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Being Helpful

hug, support, friendly, help

“A true friend is one who stabs you in the front.” — Oscar Wilde

Many years ago, in what seemed like another lifetime, I made a girl cry. Nothing to boast about. In fact, even today, I’m quite embarrassed that I did so. In a negotiation where I prioritized one small committee in a club’s priorities above the priorities of other committees, I felt that I was right in every way. I conceived a million reasons why rationally I was right — cost, our future members’ preferences, down to the stable marriage algorithm. I fell prey to pride and ego. And she broke down. Instead of apologizing, I walked away, asserting that the data supported my case.

The next day, I found solace among classmates and friends. They told me I didn’t do anything wrong. That they would’ve done the same thing. That the facts proved I was right. Until that evening, a good friend and someone I’d known since middle school, said, “You’re fucking stupid.”

He told me to drop everything and to go apologize in person right that instant. To hell with data and facts. He said that I forgot the very first principle of any negotiation… that there was a human being on the other side. And I didn’t treat her as one. He was the one person who opened my eyes up to the ego I was blinded by. So I did. In my realization, I felt terrible and even worse for needing someone else to tell me that I had to. But that’s the friend I needed. That’s what I needed to hear.

Something you might have realized if you’re a frequent visitor to this small piece of virtual real estate is that I’m not perfect. Nor do I pretend to be. The above example is evidence of that.

I was reminded of that when I was listening to Jonathan Abrams on Venture Unlocked earlier this week. Where they brought up the topic of being founder friendly — a term that indubitably carries a lot of baggage. From the VC side, it’s jargon that’s been thrown around so much over the past decade, it’s lost its luster and meaning. From the founder side, many founders frankly just don’t get what it means. Why? Because no one actually defines it.

Over the years, I’ve seen and heard explicit and implicit definitions, including:

  • Always being on the founder’s side
  • Not being confrontational or relaying critical feedback when needed
  • Saying yes to every founder request
  • Not firing the CEO (even when they don’t do a good job)
  • Helping the founder grow as the company and CEO job description grows
  • Having answers to every question the founders ask
  • Asking (good) questions
  • Telling the founders what to do

The thing is, all the above are right and wrong at the same time. It’s situationally dependent. Ok, maybe except the last one. That one’s wrong all the time. Something you realize pretty quickly is that the investor is not in the driver’s seat. At best, we sit shotgun.

So, what does “founder friendly” mean?

  • Jonathan Abrams and the 8-Bit team says, “Do no harm.”
  • Fred Wilson says, “Saving your company from yourself may well be founder friendly.”
  • To YC, it’s being honest, transparent, responsive, and acting in the best interests of the company, shareholders, employees, and founders.

The truth is everyone has a different, but similar definition. Like product-market fit, it’s hard to measure and an amorphous term. It’s obvious in hindsight. But mysterious in foresight. Yet, as a founder, there are still many telltale signs on how helpful an investor actually will be.

Leading indicators to helpfulness

One of the reasons I love working with smaller checkwriters — be it angels or emerging fund managers — is that they often punch above their weight class. They’re insanely responsive. And are often more helpful than their check size. They may not be able to single-handedly fill the round, nor can their check get you to profitability, but they’re there when you need them. In other words, they hit high on the check size-to-helpfulness ratio, which I’ve written about before.

The first meeting

Interestingly enough, the first meeting is quite telling of how helpful investors are — regardless of the decision outcome. It could be in the form of investor intros, strategic advice, hard questions to consider, or key hires to make. In fact, they’ll make you feel like you got back days if not weeks, out of a 30-minute meeting. If you, as the founder, get nothing out of the first meeting, then you likely won’t get much when they are on your cap table. The most helpful investors don’t waste time. Not theirs. But more importantly, not yours either. They know that each time you meet with them is time away from building. And they’ll make that time worthwhile.

As an investor, the golden standard should be to be helpful in every meeting. And I don’t mean ending the conversation with “Let me know how I can be helpful.” That’s reactive.

For one of my good friends, that means that if he takes a meeting with you — whether he chooses to invest or not, he will write a 3-5 page bug report on your product. For some of my other friends, it’s that if they take a meeting, they’ll nine out of ten times set up an intro. Instead of asking “How can I be helpful?”, one should ask “What do you need help on?” or “What are the biggest obstacles that prevent you from reaching your 6-12 month goals?” Then, proactively trying to find some way to help.

That said, the afore-mentioned investors’ bar for taking a meeting is rather high.

Response rate

Another proxy for helpfulness is how fast they reply to your emails. Many of the investors who I know are insanely helpful have a system to respond to founders quickly. Moreover, if the decision is a ‘No’, they don’t shy away from sharing that and why they decided to pass. Of course, the latter is not possible for every inbound pitch. But at the very minimum, are table stakes if you’ve already jumped on an initial live conversation with them.

Here, within 24 hours is epic. 48-72 hours is great. And anything longer becomes a dime a dozen.

Inactive founders sing them high praise

It’s always important to do your homework on your investor. One of such ways is talking to other founders they backed, especially the ones who are no longer founders or no longer pursuing the original idea they were backed on. Active portfolio companies are likely to still give lip service to their investors, especially when they are a large portion of their cap table. So, when you ask, “Was this investor helpful?”, you’re likely to get an overly politically correct answer. Rather, the question I recommend asking is:

“If you were to start a new company, who are the three investors — big or small — on your current cap table that you would kill to have back on?”

Conversely, if you talk to former portfolio founders, they’re likely to be a lot more honest as they don’t have a currently active relationship with the investor. Or if they still do, the investor must have done something right.

Lagging indicators to helpfulness

While not the intended purpose of this blogpost, I can’t help but shed some additional context for investors out there. In my recent conversations with GPs and LPs, I noticed a common thread among the GPs who are capable of raising a fund even in a down market. It’s that the founders they back who went on to raise A, B rounds, or greater, come back to invest in their early believers. The people who made a difference in these founders’ lives.

So, whenever I meet an emerging GP asking for fundraising advice, one of the first questions I ask, outside of these five questions which determine if they’re ready to start a fund, is:

Have any of the founders you backed before committed to your fund?

Goodwill and helpfulness builds flywheels. When your founders go on to win, if you’ve been helpful, they’ll want to pay it back.

Tangentially, it’s why the team at Ludlow Ventures says, “There is no greater compliment, as a VC, than when a founder you passed on — still sends you deal-flow and introductions.” So, getting deal flow from founders you pass on means, either:

  1. They still want something from you; or
  2. You were really helpful that they want to send all their best founder friends to you.

Hopefully, it’s the latter.

In closing

At the end of the day, no one’s perfect. Not the founders. Not the investors. No one. And it’s okay.

In the current world of chaotic down markets, high interest rates, and more, this is the time to build goodwill. This is the time to be truly founder friendly. If you have less liquidity, you can always help in many ways outside of pure capital. After all, capital for founders is a means to an end, not an end in and of itself. Sometimes it’s just being honest, candid, and transparent with the founder.

Photo by Chermiti Mohamed on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

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The Curious Case of Disappearing TVPIs

disappear, card trick, shuffle, magic

In 2016, I jumped into the VC world, knowing no better than what my forefathers and foremothers taught me. Outside of a handful few, many of the people I looked up to and sought for advice had been in the business for less than a decade. In effect, they started their investing career after the GFC (Global Financial Crisis) in 2008. While they still bore more scar tissue than I did, I learned quickly that the one question to ask founders early on was “What is your last round’s valuation?” or “What valuation are you seeking?” For the latter question, the implicit answer we sought out for was their 12-month revenue. And subsequently, their valuation multiple. In Mark Suster‘s words, we were “praying to the God of Valuation.” But really, their exit multiples matter more than the entry or current multiple.

Going into 2023, we’re seeing median pre-money valuations drop across the board. Of which, late stage deals are taking the largest hit with over 80% drop in valuation at the Series D and over 70% drop at the Series C.

Source: Cooley GO

For fund managers and partners, the question was “What is your IRR or TVPI?” or “What’s your AUM?”. Rather, the answer we should be seeking isn’t some function of their portfolio’s valuations, but the quality of the businesses they invest in.

To be fair, I failed to fully appreciate the latter answer until this year.

The odds aren’t bad, but that doesn’t mean they’re great

Jared Heyman wrote a great piece last year on the probability of success for YC startups. After parsing through the data, he found that after a couple years of survival, a startup is just as likely to go through an exit (i.e. acquisition or go public) as it is to fail (i.e. inactive). Additionally, ~88% of startups reach resolution (exit or inactive) around the 12-year mark.

Source: Jared Heyman

It’s also interesting to note that the average time it takes for a YC company to exit (if they exit) is seven years. In fact, the time horizon has shortened in the past few years from an average timeline of nine years to five. Of course that’s pre-2022, so the time to exit is likely to increase once again to the mean or longer as:

  1. Markets are less liquid. Valuations drop. Rounds are smaller. Buyers are less eager to buy. Founders have less access to liquidity and exit opportunities. As such, the markets will demand more proof from founders of market traction.
  2. Investor sentiment is guarded, echoing Howard Marks. I haven’t seen the newest numbers but at best, I imagine we’ll see more capital go towards existing investments, maintaining overall investment volume. At worst, a decline of capital deployment, outside of ephemerally “hot” industries, like generative AI.
  3. Investors’ key worry is investment losses. Investors up and downstream become more risk averse.
  4. Interest rates are rising to curb inflation, leading to a debt investor’s market rather than an equity investor’s. Founders are likely to turn to expensive debt instruments (and many already have). Higher interest rates also mean greater return expectations from investors.

