In the venture world, there’s this concept of the anti-portfolio. A portfolio for incredible startups you had the chance to invest in, but chose to pass on. Usually the startups that qualify to be in this anti-portfolio have already reached mainstream – either having gone public and/or have reached unicorn status. For anti-portfolio references, I highly recommend checking out Bessemer‘s or tuning into Samir Kaji’s Venture Unlocked podcast, where he asks each guest about their anti-portfolio.
But having chatted with a number of incredible investors, what’s more important than names on an excel sheet is the lesson or lessons we take away from passing on the greats. Those lessons are the very answer to one of the most insightful questions an LP (limited partner) can ask. “How does your anti-portfolio advise your current investment thesis?”
In a similar way, life is a mixed bag of engineered serendipity and endured scar tissue. Our past mistakes inform our future decisions. You learn how to handle kitchen cutlery after cutting yourself a few times. You learn to walk after stumbling. And you learn to communicate after making a fool of yourself. We are a product of the scar tissue we’ve accumulated.
I’m in my first inning in the venture world, and admittedly, way too early to have any true hall-of-famers in my anti-portfolio. So rather than looking into the past from the present, I thought I’d look into the “past” from the future. A “past” that has yet to come, but will be defining of my future. Something Mike Maples Jr calls backcasting. Starting from the future and making my way back to today, along the way, figuring out what I need to do to get to that future. If you’ve been following this blog for a while, you know I’m a big fan of his mental model. “The future doesn’t happen to us; it happens because of us. […] Breakthrough builders are visitors from the future, telling us what’s coming.”
Rather than what startups are in my anti-portfolio, what startups would I love to have in my anti-portfolio?
On a similar note, for non-investors: Ten years from now, what are mistakes you’d want to have made that you tell yourself that it was a decade well-spent?
The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.
Subscribe to more of my shenaniganery. Warning: Not all of it will be worth the subscription. But hey, it’s free. But even if you don’t, you can always come back at your own pace.
I was chatting with an engineer exploring new opportunities yesterday. He was at an inflection point in his career and had two incredible paths before him. One, join a product or venture studio and get his hands dirty building different products simultaneously. Two, find a co-founder and start his own company. Both had immense appeal to him. And he was unsure what path he should take, in fear he might like the other path more once he committed.
The feeling of regret is often inevitable. Especially when you have the incredible options before you, but without the luxury of time. We often ask ourselves, “How much do I value each opportunity?” Most of the time we do a quick mental calculation. We look at the biggest value of each opportunity and their future potentials. For those who prefer a more nuanced approach, we create two (or more) long lists of the pros and cons of each. Both approaches are extremely rational.
Yet, there’s still something missing. Either something that gnaws at our conscious telling us, maybe there’s something we haven’t considered. Or realizing that in constructing these lists we’ve made the decision way more complicated than it needed to be.
Rather the question I find that offers more clarity is, “How much would I sacrifice to obtain this opportunity if I no longer had it?“
Humans are naturally loss-averse. We react more strongly to losses than we do to gains. For instance, we feel the pain of losing our wallet with $100 in it, than we feel the ephemeral joy of winning $100 in the lottery.
At the same time, we tend to take most things for granted until they are taken away. There are a million and one examples. We often don’t appreciate our significant other until they leave us. We take our parents for granted until they are no longer with us. The same is true for friends, homes, personal belongings, and memories.
I also prefer the nomenclature of “I” over “you”. Unlike rational decisions, where it is most insightful to abstract oneself from the situation, irrational decisions require a true introspection of oneself. After all, regrets aren’t usually rational.
While I can’t speak for everyone, my best decisions have often been a permutation of rationality and emotions. When the nuance of each decision leads to an incalculable algorithm and frankly, decision paralysis, I find it useful to channel emotional loss as a tool to make tough choices in life. Pursuing new opportunities, at least for me, is no exception.
The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.
Subscribe to more of my shenaniganery. Warning: Not all of it will be worth the subscription. But hey, it’s free. But even if you don’t, you can always come back at your own pace.
Not too long ago, I quoted Phil Libin, founder of All Turtles and mmhmm (which has been my favorite virtual camera in and most likely post-pandemic), who said: “I think the most important job of a CEO is to isolate the rest of the company from fluctuations of the hype cycle because the hype cycle will destroy a company. It’ll shake it apart. In tech the hype cycles tend to be pretty intense.”
Hype is the difference in expectation and reality. Or more specifically, the disproportionate surplus of expectation. A month ago, Sarah Tavel at Benchmarkwrote: “Hype — the moment, either organic or manufactured, when the perception of a startup’s significance expands ahead of the startup’s lived reality — is an inevitability. And yet, it’s hard not to view hype with a mix of both awe and fear. Hype applied at the right moment can make a startup, while the wrong moment can doom it.”
Right now, we are in a hype market. And hype has taken the venture market by storm.
We’ve all been seeing this massive and increasing velocity and magnitude of capital deployment over the last few months. Startups are getting valued more and more. In the past, the pre-money valuations I was seeing ranged from 2-on-8 to 3-on-9. Or in not so esoteric VC jargon, $2M rounds on $8M pre-money valuations ($10M post-money) to $3M rounds on $9M pre-money valuations ($12M post-money). These days, I’ve been seeing 5-on-20 or 6-on-30. Some of which are still pre-traction, or even pre-product.
Founders love it. They’re getting capital on a discount. They’re getting greater sums of money for the same dilution. Investors who invested early love it. Their paper returns are going through the roof. When looking at IRR or TVPI (total value to paid-in capital – net measurement on realized and unrealized value), higher valuations in their portfolio companies are giving investors jet fuel to raise future funds. And greater exit values on acquisition or IPO mean great paydays for early investors. Elizabeth Yin of Hustle Fundsays “this incentivizes investors to throw cash at hyped up companies, instead of less buzzy startups that may be better run.”
