Jumping First
Absorb the risk yourself to unlock partners who won't move without cover
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 5
- Confidence
- 80%
When Shah pitched the vaccine social impact bond, the hesitation was understandable: the instrument was complicated, new and novel, and no one wanted to be first into an untested structure. Rather than argue harder, Shah removed the reason to hesitate. One night at a conference bar he offered that Gates would guarantee the bond issuance, backed by an endowment big enough to make the guarantee credible. The dynamic flipped immediately — partners said that if Gates would do that, it would work, and they wanted in. Countries piled in with their own full faith and credit, and for technical reasons the Gates guarantee was never needed at all. The mechanism is simple: identify the risk blocking the coalition, take it onto your own balance sheet publicly, and let the first mover recruit the rest. Shah notes entrepreneurs run this constantly — the first big funder makes everyone else's decision easy, which is also why most start with their own capital.
Origin
Extracted from Young and Profiting. Shah names the play 'jumping first' in Big Bets, drawing on the Gates guarantee that unlocked the world's first social impact bond for vaccines.
Core principles
- 01Hesitation on a novel idea is rational, not a sign of disinterest
- 02Someone has to take the risk out of it for everyone else
- 03The first big backer makes every subsequent one easier
- 04Skin in the game is the argument you don't have to make
- 05If enough people join, the guarantee often never gets called
How to run it
- 1
Locate the hesitation
Work out precisely what partners are afraid of. With the vaccine bond it was that the instrument was complicated, new and novel with no track record.
Pro tip Ask the hesitant party what would have to be true for them to say yes — the answer is usually the risk you need to absorb.
Watch out Treating hesitation as a persuasion problem instead of a risk problem leads to more pitching and no movement.
- 2
Check you can actually carry it
Shah could offer the guarantee because the Gates endowment was large enough to make it viable. The offer must be credible or it does nothing.
Watch out An offer you couldn't honour is worse than no offer — it collapses trust when tested.
- 3
Make the offer explicitly
Say the words: I will take the risk out of this for you. Shah made the guarantee offer directly at a conference, not through a formal process.
Pro tip Informal settings can move faster than official channels — this one happened at a bar.
- 4
Convert the first yes into momentum
The first commitment is the asset. Focus on who is jumping first and getting them to go with you, then use that to bring the rest.
Pro tip Show, don't tell — your own capital in the deal proves conviction better than any deck.
- 5
Step back once the coalition stands
When enough partners join with their own credit, your guarantee stops being load-bearing. Let it lapse rather than clinging to control.
Pro tip Sometimes the guarantee is never called at all — the point was to unlock the first move.
In the wild
The Gates Foundation's $750 million commitment was only a drop against what vaccinating every child required, so a new financing structure was needed: European countries would back a debt issuance and reimburse Gavi as children got vaccinated. Partners hesitated at the novelty. At a conference bar Shah suggested Gates guarantee the bond issuance itself. Others immediately said that if Gates would do that, this would work and they wanted in. Countries piled in with their own full faith and credit.
→ $6 billion raised, and for technical reasons the Gates guarantee was never required.
Shah says most entrepreneurs run this play constantly. You share the optimistic vision, but everyone knows the first big funder in any round makes it dramatically easier for everyone else to get in. That is why so many founders in the US start with their own capital — jumping first with your own money is what proves the risk is worth taking to the next person.
→ Own capital in first signals skin in the game and unblocks the rest of the round.
Common mistakes
Waiting for a partner to validate your own idea
If you won't take the first risk on your idea, you're asking someone else to have more conviction in it than you do.
Guaranteeing something you can't cover
The play only works because the guarantee is credible. An unbacked promise reads as a pitch, not as cover.
Holding the guarantee after it's redundant
Once partners bring their own credit, keeping your guarantee in place adds risk to you and control friction to them for no benefit.
Is it for you?
Best for
Anyone assembling a coalition or funding round around an idea that has no precedent to point at.
Not ideal for
Situations where you cannot survive the downside if the guarantee is actually called.
From the transcript
“I call that jumping first Sometimes someone has to go first and say you know what I will take the risk out of this for…”
“I basically suggested that that we at Gates could guarantee the bond issuance and we had a big enough endowment at that time to make…”
“everybody knows the first big funer in any funding round for example makes it a lot easier for everybody else uh to to get in…”
From the episode
Dr. Rajiv J. Shah: Leading in Times of Crisis. Navigating Ebola, COVID, and the Haitian Earthquake Emergency
Dr. Rajiv J. Shah