Jared does note in another piece that “while YC startups may cost 2-3 times as much as their non-YC peers to investors, they’re worth 6-7 times as much in terms of expected investor returns.” It’s great to be an LP in YC, but tough to be choosing YC startups. Of course, at the very end there’s a gentle reminder that VCs (and angels) are defined by the magnitude of their successes rather than the number of their failures (and successes). Just because a portco gets to an exit doesn’t mean it’ll be a fund returner. With shifting markets, this will be as true for YC under Garry’s leadership as for any other fund.

Of course, I don’t mean to pick on YC. They do a tremendous job of picking founders. And it’s true that they have set the golden standard for startup accelerators. It’s just that the above data was easily accessible.

Portfolio consistency

Interestingly enough, Oliver Jung, Airbnb’s former VP International, wrote half a month later that Adinvest’s Fund II made him $200 on every dollar he invested in the fund, largely because of a 1000x Adinvest II made into Adyen.

That’s a phenomenal outcome! To make investors back $200 on every dollar invested is definitely one for the books. The question becomes (and I have no inside scoop on this): How did the rest of the portfolio do? Was Adinvest’s Fund II purely based on luck or is there a consistent model that can be replicated in future funds?

For that question, it begs another. If we took out Adinvest’s investment in Adyen, what is the DPI (distributions to paid-in capital) of the rest of the fund? That will dictate Adinvest’s ability to raise a subsequent fund, at least from the larger, more sophisticated LPs. A great and consistent portfolio may look something a little like this.

Given that the average fund’s returns (with a large enough portfolio i.e. 100 portcos) normalizes to a 3x gross return — venture’s Mendoza line, 3-5x would put you in the ball park of good. High single digits would put you in the great category. And double digits would put you in epic.

And if Adyen really was the sole outlier success, did the GPs have the conviction to double down in subsequent rounds? If so, how did they earn their pro rata?

Sometimes all you need is one investment to push you from a nobody to a somebody, but if you’re intent on building a multi-decade-long career in the space, your founders should see you in the same or better light than those equipped with asymmetric information (i.e. those who read about you in the media).

While many Fund I’s and II’s may not have a reserve ratio, were the GPs and LPs able to continue to invest via SPVs? By doubling down, it’s the difference between a strategy to win and a strategy not to lose. How much of Adinvest’s AUM does their investment in Adyen account for? And being a fund manager means balancing oneself on the tightrope between the two strategies. In doubling down, that investment becomes a larger percent of the capital you manage (AUM). If you lose, you lose much more. If you win, you win a lot more.

Of course, this is true for any fund. I ended up overly picking on the case study of Adinvest to illustrate the point, but I have nothing against the great success Oliver, the other LPs and the team at Adinvest did have. On a broader spectrum, the purpose of having many shots on goal is theoretically so that you will have a few outliers. So your fund can grow based on a consistent strategy.

There are many times when all you have is that one outlier (often still in paper returns, not distributions yet). It happens. I’ve seen it happen. But if that one doesn’t work out, how forthcoming are you with your “disappearing TVPI?” I imagine a lot of investors who are planning to raise in 2023 will come face to face with these questions, having made big bets on hot startups in the last two years. Will you shrug it off? Or will you candidly share the lessons in which you learned?

The above is just something I’ve thought about a lot more as I see more emerging GP fundraising decks, as they boast about their angel portfolio (if they did have one).

In closing

There’s a proverb that goes: A broken clock is still right twice a day. You can be the worst investor out there, but with enough swings at bat, you’ll still be able to hit some outliers.

In the world of investing, you’re guaranteed to be wrong more often than you’re right. But I’ve seen many that do a lot of stuff ‘wrong’ and still have a winning fund. The big question… and the question, sophisticated and institutional LPs are asking is: Is it repeatable?

So, even if you did hit some home runs, is your success repeatable?

One last footnote. In talking with a number of investors who’ve been in the business for more than a decade, I’m starting to realize that selling (i.e. knowing when to sell and how much to sell) is just as important. An art and a science. I’ve written about it before (here and here), but I imagine I’ll revisit the topic again in long form soon. Especially as I see more discourse on the topic and funds close and liquidate in the near future. From great ones like Union Square Ventures to those who need to return some DPI to raise their next fund.

Photo by Edson Junior on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

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2022 Year in Review

rollercoaster, sunset

This year I learned a lot. From the fact that most of my readers love to read my blogposts on Wednesday 2PM Pacific to how I could get general partners — some of the smartest people in VC — to be vulnerable and candid to how to set up an SPV from scratch (without the help of any platform). It’s been a rollercoaster. And I loved every second of it.

My blog grew modestly. No hockey-stick curve. And that’s okay. I enjoyed inking each word. To me, that’s what makes this blog worth it.

I’ve written 87,000 words, with over a third fewer posts than last year. I want to say I was busy. And I was. But another equally true reason was that I was scared to disappoint. I wasn’t content publishing half-baked ideas. And it sucks when I know I wanted to write more. How? Because as of today, I have 53 drafts just sitting in my WordPress folder. With 245 total published essays, that’s a sixth of my thoughts I withheld or postponed because I thought: “They’re not good enough.”

Comfort is powerful. And earlier this year I found myself resigning to habitual cycles I had developed in the year prior. A fear manifested into reality. So I made a promise to myself to escape the clutches of complacency.

But while I hesitated on the writing front, I chose to take risk elsewhere. I took big bets. For one-way door decisions, bets I didn’t wait for a 100% conviction on. And just jumped when I got to 70%. As a function, I had many firsts.

It’s the first economic downturn I’m living and working through (2008 and the dot com era don’t really count as I was still in grade school).

For the first-time I broke my streak of writing weekly since the inception of this blog. While I can blame servers and bugs, the reason was simple. I just wasn’t prepared enough.

I set up my first SPV (special purpose vehicle) from scratch. With a s**tload of help, but yes, from incorporating to legal docs to setting up bank accounts, and so on.

I started interviewing LPs in fireside chats — something I never imagined I would end up love doing or be capable of doing.

I hosted my first social experiment-like event paid for and sponsored by investors for investors, rather than my usual audience of thrill seekers. Based on the feedback, I’d say it was a success. Many learnings and an indispensable village helping behind the scenes. A handful of things that could have been better. But a night of surprises. And I learned — something I hope to share more in the future (as I have larger sample sizes) — events, just like books, movies, shows, podcasts, and so on, are stories. And stories have settings, character developments, plots, a climax, and an end where the audience can imagine no other (to steal a line from Robert McKee).

Additionally, I…

  • Took my first vacation, not touching any work at all, in six years;
  • Went to my first traditional Vietnamese wedding; hell, travelled to Southeast Asia for the first time;
  • Successfully made fruit chips en masse;
  • Realized my favorite photo mode is portrait mode;
  • Built my first PC;
  • Put together my first career manifesto — my professional raison d’être.

And it’s still not enough.

But I digress. While I wrote far fewer posts, 2022 was the year I wanted to make things count. As Muhammad Ali once said, “Don’t count the days; make the days count.” The below, while I wish I had a longer list, are the blogposts that counted.

2022’s Most Popular

The below are the essays that I published during 2022, and generated the most views, ranked from most to 5th most:

  1. The Emerging LP Playbook – I never expected this one to take the top spot this year. Borne out of a personal curiosity and an attempt to better understand the black box industry of LP investing, ever since Andrew Gluck put “emerging” and “LP” back-to-back on a Zoom call, I had to learn more about it. The truth is I only knew a handful of known LPs at the time, but I’m happy this piece has expanded the horizon for not only myself, but everyone else out there who’s read this curious piece. It answers just one nexus question: For a first-time LP, where do you start?
  2. 99 Pieces of Unsolicited, (Possibly) Ungoogleable Startup Advice – I’m a collector. And have been so for a while. Specifically, a collector of quotes. I have journals dedicated to them. When the pandemic hit, I had a thought, what if I collected 99 soundbites (some albeit my own) about being a founder? All tactical. And each will share an actionable lesson. And I shared them. I didn’t know how long it’d take, but I knew that 99 sounded like a good number.
  3. How to Get Investors to Just Ask One Question: “How Can I Invest?” – I had the chance sit down with Siqi Chen, one of the best storytellers I know. And he broke down just what a founder needs to do to secure the bag. The caveat is it usually doesn’t happen after your first fundraising pitch.
  4. What Does Signal Mean For An Early-Stage Investor? – The word ‘signal’ has been thrown around quite a bit in the last two years — 2020 and 2021, if you’re a time traveler and reading this in the future. For instance, an investor would look for ‘signal’ before investing in a deal. In the above blogpost, I break down exactly what ‘signal’ means. And I imagine, in whatever time period governed by FOMO (fear of missing out), ‘signal’ will rhyme.
  5. 99 Pieces of Unsolicited, (Possibly) Ungoogleable Advice For Investors – Just like the one I wrote for founders, soon after, I thought I’d put a list of 99 soundbites for investors. And as I jumped at the opportunity to work with the brilliant team at On Deck Angels, I was living and breathing everything about investors — from angel investing to fund investing. Of course, you can sense my heavy bias towards to latter.