Sarah further elaborated, “In the reality distortion field of hype, consumers lean in and invest in a platform with their time and engagement ahead of when they otherwise might have. They pursue status-seeking-work, not because they necessarily get the reward for it relative to other uses of their time, but because they expect to be rewarded for it in the future, either because of the typical rich-get-richer effect of networks, or just in the status of being an early adopter in something that ends up being big.” The same is true for investors investing in hyped startups. It’s status-seeking work.
Frankly, if you’re a founder, this is a good time to be fundraising.
Why?
Capital is increasingly digital.
There is more than one vehicle of early stage capital.
There are only two types of capital: Tactical capital and distribution capital.
1. Capital is increasingly digital.
Of the many things COVID did, the pandemic accelerated the timeline of the venture market. Pre-pandemic, when founders started fundraising, they’d book a week-long trip to the Bay Area to talk to investors sitting on Sand Hill Road. Most meetings that week would be intro meetings and coffee chats with a diverse cast of investors. Founders would then fly back to their home base and wait to hear back. And if they did, they would fly in once again. This process would inevitably repeat over and over, as the funnel grew tighter and tighter. And hopefully, at the end of a six-to-twelve month fundraise, they’d have one, maybe a few term sheets to choose from.
Over the past 18 months, every single investor took founder meetings over Zoom. And it caused many investors to realize that they can get deals done without ever having to meet founders in-person. Of course, the pandemic forced an overcorrection in investor habits. And now that we’re coming out of isolation, the future looks like: every intro meeting will now be over Zoom, but as founders get into the DD (due diligence) phases or in-depth conversations, then they’ll fly out to meet who they will marry.
It saves founders so much time, so they can focus on actually building and delivering their product to their customers. And,
VCs can meet many more founders than they previously thought possible.
This has enabled investors to invest across multiple geographies and build communities that breathe outside of their central hub or THE central hub – formerly the SF Bay Area. Rather, we’re seeing the growth of startup communities around the nation and around the world.
2. There is more than one vehicle for early stage capital.
While meetings have gone virtual, the past year has led to a proliferation of financing options in the market as well. Capital as jet fuel for your company is everywhere. Founders now have unprecedented optionality to fundraise on their terms. And that’s great!
Solo capitalists
Individual GPs who raise larger funds than angels and super angels, so that they can lead and price rounds. The best part is they make faster decisions that funds with multiple partners, which may require partner buy-in for investments.
Rolling funds
With their 506c general solicitation designation, emerging fund managers raise venture funds faster than ever and can start deploying capital sooner than traditional 506b funds.
Micro- and nano-VCs
Smaller venture funds with sub-ten million in fund size deploying strategic checks and often leverage deep GP expertise. No ownership targets, and can fill rounds fast after getting a lead investor.
Equity crowdfunding
Platforms, like Republic and SeedInvest, provide community-fueled capital to startups. Let your biggest fans and customers invest in the platform they want to see more of in the future. With recent regulations, you can also raise up to $5 million via non-accredited and accredited investors on these platforms.
Accelerators/incubators
Short three-month long programs, like Y Combinator, 500 Startups, and Techstars, that write small, fast checks (~$100K) to help you reach milestones. Little diligence and one to two interviews after the application. Often paired with an amazing investor and/or advisor network, workshops, powerful communities, and some, even opportunity funds to invest in your next round.
Syndicates/SPVs
Created for the purpose of making one investment into a company a syndicate lead loves, syndicates are another ad hoc way of raising capital from accredited investor fans, leveraging the brand of syndicate leads and deploying through SPVs. Or special purpose vehicles. I know… people in venture are really creative with their naming conventions. In turn, this increases discoverability and market awareness for your product.
SPACs and privates are going public again
Companies going public mean early employees have turned into overnight millionaires. In other words, accredited investors who are looking to grow their net worth further by investing in different asset classes. Because of the hype, investing in venture-scale businesses tend to be extremely lucrative. These investors also happen to have deep vertical expertise, high-value networks, as well as hiring networks to help startups grow faster. More investors, more early stage capital.
Growth and private equity are going upstream
Big players who usually sat downstream are moving earlier and earlier, raising or investing in venture funds and acceleration programs to capture venture returns. And as a function of such, LPs have increased percent distributions into the venture asset classes, just under different names.
Pipe
Pipe‘s existed before the pandemic, but founders have turned their eye towards different financing options, like Pipe. They turn your recurring revenue into upfront capital. Say a customer has an annual contract locked in with you, but is billed monthly. With Pipe, you can get all that promised revenue now to finance your startup’s growth, instead of having only bits and pieces of cash as your customers pay you monthly. Non-dilutive capital and low risk.
3. There are only two types of capital: Tactical capital and distribution capital.
There’s an increasingly barbell distribution in the market. Scott Kupor once toldMark Suster that: “The industry’s gonna bifurcate. You’re going to end up with the mega VCs. Let’s call them the Goldman Sachs of venture capital. Or the Blackrock of venture capital. And on the other end, you’re going to end up with niche. Little, small people who own some neighborhood whether it’s video, or payments, or physical security, cybersecurity, physical products, whatever. And people in the middle are going to get caught.”
Those “little, small” players have deep product and go-to-market expertise and networks. Their checks may be small. But for an early stage company still trying to figure out product-market fit, the resources, advice, and connections are invaluable to a startup’s growth. They’re often in the weeds with you. They check your blind side. And they genuinely empathize with the problems and frustrations you experience, having gone through them not too long ago themselves. Admittedly, many happen to be former or active operators and/or entrepreneurs.
On the flip side, you have the a16z’s and Sequoias on their 15th or 20th fund. Tried and true. Brilliant track record with funds consistently north of 25% IRR. Internal rate of return, or how fast their cash is appreciating annually. LPs love them because they know these funds are going to make them money. And as any investor knows, double down on your winners. More money for the same multiples means bigger returns.
The same is true for historical players, like Tiger, Coatue, and Insight, who wire you cash to scale. They assume far less risk. Which admittedly means a smaller multiple. And to compensate for a lower multiple, they invest large injections of capital. By the time you hit scale, you already know what strategies work. All you need is just more money in your winning strategies.
You find product-market fit with tactical capital. You find scale with distribution capital.
