I passed on a deal.
Every time I think it’s easier to say “pass on the good to make space for the great”, the world says you’re wrong. Last week, once again, I realized how hard it was to say “No”.
We’d been chatting for a few months now. They were raising a pre-seed. And they checked most of the boxes I look for in an epic founding team:
- Spent time in the idea maze and deep domain expertise,
- Had a unique insight which led to innovation in their business model,
- Because I didn’t know their market well enough, I hesitate to say if this was an earned secret or just a lesser-known fact that an outsider would never hear about. The difference between, what Kanyi Maqubela at Kindred Ventures, a mystery and a secret.
- Consistently followed through with their promises and commitments (to me),
- Dreamed big – big TAM, big vision,
- Hustled to build relationships with some of the largest enterprise customers in their sector (though, yet to close any contracts),
- Onboarded some incredible talent,
- As I heard on my buddy’s podcast recently, “you can only learn from experience, but it doesn’t have to be yours.
I’ve written more here about what I look for.
Over the past few months, I asked for more time in hopes to find something more. Admittedly, I could think of a million excuses. And I have. I could have said:
- They’re too early, since I rarely do pre-seed deals these days.
- Or it’s the lack of traction.
- Maybe that they could be more articulate about their go-to-market and product-market fit.
- Maybe it’s the fact that at an early stage, that they have both a CEO and president. In other words, competing personalities in leadership.
- Surprisingly large team for pre-seed startup.
- Or, simply, I don’t know their space well enough, albeit adjacent to mine.
The more I thought about it, the more I realized I was just making excuses. I could circumvent most of these “reasons” with just a little effort on my part. And the fact that I was introduced to them by someone I really respect in the industry didn’t make it any easier. In fact, that alone was one of the strongest driving forces for me to want this deal to work out. The truth is, I just wasn’t excited about the product. And I had been spending time – arguably wasting theirs – trying to find my excitement. But I couldn’t, no matter how hard I tried.
I know it may be completely self-serving here. Call it immaturity or naivete. As a scout, I live by a self-imposed rule that every deal I refer, I want to be their greatest champion – their greatest evangelist – when I do so. In other words, if I had the capital, I would invest in each and every one I refer. On the same token, every deal I refer is just the start of an exciting long-term relationship. Post-referral, during diligence, post-investment and even if the deal doesn’t close. But for this startup, I just felt myself dragging my feet through knee-deep water just to meet with them over time.
Thinking I was in over my head, I hit up two mentors of mine in the space to give me the reality check I thought I needed. I thought and was, borderline, hoping they’d say, “You’re a sucker to bring personal emotions into an investment.” Or “Suck it up. Stop being a millennial/snowflake.” But neither did. I also told another friend last night and she replied, “It’s what makes you human. And I think people need to know about this side of VC.”
So, I’m writing this now in hopes that it will contextualize some of the decisions we make on this side of the table. I made the decision with the expectation that I’d be forgotten or passed on by them when they raise a future round. If they ask me again, it’ll be an honor and a privilege. And maybe my disposition will change in 1-2 years’ time. But it’s naive of me to expect that. Nevertheless, I still wish them the absolute best, and I hope they become the rock-star success they set out to be.
Photo by Bruce Jastrow on Unsplash
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Great article