All-Time Most Popular

The funny, yet in hindsight, unsurprising, thing, is that the below are perfect examples of the power law, collectively generating 90% of the views ever on my blog. The below ranked in view count popularity:

  1. The Emerging LP Playbook – I wrote this piece for myself and other investors looking to be LPs. Unsuspectingly so (at least in foresight), this piece generated a huge amount of excitement not only with my initial intended audience — who, I thought, was a niche audience — but also among many VCs and angels out there. I rarely write in hopes to change people’s minds. I’m not much of a persuasive writer, but rather I hope my words offer oases for people searching for answers in a desolate desert. But of the feedback I’ve gotten, it has surprisingly changed a number of people’s minds about LPs, as well as about different asset classes to invest in.
  2. 99 Pieces of Unsolicited, (Possibly) Ungoogleable Startup Advice – Same as the above.
  3. 10 Letters of Thanks to 10 People who Changed my Life – To this day, it still baffles me how this is the most perennially popular essay I’ve written. The SEO keywords I’ve optimized for here are all related to Thanksgiving, yet the fact that search engines bring me new readers every single week without fail is an enigma I’m still unravelling. That said, I am thankful to everyone who’s given me and the 10 people I am deeply thankful for that year the attention and time out of your busy schedule.
  4. How to Pitch VCs Without Ever Having to Send the Pitch Deck – Teach them something new. Many founders who’ve worked with me can attest that that’s been my favorite line to lead with when they ask for fundraising advice. This blogpost and the person behind it (who’ll stay anonymous for now) is the reason for that.
  5. #unfiltered #30 Inspiration and Frustration – The Honest Answers From Some of the Most Resilient People Going through a World of Uncertainty – (Part two of which you can find here.) Interestingly enough, I knew this one would stand the test of time. Something we learn in Econ 101 is that business cycles come in booms and busts. And they oscillate between great times and bad times. The human emotion, our daily lives, and our careers are no exception. Collectively, I queried 42 world-class professionals about their greatest motivators. What keeps them going? I ask them two questions, but the catch is they’re only allowed to answer one of them. These pieces are a gentle reminder that bad times, like good times, never last.

Most Memorable Pieces in 2022

In writing each of the below, I felt the needle move forward. Not for the world or for the people immediately around me. But for me. That I myself took one small essay forward, but a disproportionately giant leap in the way I thought about the world around me. Each is the culmination of not just a few hours of writing, but of many things more. Provocative conversations. Research deep dives. And generous people.

In no particular order, if I were to hide pieces of my 2022 soul and mind in Horcruxes, they would be in the below:

  • The Emerging LP Playbook – You’ll realize that this blogpost appears in all three lists. The first two are outside of my control. But the reason it appears here is this piece catalyzed a spark that’ll come more into fruition in 2023. A spark that emerged from realizing the massive information asymmetry between LPs and GPs. Hell, even between LPs.
  • How to Develop Intuition as a Rookie Startup Investor – This dates as far back as 2017, when I first inked the thought in my notebook. The thesis was simple. Intuition — one’s sixth sense was a subconscious function of the mastery of the other five senses. But then, I felt ill-equipped to explicitly describe what other investors were feeling, and over time, what I was feeling as a function of what I was thinking. In it, I share each of the questions I consider and their respective answers that inform each of my senses (sight, hearing, taste, etc.).
  • How do You Know if You Should Professionalize as an Investor? – I love asking questions. To the point, and I don’t mean this in a tongue-in-cheek way, that often the best way to answer a question is with another question. I’ve gotten the above question many a time this past year, and this piece is a permutation of what helps me get to first-principles thinking when it comes to: Should you raise a fund… or stay an angel?
  • Five Tactical Lessons After Hosting 100+ Fireside Chats – I love hosting interviews. I really do. Part of it is due to the fact I love asking questions. The other half is… well… the average coffee chat is 30 minutes long. Half of it disappears after exchanging pleasantries. So, the big question is: How do you get more time with people you respect? One answer among many is by giving them a stage. That said, as I was doing my homework to be a better MC, the information out there is either paltry or too generic. So I made a promise to myself that as I do more myself I’ll share all the non-obvious lessons I learn. So that others can do better than me. And I hopefully, get to learn from them as they get better.
  • When Should You Sell Your Shares As An Investor? – Selling is really an art more than science. Like investing, often obvious in hindsight, but painfully scary in foresight. And to be a great investor, you have to distribute your earnings. And in order to earn, you have to turn something illiquid into something liquid. This piece was one of my first explorations behind what makes selling hard and how some of the best do it.
  • Quirks That Just Make Sense – Maybe there’s a bit of recency bias here, but this is something a few of my friends have known about me for a while. I just never had a good excuse to talk about it publicly. (Weird that I thought I ever needed an excuse to). But my good buddy Matt brought me out of my shell a few weeks back. And together we put together a piece about the quirks we carry and the origin story of each. Coincidentally enough, just watched Garry Tan’s video yesterday about a similar topic.

In closing

Cheers to a year of life lessons, friendships, skills and experiences acquired that were well worth the ride! And many more to come! If there’s ever any topic you would like me to write about in the future, don’t hesitate to let me know. I have two nominations already.

To peruse one of Kurt Vonnegut‘s lessons, I hope to continue to use your time in a way that you feel is not wasted.

Thank you. And stay tuned.

Photo by iStrfry , Marcus on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

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Quirks That Just Make Sense

different, quirky, weird

“Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently — they’re not fond of rules, and they have no respect for the status quo… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… They push the human race forward, and while some may see them as the crazy ones, we see genius, because the people who are crazy enough to think that they can change the world, are the ones who do.”
— Steve Jobs

We live in a world where everyone is seeking validation from some kind of audience — large or small. And I’ve come to realize over the years that as long as we’re chasing what most people want, we will eventually be like most people. And truth be told, forgettable. Speaking for myself, I will just be a number in a sea of sameness, rather than THE number.

I realized later than I would have liked that I didn’t want to be like everyone else, after being inspired by a rejection email from someone I deeply respect when she replied with four words “Be interested and interesting.” And I count myself lucky to be surrounded by people who think different, to borrow a phrase Steve Jobs loves. For some, that means going where no human has gone before. For others, it’s a means to live their most fulfilling life.

So, I can only thank my good buddy Matt — one of the most outlier and honest-to-goodness thinkers I know — for the alchemical jazz that birthed this blogpost. Our only ask is that you suspend judgment until you reach the end. What may seem eccentric at first glance may prove to be the kernel of inspiration you didn’t know you needed today.

Below is only a snippet of quirks — seven to be exact — that make the two of us us, but hoping this inspires a larger conversation of people being unapologetically themselves.

  1. The whiteboard in the shower: Leaving no shower thought unturned
  2. Dream journaling: Better access to conscious and subconscious memory
  3. High-quality notebooks: Evergreen homes to high-quality ideas
  4. The Emotional Catalog: The vending machine of emotions
  5. The Excite-o-Meter: Matt’s personal Stoke Diary
  6. Marriage counseling: A recipe for strong co-founder relationships
  7. Restaurant recipes: It never hurts to ask

1. The whiteboard in the shower: Leaving no shower thought unturned

There are only two kinds of reactions I get when I tell people this. Utter bewilderment. And, what I call, sparkle-eyes.

Many of my best ideas happen in the shower. In fact, about 60-70% of the topics I write about on this blogpost found its origin in the shower. But, forget myself for a second. There’s a whole movement in the world called shower thoughts. There’s also some great academic literature on the subject — that hot showers open your pores, helps your blood circulate, and put you in dopamine-high, yet relaxed states, just to name a few. But whether the science matters or not here, one of my biggest frustrations in life is losing access to great ideas just because I couldn’t commit it to memory or document them. Many of mine merely happen to start in the shower.

So, with a small purchase of a $10 whiteboard and $15-20 rainproof markers, you’ll be set.

2. Dream journaling: Better access to conscious and subconscious memory

I’ve been fascinated by dreams ever since I was a kid. Luckily, blessed by vivid imagination, I was able to synthesize the art, movies, and stories I was consuming into interactive experiences in the amphitheater of my mind. To me, dreams were the ever-evolving playground that very few tangible experiences could rival. I’m gonna be hated for saying this, but I remember the day I was let down by the Disneyland promise. I was only seven. And I told myself that day, I would start trying to remember my dreams.

You see, as fantastically awesome as dreams are, the only downside is I forget the vast majority of them within seconds of waking up.

So, for a long, long time, I’ve been dream journaling. I have a notebook by my bedside. And every time, I remember a dream, I write it down and/or draw it out. Even if all I remember is a single word or a single image. Over time, I get better at it. The better I get at capturing my dreams, the more intentional I get.

There’s now a whole slew of literature on the topic, but for me, it’s fun. And an interesting byproduct of it all is I seem to have better memory than most of my peers.

3. High-quality notebooks: Evergreen homes to high-quality ideas

This is truly a prime example that while we all come from different backgrounds, curious minds can reach the same conclusion from different angles. That’s exactly what happened when Matt and I were ideating for this blogpost when we realized we both graduated from ten-cent back-to-school-sale spiral-bound notebooks.

The more expensive the notebook, the more respect you treat it with, and the higher quality of thoughts you will entrust it to house. Think of it like sunk cost fallacy. After all, it’d be a pity to leave the sacred halls between the two leather covers unadorned with ideas that would complement the quality of the frame.

To Matt and I, our weapon of choice is Leuchtturm1917. For myself, undeniably, paper that boasts the density of 150 g/m2.

4. The Emotional Catalog: The vending machine of emotions

The human emotional spectrum is fascinating, yet quite volatile and unreliable when you most need it. For instance, I know I’m not alone in this, but I used to always find myself feeling anger and aggression upon hearing constructive feedback, rather than curiosity. That I felt anxiety and overwhelmed when on stage rather than excitement and confidence. That I felt frustrated and discouraged when writing blogposts when I want to feel inspired.