Product-market fit is the process of finding hype. When you stop pushing and start finding the pull in the market. Scale is the process of manufacturing hype.
The bear case
But there are downsides to hype. Last month, Nikhil, founding partner at Footwork, put it better than I ever could.
If I could add an 8th point to Nikhil’s analysis, it’d be that investors in today’s market are incentivized to “pump and dump” their investments. Early stage investors spike up the valuations, which leads to downstream investors like Tiger Global, Coatue, Insight, and Softbank doubling down on valuation bets. Once there’s a secondary market for private shares, early stage investors then liquidate their equity to growth investors who are seeking ownership targets, or just to get a slice of the pie. This creates an ecosystem of misaligned incentives, where early stage investors are no longer in it for the long run with founders. Great fund strategy that’ll make LPs happy campers, but it leaves founders with uncommitted, temporary partners.
Sundeep Peechu of Felicis Ventures has an amazing thread on how getting the right founder-investor fit right is a huge value add. And getting founder-investor fit takes time, and sometimes a trial by fire as well. After all, it’s a long-term marriage, rather than a one-night stand. Those who don’t spend enough time “dating” before “marriage” may find a rocky road ahead when things go south.
By my count, ~30% of Felicis companies that have done well had trouble raising Series As in some fashion.
As an example, Matterport which went public last week had little appetite at the A. Non-recurring revenue, hardware business and selling to real estate was a triple whammy.
On a 9th point, underrepresented and underestimated founders are often swept under the rug. In a hype market, VCs are forced to make faster decisions, partly due to FOMO. With faster decisions, investors do less diligence before investing. Which to the earlier point of misaligned incentives, has amplified the already-existing notion of buyer’s remorse.
When VCs go back to habits of pattern recognition, they optimize for founder/startup traits they are already familiar with. And often times, their investment track record don’t include underrepresented populations. To play devil’s advocate, the good news is that there is also a simultaneous, but comparatively slow proliferation of diverse fund managers, who are more likely to take a deeper look at the problems that underestimated founders are tackling.
What kind of curve are we on?
When many others seem to think that this hype market will end soon, last week, I heard a very interesting take on the current venture market in a chat with Frank Wang, investor at Dell Technologies Capital. “VCs have been mispricing companies. We anchor ourselves on historical valuations. But these anchors could be wrong.
“We’re at the beginning of the hype and I don’t see it slowing down. VC has been so stagnant, and there hasn’t been any innovation in venture in a long time. Growth hasn’t slowed. And Tiger [Global] and Insight [Partners] is doing venture right. Hypothetically speaking, if you invest in everything, the IRR should be zero. They are returning 20% IRR because they seem to have found that VC rounds are mispriced. So, there can be an arbitrage.
“There will be a 20% market correction in the future, but we don’t know if that’s going to happen after 100% growth, or correct then grow again. The current hype is just another set of growing pains.”
Part of me is scared for the market correction. When many founders will be forced to raise flat or down rounds. The fact is we haven’t had a serious market correction since 2009. It’s going to happen. It’s not a question of “if” but rather “when” and “how much”, as Frank acutely points out.
Investors who deploy capital fast win on growing markets – on bull markets. Or investors who deploy across several years, or what the afore-mentioned Mark Suster defines as having “time diversity“, who win on correcting markets – bear markets. Think of the former as putting all your eggs in one basket. And if it’s the winning basket, you’re seen as an oracle. If not, well, you disappear into obscurity. Think of the latter as diversifying your risk appetite – a hedging strategy. More specifically, (1) being able to dollar-cost average, and (2) having exposure to multiple emerging trends and platforms. You’re not gonna lose massive amounts of capital even in a bear market, but you also will be losing out on the outsized returns on a bull market.
Only time will tell how seriously the market will correct and when. As well as who the “oracles” are.
In closing
At the end of the day, there are really smart capital allocators arguing for both sides of the hype market. Like with all progress, the windshield is often cloudier and more muddled than the rearview mirror. As Tim Urban once wrote, “You have to remember something about what it’s like to stand on a time graph: you can’t see what’s to your right.“
And as founders are going to some great term sheets from amazing investors, I love the way Ashmeet Sidana of Engineering Capitalframes it earlier this year. “A company’s success makes a VC’s reputation; a VC’s success does not make a company’s reputation. In other words to take a concrete example, Google is a great company. Google is not a great company because Sequoia invested in them. Sequoia is a great venture firm because they invested in Google.”
Whether you, the founder, can live up to the hype or not depends on your ability to find distribution before your competitors do and before your incumbents find innovation. Unfortunately, great investors might help you get there with capital, but having them on your cap table doesn’t guarantee success.
Nevertheless, the interpretation of hype is always an interesting one. There will continue to be debates if a market, product, or trend is overhyped or underhyped. The former assumes that we are on track for a near-term logarithmic curve. The latter assumes an immediate future looking like an exponential curve. The interpretation is, in many ways, a Rorschach test of our perception of the future.
Over the course of human civilization, rather than an absolutely smooth distribution, we live something closer to what Tim Urban describes as:
If the regression line is the mean, then we’d see the ebbs and flows of hype looking something like a sinusoidal function. As Mark Twain once said, “History doesn’t repeat itself, but it often rhymes.”
It won’t be a smooth ride. The world never is. But that’s what makes the now worth living through.
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For a while, I’ve been testing a new opening line to a conversation that isn’t “How are you doing” or “How have you been”. Over the years, I realized the “How are you?” family of questions have zero substantive value. Repeat guest answers include “fine”, “okay”, and “good”. This family of questions are often placeholder for “I don’t know how to start the conversation.” And hold as much value as “like” or “umm”.
I will admit that sometimes people do mean it when they ask “How are you?”. Yet, oddly enough, in those moments, the question becomes twice as powerful when asked again in quick succession. “How are you really?”
Don’t get me wrong. Often times, my knee jerk reaction is still “How are you?” for more instances than I’m willing to admit. But I’m working on changing it. After all, I’ve already seen the amazing results of its alter ego.
