but I did the work anyway. Because it's what you do. No bitching, no begrudging the request. I knew it would all come back to me in the end.

A return is assumed

If a favor has been done and it has provided value, it is assumed (but not stated) that a returning favor can be asked for - and will be granted without questions or complaints. Offering a favor and having it accepted can serve as renumeration.

Example: A friend of mine found me an amazing employee at a prior company. As a result, when I saw them post that they were having a hard time finding a new place to live (their place had been sold out from under them), I made a few calls and found them a lead on a new place. It's what you do, but also you do it because it frees you from the obligation you've accrued.

There are no second chances

If a favor has been delivered and when a returning favor is requested the party fails to deliver - demands will not be made but no future favors will be offered and in fact favors asked for will be rejected (in some cases with explanations).

The only way to get back to the norm at this point is to proactively offer multiple valuable favors over time.

Example: years ago a VC contact of mine had introduced a friend of mine to various influential folks in the industry. The VC then asked my friend to do some advisory work for a portfolio company. My friend sent him a quote for the work on an hourly basis. The VC turned that down - and has never offered another favor, or even responded to requests for favors. The relationship is dead. Opportunity lost.

Relationships balance over time

This is not a simple "one for one" trading system. Everything must end up balancing out between the parties - but this balancing is measured over a long period of time. If it seems like the balance is not being achieved, comments can be made to this effect at which point a good faith attempt to balance is assumed.

Example: I've worked with various recruiters over time, helping them source new searches and source candidates. While some of these recruiters compensate me with cash based on successfully filling jobs, others compensate with favors owed (my preferred manner). One recruiter I helped out back in the day, however, failed to grasp this. When I was looking for work one day, I found out they'd sent a job that fit me perfectly to another candidate and not to me. Needless to say, that relationship died that day.

Favors have different values

If one party has, for example, found the other party a new and fantastic job - a commensurate return is not to pull strings to get the other party a dinner reservation.

This is one of the most common areas of friction. The key is that both parties must come to a mutual agreement on the value of a favor. This required nuanced communication between the parties at both the time of the favor being asked for and when the favor is granted.

Return favors do not need to map one-to-one to initial favors. A big favor can be compensated for with multiple smaller favors.

Everything is implicit

The favors economy is a polite one. Nothing works less well than demanded quid pro quo in this sort of system. You have to be sensitive and thoughtful.

This is well worth learning.

It's been a fundamental and vital part of my career success to date.

Learn it and you can prosper.

Fail and you probably won't even notice - but your career will wither on the vine.

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