So when I committed to this blog in 2019, I started keeping tabs on when I feel strong emotions, hoping to preserve these emotions in cryogenic slumber and awakening them when I needed them most. I keep a Google Doc that has a glossary of emotions in it — from joy to anger, from optimism to jealousy, from compassion to sadness, just to name a few. And each time I consume a medium that inspires a certain emotion, I include it in that doc. They become my shots of espresso when I’m just on the wrong side of the bed.

For example, I find inspiration from Ratatouille. Or Avatar. Or Admiral William McRaven’s UT Austin commencement speech. I feel grateful after watching The Blind Side. Yet, if I want to feel sad, I watch Thai life insurance commercials (here’s an example of one). Envy, from select friends’ Facebook/LinkedIn posts. Direction, from Kurt Vonnegut or Brandon Sanderson’s lectures. And the list goes on.

5. The Excite-o-Meter: Matt’s personal Stoke Diary

Matt: I’m a big believer that energy is palpable, but ephemeral. Like a wisp of smoke, energy is beautiful and can dazzle and inspire, but it fades… eventually. The buzz dies down, and it saddens me. That’s why I’ve developed a practice to immortalize positive energy – by keeping a running list labeled “Excite-o-Meter.” It’s my personal Stoke Diary.

Here’s how it works.

At the beginning of every week, I create a “dashboard” in a specific notebook I have for work –- a two-page canvas that I reference back to throughout the week. Page one contains items that I detail at the beginning of the week, like my “Big Rocks” (priorities for the week) and “Principles to Uphold” (personal growth tenets I aspire to embody). 

Page two is more dynamic. It contains running logs of moments that captivated me in the present, that I choose to immortalize.

I allocate 25% of page two to the “Key Learnings” of the week. But the real magic happens with the other 75% of the page. I label this section “Excite-o-Meter.”

My rule is that anytime my excitement exceeds a very scientifically-defined 7/10, I jot it down immediately. 

Reached alignment on a cross-functional project that was birthed out of a chaotic primordial soup of conflicting objectives? Jotted. 

Overcame a once-limiting belief, reminding myself that I hold the paintbrush against the canvas of my life? Jotted. 

My SQL query finally ran after debugging it for 24 minutes? Jotted.

At the individual level, it helps me memorialize the moment, etching it down onto my notebook and simultaneously, my mind. But when I read the log in periods of reflection, when I browse weeks worth of “Excite-o-Meter” entries – it reminds me of who I am. Of what gets me to tick. Of what makes me experience pure exuberance. It’s my Stoke Diary, and it’s my ever-growing source of inspiration.

6. Marriage counseling: A recipe for strong co-founder relationships

Two and a half years ago, after a conversation with one of my favorite founders, I stumbled across the parallels of marriages and co-founder relationships. Ever since, while I don’t do so with any element of regularity, I’ve found couple counseling to be a huge unlock to demystifying sticky co-founder dynamics, hell, even how to make amends with friends.

7. Restaurant recipes: It never hurts to ask

I stumbled across this one quite accidentally. So, one of the things I’m quite known for among my group of friends is that I like bringing a notebook with me almost everywhere. And there have been multiple times that for a party of two, I’ve been the first to arrive. In hopes to capture my thoughts and ideas before they dissipate into the cosmos, as soon as I am seated at the restaurant, I immediately start to take notes. Additionally, when I ponder, I tend to look around as if my eyes were bees just hovering above sunflowers in a prairie without any intent to rest on any particular nectary.

That, in effect, without even noticing it myself, makes me look like a food critic — to which I’ve been offered complimentary drinks and appetizers while waiting for my dinner guest. On occasion, they serve me something I wouldn’t have ordered myself and I love it. And well, being a curious home cook I am, I had to ask how they make it, in hopes of replicating the flavor and/or texture profile at home. And I remember the first time I worked up my courage to ask, the chef de cuisine hand-wrote out her full recipe and gave it to me at the end of the meal.

Ever since, every time I like a dish at a restaurant, I give my compliments to the chef and politely ask for the recipe. Most times I get a thank you but no, but surprisingly and anecdotally, about 40-50% of the time, I actually get the recipe. And in a small, small handful of times, the chef shows me how to make the dish live.

In closing

Most people don’t self-describe themselves as quirky. Neither do they seek to find a quirk that best describes them. Quirks are products of self-discovery and unadulterated problem-solving at its purest. Bespoke solutions to ones’ problems, unabated from society’s judgmental eye, birthed by the crazy ones. And that is something Matt and I find magical.

In fact, when Matt brought up this topic with his bud, Rebecca, recently, she described it best, “Quirks are an evolutionary adaptation. They stand out and persist because they survive. Because they are a survival mechanism. Everyone has a bunch of systems. I have a way of organizing my notes, packing my suitcase, curating my notes, and a bunch more.”

While the purpose of this blogpost isn’t for you to pick what quirks you like and copy them (while we won’t stop you if you do), rather, we hope this helps you better understand where quirks come from. And just maybe, this will help you build the blueprint schematics to what makes you you.

Photo by Mulyadi on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

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How to Find Your Mentor

how to find your mentor, child

An old college friend reached out to me not too long ago and asked me if I had any tips to share on getting a mentor. And the first thing I responded with is: “Don’t ask people to be your mentor. In fact, don’t even mention the word mentorship.”

You see, mentorship is a loaded word. It comes with baggage. Centuries of it. Hell, millennia of it. And apparently, dating as far back as 3,000 years ago to Homer’s Odyssey. Mentorship comes with an expectation of commitment. While that amount of commitment differs per person, a mentorship ask from a stranger is an amorphous expectation of time and energy from a busy person who likely has a laundry list of other priorities. Without any precedence or context, it’s hard to make that decision with asymmetric information.

The best pairs of mentorship have always been a two-way street. It takes two to tango. If we were to take the equation of a line:

y = mx + b

… a mentee wants a mentor whose current b, or position and experience level in time, is greater than their own. A mentor wants a mentee whose m (rate of learning, iteration, and hustle) is as great or greater than their own. The bet is that at some point in the future, at least in my experience, mentors would like to learn from their mentees as well, and/or see it paid forward.

Yet, I see so many mentees out there who discount their own value in the relationship. One of my mentors shared with me a few years ago that the older you are, the younger your mentors should be. And I’ve carried that in my heart ever since. More recently, I found that line in the form of a tweet from Samir Kaji.

I can’t claim to have mentored tons of folks, but I also realize both from anecdotal experience and talking with my mentors that the best thing about mentorship is the feedback. That the mentors learn about the result of their advice as an opportunity to finetune their own learnings.

Take for example, my office hours. Of the hundred or so people I’ve met through open office hours, I’ve probably shared the same piece of advice at most five times. It gets even more interesting when you consider that the vast majority of people I’ve met via office hours come for fundraising advice. Somewhere in the ballpark of 80% of people. While there are similar thematic questions I ask people to consider, the best advice is tailored to every unique situation. That said, my advice, like any others’, starts as a product of my own anecdotal experience. A sample size of one. And as we learned in Stats 1 in high school or college, that’s a poor sample size. So, one of the best ways for me to refine my own learnings is either:

  1. Act on it again and again. But there are some things in life I can’t do again. For instance, high school or freshman year of college or my first job. Those are experiences entombed in amber that unless I had a time machine, they’re one and done.
  2. Learn how other people execute on that advice and what resulted of it.

One of the many joys of writing this blog is that every so often a kind reader reaches out to me and shares the results of them implementing the thoughts I’ve shared here. Then they let me know I’m either full of s**t or I drastically helped them grow. And I love both forms of feedback equally as much. After all, it’s the rate of compounded learning that helps me mature — even if it’s outside of my own anecdotal experience. Feedback and learning of others’ results gives me a sample size greater than one. The same is true for other mentors, advisors, and investors out there.

So, what does that mean tactically?

Start with the ask.

There’s a metaphorical saying in the world of venture that investors invest in lines, not dots. They want to see progression rather than stagnation. So in reaching out to anyone you’d want to learn from, don’t lead with “Can I have 30 minutes of your time?” Instead, lead with a question. Why are you reaching out? What question can only they answer?

So, that means, “should I get an MBA?” is not a good question to ask. It’s generic, doesn’t contextualize the question, and you can figure out how to do so on the internet. On the flip side, a better question would be: “I saw that you graduated from Wharton before breaking into VC. So I’m curious, did you always know you wanted to be in VC, or was that something you discovered in B-school? And what experiences did you gain in B-school that set you up for VC?”

Moreover, show you’ve spent time in the idea maze before proposing the question to the person you want to learn from. “I’ve read about X and Y, and have thought about or tried A and B already with these results. But the question still gnaws at me.”

Why does this contextualization matter? One, it gives that person context to better answer your question. Two, the last thing any person giving advice wants is for their advice to dissipate into the cosmos. For their advice to go to naught. And if you show that you’ve spend blood, sweat and tears already pondering the problem, then you’re more likely to take their advice seriously. In effect, their advice will be a lot more meaningful. And, chances are you’re going to be a lot less whimsical than the average person asking for their time. Use someone’s time in a way that won’t feel wasted.

Follow up even if they ghost you.

If they respond the first time, great. And if not, don’t give up until you’ve sent at least three emails. If they don’t respond the first time, they just might not have seen it. If they don’t respond after the ninth email, they’re just not interested.

And with each email follow up, tell them when you plan to follow up since you assume they’re busy. “If you’re too busy, I completely understand and I’ll follow up in two weeks.” On the last email if no response, thank them for their time and wish them well.

Don’t set recurring meetings (initially).