This is admittedly less of a DGQ (damn good question) and more of a DGT (damn good tactic). Instead of asking a question, make a speculation as the icebreaker. The more detailed the speculation, the more engaged the response. In practice, adding a flare of exaggeration often helps lighten the mood, but too much and it might reflect poorly on your first impression. Metaphors and similes often help a lot.
Here’s are a couple examples that I’ve used in the past:
Instead of…
Try…
What did you do over the weekend?
If they look worn out, “You look like you fought tooth and claw with your two children over the weekend. Who won?”
If not, “You’re smiling from ear to ear. You look like you just cleaned the table at poker night.”
What do you do for a living?
“I’m going to take a wild guess here. You’re an award-winning freelance designer who moonlights as a webtoon artist that just sold 50,000 copies.”
“Don’t tell me what you do. Let me take a stab and tell me if I’m right or right. You’re a recovering investment banker and found that you had a talent for music development
How are you doing?
“You look like you’ve shaved 10 years off with that new keto diet.”
“That new dance class is really working out for you, isn’t it?”
Always default on positivity rather than negativity. And if your brain still goes to the negative, try adding in some lightheartedness. If you know the person already, do a bit of light research on their socials to give some credit to your speculation. If you don’t, observe their habits and apparel as a starting point. Comment on what you think they’re really proud of (i.e. physique, fashion).
People love to be heard, and letting people know that they will be heard before they even speak provides them the safety net to engage in thoughtful conversation with you.
There is a caveat. It works far less effectively when you’re in a short call and the other person is focusing on making a transaction than considering the potential of a long-term relationship. That’s not your fault. Some people are just like that, and it’d be a waste of your time to try to convince them otherwise.
As with all great ideas and tactics, this too is not original. Every time someone makes me really feel at home or when a friend tells me someone makes them feel like the most important person in the world in that moment when they converse, I observed their behavior. And many of those individuals, some who ended up being good friends of mine, used the above tactic in one way or another.
The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.
Subscribe to more of my shenaniganery. Warning: Not all of it will be worth the subscription. But hey, it’s free. But even if you don’t, you can always come back at your own pace.
There is an incredible wealth of people in this world who self-proclaim to have insights or secrets to unlocking insights. From parents to teachers to the wise soul who lives down the street. From coaches to gurus to your friendly YouTube ad. To mentors. To investors. While there are a handful who do have incredibly insightful anecdotes, their stories should serve as reference points rather than edicts of the future. Another tool in the toolkit. No advice is unconditionally right nor unconditionally wrong. All are circumstantial.
After all, a friend once told me: All advice is autobiographical.
The same is true for anything I’ve ever written. Including this blogpost in itself.
Over the past two weeks, as a first-time mentor, I’ve had the incredible fortune of working alongside and talking to some amazing founders at Techstars LA. At the same time, I was able to observe some incredible mentors at work. And in this short span of time so far, I’ve gotten to understand something very acutely. The dichotomy between mentors and investors. For the purpose of this blogpost, I’m going to focus on startup mentors, rather than other kinds of mentors (i.e. personal mentors). Although I imagine the two cohorts of mentors are quite synonymous.
While the two categories aren’t mutually exclusive, there are differences. A great mentor can be a great investor, and vice versa. But they start from two fundamentally different mindsets.
Investors/mentors
An investor tries to fit a startup in the mold they’ve prescribed. A mentor fits themselves into the mold a startup prescribes.
An investor thinks “Will this succeed?” A mentor thinks “Assuming this will succeed, how do we get there?”
An investor starts with “Why you?” A mentor starts with “Why not you?”
An investor evaluates how your past will help you get to your future. A mentor helps you in the present to get to your future.
An investor has a fiduciary responsibility to their investors (i.e. LPs). A mentor doesn’t. Or a mentor, at least, has a temporal responsibility to their significant other. Then again, everyone does to the people close to them.
An investor will be on your tail to hold you accountable because they’ve got skin in the game. A mentor might not.
You can’t fire your investor. You can theoretically “fire” your mentor. More likely, you’re going to switch between multiple mentors over the course of your founding journey.
An investor has a variable check size-to-helpfulness ratio. Who knows if this investor will be multiplicatively more helpful with intros, advice, operational know-how than the size of their check? A mentor has theoretically an infinite CS:H ratio. Check size, zero. Helpfulness, the sky’s the limit.
It’s also much harder to find a mentor than an investor, outside of startup communities, like On Deck and Indie Hackers, and acceleration and incubation programs, like Y Combinator and Techstars. Frankly, being a mentor is effectively doing free consultations over an extended period of time. And if you’re outside of these communities, the best way to bring on mentors is to bring them on as advisors with advisor equity. I would use Founder’s Institute’s FAST as a reference point. And Tim Ferriss‘ litmus test for bringing on advisors: If you could only ask 5-10 very specific questions to this person once every quarter, would they still be worth 0.5% of your company without a vesting schedule?
In closing
As I mentioned above, being a mentor and an investor isn’t mutually exclusive. The best investors are often incredible mentors. And some of the greatest mentors end up being investors into your startup as well. Having been in the venture world for a while, I’ve definitely seen all categories on this Venn diagram. Sometimes you need more of one than the other. Sometimes you need both. It’s a fluid cycle. And for the small minority of venture-scalable startups, it’s worth having both.
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Founders often ask me what makes a VC say yes. Or what they need to do for a VC to say yes. Or what they need to do for me to say yes. TL;DR: it depends. On firm, partner, thesis, active conversations, stealth investments, next fund fundraising schedules, reserve ratios, implicit biases, and more. In sum, a million reasons. And even if I knew all the above, I still can’t guarantee a term sheet.
So I can’t say what’ll guarantee a VC yes. A term sheet. If I could, I’d be the one writing them. Nevertheless I do my best to help brilliant founders get funded. On the flip side, here’s what aren’t educated guesses, but guarantees. Or as close as one can get to a guarantee. A guaranteed no. An anti-playbook, if I might call it that. If it doesn’t help, I hope, at the very minimum, it provides you a few minutes of entertainment.