First of all, it’s a heavy ask to anyone — stranger or not. Second of all, there’s no promise that their time (and your time) won’t be wasted. Third, do you even have that much to ask about? Most of the time, you don’t. What you think you want and what you actually need are usually very different. It’s an iterative process.

Instead, start with a single question. Ask it. If they’re free for a meeting, set 20 minutes (here‘s why I like 20, instead of 30). If not, get their thoughts asynchronously. Get advice. Act on the advice (or not, but be intentional if not). The most important part is to share your results with the origin of that advice.

So, when you close out that initial meeting, ask if you can reach out to them 24 or 48 hours later after you’ve had time to mull on it or act on it. Timeframe will vary. And if you do follow up shortly after without results, limit any additional ask to 1-2 questions, max. Ideally it should take them 2-3 minutes to respond to. For any advice that takes a longer feedback loop, set a time in the future (two weeks, a month, 2 months, etc.) later to reach back out to share your learnings. And sometimes, that means you didn’t implement their advice. Why not? What did you learn from doing the counterfactual?

When you reach back out to share your learnings, see if you can jump on another 20 minute call, or shorter. And get their thoughts on the facts. Possibly get more advice. And do that again and again. Until at some point — my litmus test is usually 3-4 of these discrete exchanges, in no particular frequency —, I ask if we can get something recurring on the calendar. Nothing long. Stick to 20 minutes. And set an end date for the recurring nature. I usually do 4-5 times as the first run through.

At the end of those recurring meetings, be honest and mutually evaluate: Was it a good use of everyone’s time? If not, end it, but reach back out periodically to share your thanks, especially around the holiday season. If it does work, set another set of recurring meetings and reevaluate again in X time. And voila, you have yourself a mentor (in the traditional sense).

One more note on this… if that person is extremely busy and you know they are, sometimes a more personal touch to the email is recording a Loom and asking your question in front of a camera to that person in particular. For any Loom video, I wouldn’t go over a minute of recording time. Keep it concise, and use text to describe everything else.

Build a platform where they can share their advice with others.

Either start a podcast or a blog. Or help them find an audience that is outside of yourself —a fireside chat, a club, a non-profit, posting a Twitter thread or LinkedIn post, and so on. Their time is limited, and if they’re likely to give that same piece of advice to many others, help them find the tribe of people who are willing to listen to their advice. So instead of their advice being one-to-one, it’s one-to-many. In sum, a larger impact radius.

Of course, the caveat here is if the advice you seek is personal experience that isn’t suited for a stage, then don’t do it.

In closing

Some of the mentors I have today are folks I’ve known for years, but neither of us remember the discrete date in which it all started. Simply put, “it just happened.” There are others where we’ve never explicitly said we were mentor and mentee. Yet, I learn just as much if not more than if I had explicitly asked for mentorship. The same is true for some of the “mentees” I have.

At the same time, I wouldn’t discount the fact that you can truly find mentors everywhere in your life. Too many people focus on only finding strategic mentors, but fail to see the value in tactical and peer mentors, which I wrote more about three years back.

Photo by Ben White on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

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How to Hire Your First Executive

climb, hill

Last week I had the chance to sit with the one and only Steven Rosenblatt, former President at Foursquare and the one who got Apple into the advertising business, now Founding GP at Oceans. Of the many things I could have asked, I had one burning question. Something that I also knew Steven knew like the back of his hand. Hiring executives.

Particularly, I’ve always been curious, since I’ve never done so myself, but have watched many friends and founders do it — successfully and well… its polar opposite, best described with this meme.

And in fourteen words, I asked Steven: For a first-time founder, how does one go about hiring their first executive?

To which, Steven generously shared: “There are three questions that founding CEOs need to ask themselves.”

  1. “What’s the most critical gap in the company that you need incredible leverage?” What are the holes you’re really failing at? That if you can hire, will dramatically increase the success of the company. If you don’t solve, you won’t have the right to raise the next round of funding. You don’t need to build a $100M company today; you need to build a $10M company today.
  2. “What are the things you hate to do or suck at?” A lot of CEOs optimize for the question: What kind of CEO do I want to be? But what’s more powerful, as Steven shared, is: What kind of CEO do I NOT want to be? Are you sure your superpower as a founder is aligned with what you want to do?
  3. “Is this person going to help me build the culture that I want at my company?” Sometimes someone is going to look great on paper, but the rest of the company and culture will outright reject them.

Culture, talent, and everything in between

As the saying goes, you look for the shimmer, but mine for the gold. (Yes, I made that up. But trust me, if I say it enough times, it’ll stick.) So, I’d be remiss to leave the jewel unexcavated. As such, in the double take, I asked: Tactically, how do you know if someone is a good culture fit?

“Write down the things that are important to you,” Steven shared, “What kind of team are you looking to build?” A results-oriented one or a process-oriented one? A culture of one-on-ones or not? Distributed or not? A family or a world-class orchestra?

“There’s no script for this,” elaborates Steven, “But think deeply about how you want to treat your employees, how you think about growth, and how you talk to investors. When I transitioned from Apple to Foursquare, on day one, while I was still only an advisor, Dennis invited me to an Exec meeting. I knew this was a culture of transparency. Additionally, at our weekly All-Hands, while Dennis led some of them, I would lead them as well as other execs. Something I found that our employees really really appreciated it. I went from a culture of secrets to one of transparency.

“So, to understand if someone is a good fit for your culture, after you write down what’s important to you, ask them:

  • What’s important to you? What haven’t you achieved that you want to achieve?
  • How do you do your best work? When do you feel the most motivated?
  • Why do you want to work here? Why are you excited to do so?

“These are multi-year relationships. And you need someone great to help you get to the next level. The truth is your first execs aren’t going to change; it’s who they are. And if they don’t live and breathe your values from the beginning, they won’t change their personality just for you.

“One thing I make sure to bring up is why they shouldn’t be here. ‘I’m not sure you really want to work here. Let me give you a bunch of examples of why you won’t want to be here. Let me tell why this is really, really hard.’ I then listen to how they react to it. In the early stages, you want someone who’s bought into the mission. After all, this is someone you’ll spend a lot of time with. Can you take this person out to brunch with your family?”

Whether it’s Steven’s brunch test or Stripe’s Sunday test or Netflix’s Keeper test, have a good heuristic for the type of person you want to hire.

The first 90 days

Now that you’ve hired a great candidate, I had to ask the man, “What does a great exec hire do in their first 90 days?”

There’s a saying that good things come in pairs. If I might add to that, it turns out great things come in triads. ‘Cause without skipping a beat, Steven said, “A great exec hire must do three things in their first 90 days: 1/ spend time with everyone; 2/ align with the founders, and 3/ build an action plan.”

1. Spend time with everyone

“Meet with everyone who’s at the company and really get to know them. Not just what they do at the company, but also why they choose to do what they do.”

Digging a level deeper, I asked: “So what questions do you ask your team members to really get to know them?” Steven, responded in kind, with his Rolodex of questions — a set I know I’m keeping in my 52-card deck:

  • What’s on your mind?
  • What does your day-to-day look like?
  • What inspires you?
  • And what’s holding you back? What’s stopping you from doing your best work?
  • If budget wasn’t an issue, what would you do? And what would you need to be able to get it done?

Of course, goalpost of everyone changes as your company scales. If someone is the first exec hire, talking to literally everyone makes sense. On the flip side, as Steven shared, “if you’re at a point, when you’re on a 100+ team — like a Series B company — you may not be able to talk to all 100 employees. In that case, 50-70 employees should suffice.”

2. Align with the founders

As important as it is to talk with the team, the conversations before and after the exec is hired are different only in the context that the latter goes much deeper. The best way for an exec to hit the ground running is to really understand the company’s past, present and future.

The past. “A great exec needs to understand what’s been built to date and why. What were some of the hard decisions we had to make? Where did we pivot? What did we stop doing? And what have we learned to date?

The present. “Who is using the product and who are our target customers? How are they using it? Gather as much product-related data as possible.”

The future. “Where do we think we want to be in the next 90 days? Six months? A year? Are there things that the exec would like to change? Where are we not aligned and why aren’t we?”

Within that three-month period, a great exec should have already figured out where they are going to prioritize their time. When putting it all together, a world-class exec is able to answer the question: Is the plan we want to execute on the same as the one our team is doing day-to-day? Is there any cognitive dissonance?

3. Build an action plan.

After they’ve talked to everyone, “the exec then comes back to management and lays it out. ‘Here’s where we need to get to to be fundable. I’ve talked to the employees, and here are the gaps we need to solve in the next few months. To help us get there, here are some of the hires I’m going to recruit.’

“In the prior conversations, you, the founder, have laid out that plan to fundability in the next 12 to 18 months. Does the exec agree with it? After all, the company’s KPIs are the exec’s KPIs.

“If so, the question becomes: How will the exec spend their time? What part are they owning? You hired this person to either take something off your plate or do something you hate doing or are not good or mediocre at. The exec’s job is to free up the founders’ time to do what they’re great at. So, you can focus on things that are higher leverage.”

So it got me thinking about the validity of my own question, is 90 days really the right benchmark for an exec to go from 0 to 100. Turns out, it may not be. “Given that this is your first exec hire and you’re still early, 60 days is more than enough, ” said Steven, “As you go further down the road, it’ll take more time to ramp up.” When you have a real business going on — something that’s default alive, as opposed to default dead — that’s when 60 days of an onboarding period turns to 90.

Letting go

I was also curious of the counterfactual. What if your hire goes wrong? How do you let someone go?