Not treating me as a human. This is less of a reason for me to get myself worked up. There are discriminatory, dismissive, bigoted people in the world. I get it. This is more of a problem for the founder when they’re looking to scale the team. Being a dick limits your ability to grow and/or empathize with the market. If you’re fine with treating me this way, then you’re definitely going to not bat an eyelid with other future hires, team members, investors, and customers. Equally true for any VCs/angels/investors out there.
Badmouthing others. This is more of a personal turnoff. We’re all intellectuals here. And it’s okay to have differing opinions of the world. But it’s not okay to talk behind others back. If you’re gonna badmouth others, I imagine the exact same for anyone else who gets on your bad side for whatever reason, including myself. Practice good social hygiene.
Complaining about your team/product. Complaining is a bit more nuanced. It’s fine from time to time, we’re human. I don’t expect you to be the perfect human, but a first meeting with me, as with any investor, is a first date. I want to hear about the bigger picture, the vision, the dream. Impress me. If you have time to complain during a 30-minute meeting, you’re probably not spending your time wisely. And if this is an intro meeting, you have yet to build up your social rapport with me to complain. Being frustrated about the market is fine. Being honest, introspective, and vulnerable is also fine. Your mileage may differ for the last part, but I love candid founders.
Lying. That goes without saying, if you’re lying about numbers or if I somehow find out that you are, then no. If you don’t know, you don’t know. If your numbers aren’t pretty, admit it. While I might not be able to help you get funded, I’ll do my best to help. If you don’t know something, admit it as well. And find out after. Going back to the earlier point, I love candid founders who have a bias to action.
Having an exit strategy slide. This is more true for larger $100M+ funds I send deals to. Having an exit makes sense for angels, and smaller funds, but larger funds need to look for fund returners and outsized winners, and an exit of XX/XXX million is not sexy at all.
Crazy, but not crazy and reasonable. This one is a new one, inspired by PG. It’s fairly rare, since I try to avoid putting myself in situations with crazy, especially cantankerous people. But it happens. If by any chance, you know your idea might err on the side of crazy, walk me through the logic of how you got there. Don’t just tell me “It makes sense to me” or “I know the industry better than you do.”
Lack of focus. It’s great if you want to do a million things, but saying you want to focus on everything means you’ll end up focusing on nothing. A lack of focus shows a lack of priorities. Focus and be able to back up why are you focusing on this at this point in time. I love Phil Libin‘s 4-year plan defined by one word for each year forward. You can find that plan here and here.
Asking for an intro without any context. “I saw you were connected with X on LinkedIn. Can you introduce us?” If that line pops up in the first 30 seconds of our first conversation, I’m running away. I need to know who you are, what you’re building, why it matters, and hell, why would this person you want to get introduced to is a good use of yours and their time. Build a relationship first. Don’t lead with the transaction. I am not an ATM machine. Neither are other people – investors or not.
Asking me to sign an NDA. Early on in my career, I admittedly signed a number of NDAs sent to me by founders. I love connecting brilliant people together, but if I have to get your permission each time I pass it to an investor or a potential advisor, it’s too much work for me. Frankly, I have other priorities. I get it; I’m a stranger. But I hope you can at least trust that I won’t run away with your idea or give it to a competitor. You have my word. If that isn’t enough for you, that’s fine. I’m just not your guy.
Asking the VC to do their work. “When we raise X dollars, we will do Y tasks.” I usually follow up on that statement with “What have you done so far to accomplish Y?” My least favorite founders are the ones who say something along the lines of, “We’ll worry about that when we get there.” Or “We were hoping our future investors will find someone for us.” We don’t expect you to know everything and everyone, nor do everything right, but we expect you to do some legwork to show you are learning. Show us that you’ve been scrappy, resourceful, and used what you had available to you.
Lack of self-awareness. “Where are you weak at?” If your answer is “Nothing” or “I’m good at everything”, that sends alarm bells to any investor. Which might also lead to a secondary question of “What do you need me for then?” A close cousin is one of my favorites: “What is your competition doing right?” If your answer is also “Nothing”, then you might need to do some market research and reconnaissance again. There’s a reason other customers are using your competitors’ and incumbents’ products. Find it out. On top of what they’re weak at. There’s a romanticized concept in Silicon Valley that every founder needs to be like Jobs with his reality distortion field. While it’s true you need to be able to help others see the future you’re seeing, you also have to deeply understand the realities of today of what’s stopping you from getting there.
Nothing’s changed since the last time we spoke. Investors invest on potential. A bet we make in a company is a bet that it has a chance to be as big as X tech giant in your space. Your ability to meet the demand in the market scales with the number of investment dollars in your company. That said, we expect movement. We expect deltas. And if your product really is inevitable in the market, you should be making progress with or without injections of capital. The latter, just at a slower pace. Venture capital is impatient capital. Also understand, 99% of businesses in the world don’t need VC dollars and operate incredibly well without venture investors.
You’re not obsessed about the product and the market. Building a scalable startup requires obsession. It requires you to lose sleep. You can’t just check out at 5 or 6pm. While I can’t measure that in the first meeting, a close proxy is how well you know the table stakes metrics of your business – net retention, CAC, LTV, growth, revenue, engagement rates – and more. In fact, obsessed founders usually tell me that they’ve already thought of and tried out the first 10 ideas I think of. Moreover they bring me back the results of their discovery. Obsession is contagious.
I have no idea what your product is or does. This is simple. If I walk out of our meeting and I still have no idea how to describe your product to others and why we need it in the world now, there’s no way I can confidently pitch your startup to the partners. Piggybacking off of the #14, if you’re obsessed about the product, you’ve told your story a million times and a million ways already. A few of which should have already resonated with select audiences. And even if it wasn’t to investors, you must’ve already told that same story to your customers. As a CEO/founder, you are the first and most important salesperson. In many ways, it means you have to push the sale. You have to get your customers to take action. I, admittedly, am a potential customer. A recipient of your sales strategy. And if I don’t get your pitch, it’s likely others might not as well. That said, for certain industries, like deep tech or biotech, I’m really, really dumb. So take my thoughts with a grain of salt.
This post was inspired by Jason Lemkin‘s blogpost, which I highly recommend checking out.