“Unless they’re a new hire, the day you let them go should not be the first time they’re hearing about this. Ideally, there should be no surprises that things aren’t going right. As the CEO, you should be having several frequent and transparent conversations to help them course-correct. If it’s clear that this person is not working out, move swiftly to let the person go. The longer you wait, the more damage it will cause long-term.

“It should also not be a surprise to the team when you do let them go. People often play to the lowest common denominator. Never the highest. ‘I just need to be better than the worst.’ If someone is really weak in their role, people see that. And if you don’t do anything about that person, they will set the culture and the standard for everyone else. So if you let someone go, and everyone else breathes a sigh of relief, that sets the record straight and your team can move on.”

Paul Graham and Suhail Doshi have a similar approach. If you ask your co-founders to separately think of someone who should be fired, and if they all thought of the same person, it’s probably time to let them go.

To take this a level deeper, I love the words Matt Mochary uses and recently shared on an episode of Lenny Rachitsky’s podcast. “The best way to lay someone off is for them to hear it from their manager in a one-on-one.” And before you give them the lay of the land, preface these hard conversations with: “This is going to be a difficult conversation. Are you ready?”

After they say “Yes”, then you share: “I’m letting you go. And this is why.”

After you share the why, you follow up with: “My guess is that you’re feeling a lot of emotion, anger, and sadness. Am I right?” Then actively listen to their fear and pain.

After you’ve had the conversation, don’t ask the canonical “How can I help?” But actively step in and help them find a better home. At the same time, it’s worth giving some people the space and time to process the multitude of emotions and stimuli. So, this doesn’t have to the first conversation, but most likely the second or third post-announcement.

In closing

As we wrapped up our conversation, Steven left me with these closing words. “Don’t be scared to make that first executive hire. But also, don’t rush into it. Take the time to get it right.”

He’s right. As with all great things, take the time to get it right.

Cover photo by Tobias Mrzyk on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

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How to Take Control of your Fundraising Process

It’s not often I get to work with someone I deeply respect on the content front. In fact, in the history of this blog, I’ve never done so before. But there are a rarified few in the world that if I was ever given the chance to work with them, I’d do so in a heartbeat. Tom White is one of them. As someone who I had the chance to work briefly with when our time at On Deck overlapped, he is someone I’ve been continually enamored with — both in how he commands the English language and in how intentional and thoughtful he is as an investor.

So when Tom reached out to collaborate on a blogpost for the Stonks blog, it was a no-brainer. And, the below is that product on how founders can own their fundraising process.

David’s note: Tom never ceases to amaze me on his ability to meme anything.

It’s a tale as old as time.

After a good meeting and a great pitch, the VC across the table (or on your screen in this day and age) offers a forced smile and utters: “Thanks again for making the time. Let me circle back internally and we’ll get back to you if we’re interested.”

If you have ever fundraised as a founder — hell, if you’ve ever fundraised, period — you have heard those fatal few words many more times than you care to remember. Though frequently said, the pangs of disappointment and frustration that they impart seldom fade away.

Fear not fellow founders!

To ensure you never hear those dreaded words again, we turned to the one and only David Zhou. A “tenaciously and idiosyncratically curious” writer and investor per LinkedIn, David pens the inimitable, brilliantly-named Cup of Zhou, scouts for a number of VCs, and helps run the On Deck Angel Fellowship.

Over to David!

Your ability to raise capital is directly proportional to your ability to inspire confidence in potential investors.

I’ll get into that, however, first a brief aside.

One of my favorite lines in literature comes from the seventh book of the Harry Potter franchise: Harry Potter and the Deathly Hallows. Inscribed on the golden snitch is a simple, but profound phrase: “I open at the close.”

In many ways, that line alone echoes much of the world of entrepreneurship. Whether backcasting from the future as Mike Maples Jr. puts it (i.e. great founders are simply visitors from the future) or breaking down your TAM to your SAM then SOM, the greatest founders — no, storytellers — start from the end. They share the future that they wish to see and distort today’s reality to fit into that predestined mold. Without further ado, my five tips on willing the future you want to see via successful fundraising.

1. Measure Founder-Investor Fit

Before you dive into talking with every investor under the sun, you must first understand there are more investors out there than you possibly have time for. You will never pitch every single one, nor should you. You need to be judicious with your time.

As you raise your first institutional round, you’re seeking out early believers. Julian Weisser — an investor with whom I’m lucky enough to work — calls this belief capital. You’re selling a promise, a vision.

And let’s be honest, at pre-seed there is no amount of traction that will convince any investor with numbers alone.

You see, it’s all about narrative building.

More on that below, but for early investors, it’s about whether they not only believe, but are also willing to fight for the future you collectively desire.

2. Close the First Meeting

I recommend that many founders with whom I work ask a two-part question heavily inspired by my conversation with Hustle Fund’s Eric Bahn for my emerging LP playbook: “Critical feedback is important to me in my journey to grow as a founder and a leader. So I hope you don’t mind if I ask, given what you know about my startup and myself: On a scale of one to ten, how fundable am I?”

To be honest, the number they give is inconsequential. That said, if they give you a ten, get a term sheet on the spot.

The more important question is the following one: “Whether I didn’t share it yet or don’t have it, what would get me to a ten? What would make this startup a no-brainer investment?”

Collect that feedback.

Put it in your FAQs.

Incorporate it into your next pitch.

Test and iterate.

I was listening to Felicis Ventures’ Aydin Senkut on Venture Unlocked recently and he mentioned that he iterated on his fund pitch deck every single time he got a no. And by the time he received his first yes from an investor, he was on the 107th version of the pitch deck.

As such, the answer to the second question should help you preempt and address concerns—explicit or implicit—in future pitches.

I discovered the below courtesy of the amazing Siqi Chen. Per a 2015 Harvard study, most people believe that people make decisions by:

  1. Observing reality
  2. Collecting facts
  3. Forming opinions based on the facts collected
  4. Then, making a rational decision.

But the reality is, people do not. People aren’t rational and investors are no exception.

Like everyone else, investors:

  1. Are presented with facts.
  2. Fit facts into existing opinions.
  3. Make a decision that feels good.

Most of these opinions are not explicit. It’s neither on the website nor laid out in the firm’s thesis.

The good news is that most investors will share the same reservations. If one investor hesitates about something, another will likely do so. The best thing a founder can do is to address it before it comes up.

For example, if an investor tells you that if you have a better pulse on the competitive landscape, you would then be a ten. In the next version of the pitch, you might say “You might be thinking that this space is highly competitive, and you’re right. At a cursory glance, we all look like we tackle the same problem and fight over the same users. But that’s when this space deserves a double take. Company A is best in class for X. Company B is second to none in Y. But we are world-class in Z. And no one is offering a better solution for Z. Not only that, customers are begging for solutions for Z. One in every five posts on Z’s subreddit asks for a solution like ours. But if you look at the responses, no one has a perfect solution for it. In fact, people are duct taping their way across this problem. Not only that, in the past three months, since we shared our product on the subreddit, we’ve had 10k signups to the waitlist with 500 of them paying a deposit to get early access to our product.”

On that note, I don’t think it’s worth trying to change the original investor’s opinion after they share such feedback. Most of the time, you’ve unfortunately lost your window of opportunity. If it takes X amount of information for an investor to form an opinion about you, it takes 2-3X the amount of effort and time — if not more — for him/her to change said opinion and form a new one.

Lastly, per Homebrew’s Hunter Walk: “Never follow your investor’s advice and you might fail. Always follow your investor’s advice and you’ll definitely fail.”

3. Schedule the Second Meeting during the First

Say the vibes are right and you get the impression that the investor really loves your product and/or your problem space and/or you as a person. When you’re raising your first institutional round, it’s either a “Hell yes” or a “No.”

Open up your calendar at the end of the first meeting and schedule your next meeting there and then, but be sure to give the VC enough time to talk with his/her team and also suggest where their firm might want to dive deeper. Give three options for topics to dive into the next meeting. For instance:

  1. The team and future hiring plans
  2. The vision and financial projections
  3. The product, demo, and team’s current focus

From there, have the investor pick one of the above before your next meeting. If they don’t, say something along the lines of: “During this conversation, you seemed to love to hear about the product, so we’d love to dive deeper into the product the next time around unless you prefer one of the other two options.”

Also, start tracking which paths seem to convert investors faster. For example, if 30% of the investors you talk to jump into diligence after hearing the vision, but only 15% convert after the product path, lead with the vision one first next time. “Most of our investors fall in love with us after hearing about the vision, and would love to share more on that at the next meeting.”

The moral of the story is simple: make it easy for your investor to say yes to the next meeting.

4. Realize that ‘No’ is merely a ‘Yes’ in Disguise

If you get the feeling that it may be a no, ask the investor, “What firm/investor do you think I should talk to who might be a better fit for what I’m working on?”

Do not ask for introductions. An introduction will come naturally if an investor is really excited about you. Additionally, even if the investor who passed does introduce you, a natural question will be: “Why didn’t you invest?”

This sets you up for failure because the other investor’s first impression of you will be negative. The only exceptions are if the reason is outside of your control. For instance, they’re raising their next fund since they don’t have any more to deploy out of the current fund, or they’ve recently changed their investment thesis away from what you’re building.

But I digress. What you should do instead is collect a Rolodex of names.

Never ever run out of leads. You never want to be in the position to beg someone who turned you down for money.

When a certain investor gets mentioned more than once — ideally at least three to four times — that’s your cue to reach out to them. “Hey Tom, we haven’t met before, but I’m currently fundraising for David’s Lemonade Stand. And four investors highly recommended I chat with you on the product, given your experience in food-tech and how you helped Sally’s Lemonade Bar grow from 10 to 500 customers.”