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!
In writing this blog, one of the greatest illusions I seemingly end up creating is that I know a lot. At least that’s what a handful of readers and friends have told me over the years. Truth is I don’t. And more often than not, I am learning and/or refining my thoughts as I am writing.
I’m gonna be honest. The script for this essay was going to be entirely different. In fact, I had exactly six hundred and eleven words written on another introduction to this piece. But in the past few weeks, I hit another seemingly insurmountable roadblock. Catalyzed by a conversation with a mentor who said: “David, you’ve confused movement with progress.” And she was right. The more I thought about it, the clearer it became. Snowballing upon itself until I realized how far I’ve gone when I mistook a compliment for an insult.
The more I read my previous intro, the more it sounded like total BS. Something someone would write never having experienced true self-doubt. I was my own harshest critic.
The irony of it all was that as I was interviewing other incredible individuals for the purpose of this blogpost, I felt I needed their advice below more than anyone else. In a way, I’m glad that some friends needed more time to collect and share their thoughts. In sum, this piece took me two months to put together. And every day, every minute, and every second was worth it.
As I’m writing this piece, I’m somehow reminded of a line Elizabeth Gilbert, author of Eat Pray Love, said in a 2016 interview with On Being, “Creative living is choosing the path of curiosity over the path of fear.”
The process
In concepting this essay, I spent more time than I’d like to admit beating myself up to get to the “right” phrasing of the question. And each time I thought I got closer to the “right” question, a day later, I would find myself second-guessing if people might even bother responding to a “lazy” question. A low-hanging fruit, so to speak. And the fallacy with a low-hanging fruit is that they’ve most likely been asked the same by others. Probably to the point of fatigue, paired with an eye roll. But the thing is… with the topic of self-doubt, it’s not a topic most people are comfortable sharing, much less in public. And equally so, are rarely asked a question on this topic. The flip side of the coin is that they too are less likely to answer such a question. In the end, I settled with a question I came up with two weeks prior.
Speaking on self-doubt, 25% of the people I reached out to in my existing network didn’t have time to respond. Another 20% refused within 24 hours. And another 20% agreed initially, but ended up refusing some time after the initial exchange.
In reaching out, I used a similar framework as I shared in my cold email template.
TL;DR: I’m writing a blogpost on self-doubt, and you were one of the first people I thought of in having been candid enough to share your life journey. What are some of the personal narratives, questions, or comments you find yourself regressing to when you’re filled with self-doubt?
The longer version: Recently, after sharing my own internal conflict (here and here), I had a number of friends and readers reach out to share their own struggles. With almost half of them mentioning at one point in time that “I wish I were like [insert role model’s name] because s/he seems to have it all down.”
But people, like you, are just as human and as real as the next person over. So, in my effort to use my humble platform to humanize the world around us, I thought you’d be one of the best to answer this question!
What are some of the personal narratives, questions, or comments you find yourself regressing to when you’re filled with self-doubt?
Because I also plan to share your answer in the form of a blog post, similar to a study I did last year, where I asked [names redacted] and some other great folks! By default, I will abstract your name from what you share. In this case, I will cite you as “[title]”. That said, if you’re open to me using your real name or would like a different “title”, please do let me know. If you’re curious as to why my default is not to include your name, this is why.
And I know your candor will help many more, like me, who are going, have gone, and will go through difficult times. So, thank you. I have nothing short of my deepest gratitude for not only your candor, your time, but also your willingness to share your thoughts with the amazing people in this world.
Warmest, David
My only ask
My only ask is that you stay open-minded as you read the below memoirs. For context, this has been the blogpost that I’ve gotten the greatest percentage and number of “No’s” from. In the forms of:
“This is not something I’m ready to share at this point in my life.”
“I’ve been too busy. Sorry.”
“I’m sorry. I don’t think I’ll have time to get to this.”
“I don’t think now is a good time for me to be involved unfortunately.”
It isn’t easy to share what each of my amazing friends have shared below. Some of which stories may never see the light of day without their courage. And I hope you let their authentic voice shine as much as, if not with more respect that you have given me all this time. On behalf of everyone here, thank you. Thank you for giving all of us the platform to share our most vulnerable selves.
Unless otherwise specified with their first and last name, the below names, listed in alphabetical order, are pseudonyms to respect the courage it took each and every one of them to share what they did: Andrei, Annie, Elijah, Harry, Liam, Lucas, Mateo, Mya, Stephanie, Zack
The question
What are some of the personal narratives, questions, or comments you find yourself regressing to when you’re filled with self-doubt?
“I have a rather conversational style of writing. I suspect it’s the product of some natural proclivities and the sheer joy that comes from clacking a keyboard.
“We live in a world where every action has the potential to be a performance. Performances, by their very nature, are meant to be judged—are they memorable? Funny? Heart-wrenching? All of us, whether we like it or not, are constantly on stage and constantly judged. Personally, I get stage fright, and don’t recall being consulted before I signed up for this part.
“My own vintage of self-doubt stems from being judged poorly by someone I need something from. I’m in a position of vulnerability, they’re in a position of power. An old turn of phrase from the Bible, later memorialized forever in A Knight’s Tale, captures what my psyche so desperately tries to avoid: “You have been weighed, you have been measured, and you have been found wanting.” The external “they think I’m lacking” becomes the internal “I’m not good enough,” and by then I’m well stuck in the swamp of self-doubt.
“For me it’s the idea of being rejected, rather than rejection itself, that causes self-doubt to metastasize. As the CEO of a venture-backed startup, this is not ideal.
“Two months back I had a bad panic attack. Wave after wave of self-doubt assailed me for hours after the attack subsided. Just yesterday, I had the minor upwellings of another one. Both were caused by pitches I knew I bombed (ironically, both investors ended up investing). In a perfect world, one in which I am preternaturally confident, the opinion of others shouldn’t stir feelings of self-doubt. In the real world, I care very much what others think of me.