5. Use Investor Updates

Send interested investors weekly investor updates during your fundraise and monthly ones after its conclusion. Share important learnings, key metrics, and your fundraise’s progress.

Be sure to induce FOMO in your updates. Not in the sense that your round is closing soon, rather, that you’re at an inflection point right now in both your product and the market. Two example prompts:

  • Why are you within the next 12-18 months “guaranteed” (I also use this word hesitantly) to 10x against your KPIs?
  • Is the blocker right now a market risk (which leaves a lot for debate, and most investors will choose to wait for a future round) or an execution risk?
  • How have you de-risked your biggest risks?

Taking this a step further, you need the courage to “fire” an investor. If an investor doesn’t get back to you after two emails, it could just be that they’re busy. If they don’t get back to you after eight or nine emails, they’re just not interested. My rule of thumb is always three emails each a week apart for each investor. I have seen founders who have done more, but I would not recommend any fewer.

Regardless, whatever number you decide on, the last email ought to try to convert them. For examples:

“Since you haven’t gotten back to me yet about your interest, I assume you’re not interested in investing. As such, this will be our last investor update to you. If we are wrong, please do let us know.”

Interestingly enough I’ve seen more investors start conversations by this last email than by the very first. Remember to treat your fundraise like a sales pipeline; A/B test different copy and see which lands the best.

Concluding Thoughts


Remember, fundraising is a lot like life: it’s simple, but far from easy. It requires grit, determination, and a healthy dose of elbow grease. Despite current market conditions, forge ahead! Follow Jim Valvano’s lead and “Don’t give up. Don’t ever give up!”

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

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How do You Know if You Should Professionalize as an Investor?

climb, grow, elevation

Last Friday, one of the greatest operators and super-connectors I know, who also moonlights as an angel investor, asked me: How do I know if I should professionalize as an investor?

Undeniably, a great question. But before I share my answer to her question, I thought it’d be best if I first elaborated on what “professionalize” means in this context. It’s a term we have used more than once here at On Deck Angels. And as a result, it has spilled over into the vocabulary I use even outside of venture. But in the context of investing, professionalize is where one would go from an amateur, part-time investor to a full-time investor. Either working at a fund, starting their own syndicate or fund, or as a full-time angel.

The thing is, to be a career startup investor, you have to be lucky. The capital required to have a seat at the poker table is high. While there are many platforms — from Republic to Wefunder to Titan Invest — that are working to democratize access, the truth, for now, still is that to access the best deals, you’re either lucky as a network leader or as a capital allocator. In other words, do you know the best and most entrepreneurial talent? And do you have a frick-ton of money?

And given that some element of luck on top of skill is table stakes, I felt the best response I could give wasn’t in the form of a statement or opinion, but in the form of five questions.

  1. Why do you invest? What compels you to continue investing?
  2. What are two positive adjectives you would use to describe your sibling*? What are two negative adjectives you would use to describe your sibling*?
    • *Or life partner, or someone you know really really well.
  3. Have you ever laid someone off and regretted it? Why did you regret it? And at point after the event did you notice your regret?
    • If not… as an investor, have you ever said no to a founder and regretted it? Why did you regret it? And at point after the event did you notice your regret?
  4. Of the five people you hang out with most, what are common traits that at least two of them have? List as many as you can.
  5. If you were to start a fund or syndicate tomorrow, what would you call it?

So before you keep reading, I would recommend pausing. And to pull out a notepad and jot your own answers down to the questions above. It’s a useful exercise I ask myself, and evidently others as well, if you’re looking to professionalize as an investor.

When you’re ready, keep reading beyond the below image, as I’ll share my rationale behind the above questions.

*Author’s Note: Effectively, I was trying to space out the questions from the rationale of why I ask them below as much as I could, so that the below text wouldn’t influence your thinking (if you plan on doing this exercise).

windy road, path, goal
Photo by Adelin Grigorescu on Unsplash

So, why the five questions?

  1. Motivation – Why are you an investor? The underlying motivation matters. Are you in it for money? To pay it forward? To prove someone or some notion wrong? How fleeting is your motivation? Raising a fund is a decade-long relationship. Raising three is two-decades long of a relationship. So, the question is how deep is your motivation. Can it last multiple decades?
  2. Strengths/weaknesses – This question is adapted from Doug Leone’s. People often describe others in comparison to themselves. For example, if I say Joanna is funny, by transitive property, I believe Joanna is funnier than I am. If I say Kai is smart, I believe Kai is smarter than I am. I often find this question to be much more useful in understanding a person than just asking for their strengths and weaknesses. After all, adjectives are, by definition, comparative words.
  3. Standards – This question is a riff on Matt Mochary’s. If your answer to the question is no, then you don’t know your bar for excellence. Why does your bar matter? There’s a saying that A-players hire other A-players because they know just much it takes to win. B-players, on the other hand, know they’re not as good as A-players, but on average, still want to feel superior, so they hire C-players. A-players can stand B-players, but can’t stand C-players. So eventually, the A-players leave your company. Why does this matter for an investor? You need to be able to differentiate between an A-player and a B-player. The difference between a great founder and a good founder is a fine line, and most people miss it. If you want to have a chance at being a top decile investor, you need to know. After all, people often learn more from loss than from gain. For the second part of the question, being a great investor — or to be fair, a great anything — is all about the velocity in which you learn. Speed and direction.
  4. Deal flow – This question is a proxy of where you’re going to the majority of your early deal flow, and likely who and where you’re connected the most with. The follow up would be do you get enough quality deal flow from people with these traits. In other words, if you had the capital, are you confident you could put at least $250K to use every quarter? If not, stay a scout or raise a syndicate instead of a fund. Until you can build up to this.
  5. Legacy – Building a fund is multi-generational. Just three funds would be a 20-year relationship. And the best funds often outlive the founder(s) themselves. So the biggest question here is what kind of legacy are you trying to build? Or are you trying to build one? This legacy, founded upon your values, determines how you plan for succession and who you raise to be your firm’s next leaders.

In closing

Of course, the five questions aren’t an end-all-be-all. There’s still the ability to think through fund strategy and portfolio construction. There’s fund admin. The back office. Tech stack. Picking strategic markets where you have an unfair advantage. That said, if you can answer the above questions well, you’ll have a compelling narrative to either fundraise from LPs or join a larger fund.

Cover photo by Hu Chen on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

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#unfiltered #73 The Risks and Opportunities Created By Compelling Narratives

“If you look at all big human achievements, like flying to the moon, for instance, it’s all based on large scale cooperation. How did humans get to the moon? It wasn’t Neil Armstrong flying there by himself. There were millions of people cooperating to build the spaceship, to do the math, to provide the food, to provide the special clothing, and the funding.

“The big question becomes: why are we capable of cooperating on such a large scale when chimpanzees or elephants or pigs can’t?

“It’s the ability to invent and believe fictional stories.”

Yuval Noah Harari is right. He shared the above thoughts in a Startalk episode that came out yesterday.

For any big achievement, and I’m specifically reminded of the recent news with FTX — for FTX to get as large as it did at its peak — it was a monumental achievement. It was the work of many, rather than a single individual. It was the result of many buying into this narrative that Sam Bankman-Fried shared. That includes his team. His customers. His investors, from Sequoia to Tiger to Softbank to Coinbase. Many of whom are smart people who gave into the velocity of the market the last two years.

Source: Sequoia article on FTX
While I’m not sure how I feel about founders playing games during the meeting, I can’t deny the vision isn’t compelling.

To be fair, and this is not to condone the wrongdoings of the FTX team, every founder’s job is to distort reality. To put the human race on a fast track towards a future that is non-fiction to the founder, but fiction to everyone else. A world that isn’t false, but has yet to come. As author William Gibson once said, “The future is already here — it’s just not evenly distributed.”

I also love the thesis of Alexia‘s fund, Dream Machine. We make science fiction non-fiction.

Founders pitch their answer to: What will the world look like? Investors, customers, and talent then make bets with their time and money on which future they would like to see happen and the likelihood of it happening.

FTX is no exception. The fine line is when a founder does get creative, it is imperative for them to have a moral compass, which seems like SBF didn’t have. And of the million and one things they’ve done wrong (no board, giving loans using customer money, fraud, etc. and some more that are more questionable in nature, like political donations, etc. — none of which from what little I know are things I would ever endorse), I have to say they nailed their marketing and messaging. They got a lot of people excited about it fast. It’s easier to get people excited about the future of money than the future of fintech or the future of crypto.

As Jason Lemkin points out, they nailed their website.

The Super Bowl ad

The past week has been an insane week for crypto, namely when FTX filed for bankruptcy. And while there are many different angles to it, I took it upon myself to revisit a podcast episode from two months back where Nathaniel Whittemore, FTX’s former Head of Marketing, shared his marketing insights. Namely, around their 2021 Super Bowl ad.

A Super Bowl ad two years since its founding date. If nothing else, that’s impressive. Moreover, they got Larry David who has been known to never appear on ads to do it for them.

But what I found to be very powerful is Nathaniel breaks down why they chose to do a Super Bowl ad in the first place:

“People always focus on how much [an ad] costs. ‘This ad costs X.’ Which in a vacuum seems so high. […] What I think that analysis doesn’t take into consideration:

  1. “The number of people actually watching those ads. If you’re gonna get X people with an ad that costs a $100,000, but then, 50x that with an ad that costs $5 million, that’s the same ratio.
  2. “But the more important piece is that at least in America, the Super Bowl is the literal one moment each year that people not only are not annoyed with ads, but it is an active part of the experience that they’re having and they’re excited.”