“It’s easy to build stories in our mind to validate self-doubt, especially in the early days of a company when you don’t have a ton of evidence to beat back the self-doubt. I’m still not sure what the evolutionary advantage is to this pattern, to play devil’s advocate against ourselves, but it’s real nonetheless. We all do it. And the cleverer the mind, the more insidious the arguments.
“When this happens, my mind runs to something my dad used to say: ‘What you think about me is none of my business.‘ If I ever get a tattoo, it will be these 10 words. There’s something comforting, almost even glib, that enables me to turn the corner more quickly than I normally would. It’s a well-trodden path that leads me back to positivity, outcome independence, and abundance mentality.
“Self-doubt is inevitable. So rather than trying to avoid it, focus on leaving it behind.”
Of course, I couldn’t help but include Taylor’s afterword as well.
“Unintentionally mirrored after one of my favorite writers, John Gierach. John muses on life’s richest veins and uses fly fishing as his vessel.”
A blessing in disguise
“Self-doubt may feel painful at first sight… but in essence it’s a real blessing… because it helps balance one’s ego + falling for believing in their own shit! If you are trying to learn new things and explore uncharted territories… it’s inevitable to have self doubt. It’s almost like having a sense of danger when you are venturing in extreme sports let’s say.”
– Andrei, Managing Director at a VC Firm with 10+ Funds
Lily pads
“When I start feeling self-doubt, my mind immediately regresses to ‘lily pads’ or landing places of past memories where I feel like I could have done something better. I start to overthink everything I wish I could have done differently in past roles or interactions, and get paralyzed with fear that I will have the same regrets in the future based on the next choices I make and actions I take.
“Here’s a few questions I regress to:
How did I trick someone into believing I was the right person for this job?
Will I ever be able to match the level of success I had with a previous project or was that the ultimate cap of my success?
Do other people perceive a mistake I made in the past with the same level of intensity? Are they as fixated on it or was it something that barely registered for them?
“The things that have helped:
I think through the advice I would give a friend, and then I try to be as gentle with myself (which is a hard thing to do).
I remember that the best wins in life come from taking risks, and assure myself that if I don’t feel some doubt, then I am not pushing myself to grow.
I keep a folder of compliments and nice feedback I have received, and I go back and read through a few threads to remind myself I have been able to get through things successfully in the past.”
– Annie, Head of PR
I followed up with Annie after, if she could shed some more color on what advice she gives to herself, as well as an example of a compliment she finds herself revisiting when she finds herself wrestling with self-doubt. And here’s what she shared:
On self-advice,
“Look at your success over weeks or months, rather than by the hour. A single day may not feel like you’ve achieved everything you set out to do or landed a milestone, but if you can Zoom out, you are doing it right.”
On compliments,
“In response to a tough email I once sent, an executive privately emailed me to compliment my professionalism and how I had organized my thoughts. That compliment resonated because I had put hours of thought into that response even though it was only a few paragraphs long, and it meant a lot to me to have someone validate my thought process and my output. When I am doubting myself and worried my instincts are off, I go back to that email. I also try to put it into action and go out of my way to compliment people now in similar situations, because I know how much of a difference a one-line compliment can make.”
An old friend
“Self-doubt (SD) is especially bad when I’m starting a new project. My first company was deeply personal and mission-driven but required a lot of upfront capital (like most of my savings). I was always pretty good at hyping myself up to start the project but then the flashbacks would come. I begin to think of my mom and the 14hr shifts she’s worked since 2002. I had been working towards affording her an early retirement at the time and SD reminded me that it could all go away in a second.
“One wrong move and I would revert our family back to poverty.
“It would be on me.
“These thoughts left me sleepless, and also [made me] lose excitement in other parts of my life too. It sucked but having gone through it, I now consider SD a friend. Not a friend I’d want to hang out with all the time but an old friend with good intention and zero sugar coat.
“I can be a reckless person at times and can trust SD to be there to remind me that I have a lot to fucking lose.
“It reminds me to be very careful and to hustle like I have everything to lose.
“Whatever causes SD’s intervention these days, I realize it must be really fucking important to me and worth a second thought.”
– Mya, Forbes 30 Under 30 Founder
When you lose
“Say I lose my biggest client and I start to be overwhelmed with self doubt, my go to thoughts / comments / narratives are:
Am I delusional about my abilities? Maybe I’m actually an idiot with an ego? Imposter
What if I had done this, done that. Every little time I wasn’t perfect becomes a possible moment that will come back to ruin me
I’ve always been unlucky and luck seems to be a big part of success, so maybe I’m doomed no matter what
“But then there’s also a deeper narrative:
Maybe I just don’t ACTUALLY want this. I just think I want this. And my soul just isn’t in it and therefore I will fail. I’m not self aware enough
We all die. Nothing matters… especially me and what I’m doing.
A lot of successful people seem miserable. Is this a rat race? Am i setting myself up to fail on what really matters
Overall inability to identify a reason for why I am doing something and why I am the one that can do it”
– Elijah, Venture-backed founder
Self-compassion
“When I think about narratives, I try to go back to the psychology of ‘self talk’–especially when it comes to reducing ‘negative self talk’. Through time, self awareness and an emphasis on reducing self criticism, has helped me to become less doubtful. The question of ‘Why are you doing this?’, if done with self compassion can be a great way to maintain focus and inspire creativity.
“In terms of negative self talk day to day, I try to look at things through the constructive criticism lens, rather than the self critic. The former allows for more creativity. Life can be a challenge, and patience with the process helps me to embrace more self confidence.”
– Zack, General Partner at Venture Firm/Podcast Host
When Zack shared this, I couldn’t help but recall Jack Kornfield‘s line, “If your compassion does not include yourself, it is incomplete.”
What’s next
“Great question.
“I wish I could be of specific help but I do not do ‘self doubt.’
“I have had many many many challenges and course changes in my life, but each one of them created a new path. There are times when I am disappointed that my path doesn’t go in the direction.
“I had originally predicted or hoped for, but I can’t remember ever feeling self doubt. That’s because I always know I will discover the way forward that does work for me in the moment. I tend to focus more on the ‘what to do next’ rather than the ‘why something happened.’ I tend to be very stoic in my assessment and dealings with challenges. I don’t like feeling bad so I tend to create plans pretty quickly to move through whatever challenges I have.