He also does caveat that it doesn’t mean a Super Bowl is good for every kind of marketing campaign. But more so for brand-building, as opposed to product marketing or lead gen.

To echo that, David Sacks wrote a great piece on the importance of having an operating philosophy which I’ve referenced on this blog before. In it, he finds it incredibly powerful for companies to aggregate product updates and marketing campaigns in four big “lightning strikes” (each quarter) rather than have tidbits of information floating around every week.

Of course, companies like Twitch, Salesforce, Apple, and Google have taken it a step further by having a large launch event once a year. As Sacks mentions, “It’s not just about the external marketing value. There’s a huge internal benefit from setting dates and deadlines in order to hit a public launch.” It drives excitement and a narrative that both customers and future customers, as well as team members can get behind. The world is waiting. Your team is shooting to meet and beat expectations. And that’s incredibly motivating.

What does this mean for the crypto narrative?

A friend who took a hit from the recent series of events asked me at dinner last night, “What does this mean for crypto?”

Of which I think Yuval does a better job explaining it than I could. In the same podcast episode, he explains, “Not everybody believes in the same god or in any god. But everybody believes in money. And if you think about it, it’s strange because no other animal even knows that money exists. If you give a pig an apple in one hand and a pile of a million dollars in the other hand, the pig would obviously choose the apple. And the chimpanzee the same. And the elephant.

“Nobody, besides us, knows something like money exists in the world. The value of money doesn’t come from the paper. Most of the money in today’s world is not even paper; it’s just electronic data moving between computers. So where’s the value from? It’s from stories we believe.

“We are at risk of the whole thing collapsing. It happens from time to time in history. Inflation to some extent is that. The value of money is not what we were told it is. And inflation can sometimes hit thousands of persons and millions of persons. Eventually, the money becomes worthless.”

I don’t personally believe crypto will become worthless at any predictable point in the future. In fact, I think it has a great future ahead. Just a little early for its time from an infrastructure perspective. But, it is a non-zero possibility. That said, the more institutions, especially larger ones like FTX, that use crypto as the currency of faith, collapses, the more the faith behind the story of crypto will waver. And with repeated bad players, it is a race between mass adoption and the rate faith deteriorates.

For as long as the exchange currency is in dollars, crypto has still yet to be widely adopted. For instance, the value of crypto is pegged as a function of the dollar. As of the day I’m writing this on November 16th, 2022, if you type in bitcoin in Google search, the first search result is that Bitcoin is worth 16,768 US Dollars. In other words, as long as crypto is measured in dollars, the story of the dollar is stronger than that of crypto.

In closing

I’m not here to share my latest scoop or an update on the current situation about FTX. Twitter is filled with these already. Plenty of smart individuals have already covered all the ground I would ever even think about covering. I don’t keep my finger on the pulse of crypto and FTX nearly as much as my friends and colleagues.

Really, the purpose of this blogpost is really my curiosity that in order for FTX to get the notoriety that it has today, the team must have done something really well. And in my eyes, it’s not the product or the business, but the narrative in which they built. So, if someone at HBS or GSB isn’t writing a case study on this, they should.

P.S. Had to pass this to two friends at 6AM this morning to see if this blogpost was even worth publishing. Bless their hearts for their support so early in the morning.

Cover photo by Dollar Gill on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

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How to Win Hot Deals

hot, spicy, chili, pepper, deal

Two weeks ago, in an On Deck Angels workshop, one of our community members asked: “What do you recommend to do to increase access to allocation and top-performing deals?” To which I responded briefly with my belief that investors should always try to win their right on the cap table — whether it’s in the current round or the next. And, there are four ways to win that right:

  1. Go early.
  2. Being a valuable asset to the company.
  3. You are never too good to chase the best.
  4. Get to know the lead investor. Specifically, in their mind, be different.

As a footnote to all this, Founder Collective did a study a year or so ago where they found the 30 most valuable companies in the world raised half as much and were worth 4x the 30 most funded companies in the world. So, while hot rounds are great and all, there’s no telling that they’ll be the most valuable companies in ten, even five, years’ time. All that to say, I realize I’m writing this blogpost in a down market — likely only a few quarters of many more before we see the end of this recessionary period. The truth is, there are probably not as many hot rounds as there are before. But they still exist. And as an investor, you want to be ready for when that happens. While you set yourself up to have a prepared mind for getting picked, focus on picking.

To take a deeper dive on getting picked…

Just like it’s important for a founder to find product-market fit, it’s equally as important for an investor to find investor-market fit. Think of your check or your vehicle as a product in and of itself. As an investor, you are either great at picking or great at getting picked or both. For the purpose of responding to the above question, I’ll focus on the latter — getting picked.

It’s a three-sided marketplace where your customers are your LPs, founders, and your co-investors. Of all the above, to be fair, LPs loving you doesn’t necessarily get you better access to deals, so we’ll save that discussion for another day. And while there are many factors to getting picked, it boils down to two things:

  1. Founders love you
  2. Co-investors love you

In both scenarios, you get proprietary access to deals. As Sapphire’s Beezer said, “‘proprietary deal flow’ is not really a thing.” Proprietary access, on the other hand, is a thing.

Lenny Rachitsky and Yuriy Timen put out a great piece on activation rates recently. In it, there’s one line I particularly like, when they defined the activation metric:

“Your activation milestone (often referred to as your ‘aha moment’) is the earliest point in your onboarding flow that, by showing your product’s value, is predictive of long-term retention.”

The product, your fund or check. Retention, how likely they are to keep you on their speed dial (for a particular topic or function). And there are two distinct qualities of a great activation metric: “highly predictable” and “highly actionable.”

  • Highly predictable: The founders know exactly what they can get from you. The value you give isn’t vague, like “we invest in the best early-stage founders.” a16z can afford to say that. You can’t.
  • Highly actionable: Knowing what value founders can get from you, they know the exact types of questions to ask you to best extract that value.

The earlier you are in your investing journey, the more obvious you should make the above.

Taking the product analogy in stride, how do you get to a point where your customers get to your activation milestone? Where they form a new habit around keeping you top of mind?

How do you get founders to love you?

In my mind, there are two ways we can measure if founders love you:

  1. For founders you’ve invested in: If they answer with your name to “If you were to start a new company, who are the first three investors you would bring back to your cap table?”
  2. For founders you haven’t invested in: You get (great) deal flow from founders you passed on.

Tactically, in combination with being predictable and having your value be actionable…

Go early. Be the first check in when they’re still non-obvious. This of course requires a combination of luck and conviction. The latter is more predictable than the first. Be bullish when others are bearish.

Being a valuable asset to the company. Founders have 2 jobs: (a) make money and (b) hire people to make money. As an investor, everything you do is directly or indirectly involved in that. Also, when a founder fundraises, I would ask them what they plan to do with that money (i.e. hire VPs, more engineers, scale to X # of customers), and see if you can be preemptively helpful there.

You are never too good to chase the best. This is something that I picked up from a Pat Grady video some long while back. But to win the best deals, you go to where the founders are, don’t expect them to come to you. That’s how Sarah Guo, Pat’s wife, won a lot of deals that Sequoia wanted to get into.

How do you get co-investors to love you?

The best way to measure this is your co-investors proactively invite you to invest in future deals together.

The best way to get there is to:

Get to know the lead investor. Specifically, in their mind, be different.

Their lead investor might have a large portfolio where they can’t be as helpful to every investment they make. Try to squeeze in the round and be insanely helpful to their/your portfolio. And over time, as you co-invest in more deals, they’ll keep you top of mind for future ones.

For this one, it pays not to be generalist. I don’t mean as a function of industry but as a function of how you add value to your portfolio. Someone who can do everything is less desirable than someone who is really good at just one thing. Say, hiring executives or getting FDA approval or generating PR buzz. Interestingly enough, responsiveness is also a differentiator. I heard an investor say recently that the value of an investor is determined not by what happens during the meeting, but in between meetings. And I completely agree. The cap table doesn’t need another investor. The cap table needs people who will increase the chances of the company’s multi-billion dollar outcome.

The takeaway here is to not be better, but to be different. People can’t tell better, but they can tell different. That’s why the word differentiated is used so much. Have a differentiated approach. Have a diversified portfolio. On the other hand, having a better generalist strategy than a16z or Sequoia is hard to measure. While it may be true in the long run, better is difficult to measure in foresight, but obvious in hindsight. Just like product-market fit. Hard to pinpoint in the windshield, but obvious in the rearview mirror. It’s better to be the in a pool of one than a pool of many. Be the one CEO coach. Be the one who helps founders build robust communities. Or, be something that no one expects. Like Charlie Munger, be the best 30 second mind in the world.

Another reason I left this in the co-investor love section is that while being different does help you stand out to founders, there seems to be a lot more logo chasing from founders. Differentiation, unfortunately, falls short of brand recognition. I genuinely hope that this does change in the next few quarters.

In closing

While the question that inspired this blogpost is meant for hot rounds, the same holds for just being a great investor. One thing I’ve told many applicants to On Deck Angels is that we look for folks who are excited about putting investor on their resume and is willing to put in the legwork to become a great investor. The above is one of many paths to become one.

Arguably the above is how to be a great champion of people. The investor part comes with luck and having an eye for great talent, ideally before others. Betting on the non-obvious before they become obvious.

The best startup investors are disciplined and constantly learning. Some might argue that they may not have the time to entertain hot startups in general. Or at least startups when they are hot.

Photo by Pickled Stardust on Unsplash

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Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.

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