“I do my best to recognize progress and change and do my best to adjust to it as fast as possible in order to minimize discomfort. I also tend not to think of things as either good or bad… just events that happen. The only thing I know I have control of is my response to change. I can’t control much… including the tempo of change. I tend to not look backward as to ‘why’ things happen and focus on ‘what’ I may have done to cause them as well as ‘what’ I am going to do next. In essence, I don’t feel like a victim ever… I own the events and challenges I face and do my best to strategize how to move through them.
“One easy example is this past year. My business model of being an in-person speaker got turned off like a light switch. I then just kept moving and building relationships. I believe the choice we have is to either keep up with the tempo of change in the world or not.
“Another example is happening right now. This past year I began walking a great deal and listening to audible books, taking notes and creating content. It was very enjoyable. I injured my hip a few weeks ago and it has totally disrupted my routine. I am working as quickly as possible to create new routines and healthy habits to continue to live what I believe is my purpose. It sucks that things change, but that is inevitable :)”
– Liam, Former FBI, Author
Personal suffering as a proxy
When talking about mental health, Max Nussenbaum, Program Director @OnDeck Writer Fellowship, always comes to mind. When I pinged him for answers, he gave me the opportunity to quote some of his amazingly candid essays.
“I wrote two pieces on this, one about being a startup founder and the other about being a writer.”
Both of the above pieces I highly recommend. But here are a few of Max’s thoughts that resonated with me the most. Even then, this snapshot will not do the nuance he describes justice:
“Since I didn’t know how to prove to myself that I belonged where I was, I turned to the only method I could come up with: treating my personal suffering as a proxy. The rest of my life becoming less and less put together must have meant that I was throwing more and more of myself into the company, and therefore that no one—least of all me—could question my commitment or whether I was cut out for this. And so I partied too much and foreclosed any real connection with the people I was dating and just generally reveled in everything around me being a bit of a mess.”
“A lot of this was fun, but I was stressed and anxious all the time; there was both a euphoria and a terror in feeling like my life was moving so fast that the whole thing threatened to go off the rails at any moment. I would look around and think to myself, this must be what really living is all about. And whenever I felt like an imposter as a founder, I’d use the corresponding messiness of my personal life as proof that I was giving the company my all.
“Of course, none of this made any logical sense, and none of it made us more successful. A stable relationship almost certainly would have been a support system that helped me be a better founder; at the very least, it’s hard to do good work when you were out till 4 a.m. doing drugs with strangers the night before. But that’s the thing: I wasn’t optimizing for actually making my company successful. I was optimizing for assuaging my own insecurities.”
Doing your best
“In short, I have a simple approach for when self-doubt could come in – in that, as long as you believe you are doing the best you can, getting support from others to help get through the situation, and striving to continually improve, then what is meant to be, will be. If it doesn’t happen, then it wasn’t meant to happen and something that’s better suited for you will come along in due time.
“While it might be short term disappointment, either turn it into a driving force to do better and achieve what you were originally trying to do, but knowing limits, putting in a plan for constant improvement and being satisfied with the achievements as long as you can internally reflect and know you did your best.”
– Mateo, Head of International at a post-Series B startup
Your best days are ahead
“I grew up in a poor, uneducated family, and have for a long time felt like I didn’t quite fit in. To them, my curiosity and intellectual pursuits are deemed futile and a pipe dream. It has also been met with ridicule and mockery. As much as I pretend that it doesn’t affect me, ultimately the people in your family have so much influence on our sense of self worth. It wasn’t until moving out here in 2013, that I felt like I found my family and my tribe. That narrative still bounces around in my head from time to time, but I have worked really hard through therapy and conversations with mentors to eradicate a good majority of it.
“I guess imposter syndrome, is the widely used term for this condition. For folks like us, that may be more deeply rooted and takes more effort to overcome. Am I smart enough to do this? Do I know enough? Am I experienced enough? I’m not educated like my colleagues. I didn’t go to Stanford, Cal, or MIT. What am I doing here?
“There’s only so much one can tell oneself to overcome these deeply rooted self doubts, ‘you got this’ ‘you belong here’.
“I have found that working through it is a journey that involves creating new habits and forming new narratives. Turning the negative self talk into, ‘this is part of the process’ ‘your beginner’s mind is an asset’ ‘I’m not my highly educated colleagues, but my game and perspective is unique’.
“Growing up in South Carolina in my family, so many of the things the could have been cultivated weren’t, and that’s fine. I feel like my best days are ahead of me, and I’ll take that.”
– Harry, Senior Design Leader at a Fortune 100 company
The war between results and doubt
“Whenever I go a month or more without a sale, the doubt starts to creep in. The only thing that pushes the doubt away is a successful sale. I am better at dealing with it now because I have been through so many cycles and ups and downs, but I have never truly figured out how to eliminate the doubt (or better channel/repurpose that negative energy) that creeps in whenever I have a little capacity to do more work.”
– Lucas, Managing Director at an Executive Search Firm
Would she say the same for a man?
As if the world gave me the sign to take this leap of faith to write this blogpost, the first person I reached out to was Stephanie. I happened to catch her right at the moment she had been rejected after an interview for a senior position at a firm.
“I was honest about my career and life. Next time I could speak differently but I know with my resume and the time off I took that I would get the questions I received.
“I just hated the comment she made. She was very complimentary but then used this word that made me wonder, ‘Hmm would she say this about a man with my same career path?’
“The interviewer commented to my friend that I was smart but ‘too whimsical’ for the role they are hiring for. It made me question my whole career path for a second. By the way, I had never been called ‘whimsical’ before… that’s a word used for fairies.
“I try not to overstress myself and that’s why my personality is more chillax, but I take myself very seriously at work.
“Questions I ask myself and messages I give myself when I have doubt:
‘Am I doing the right thing with my life?’
‘What can I do to help others understand why I am taking this direction?’
‘How can I be my number one fan?’
‘Be compassionate with yourself.’
‘Focus on your mental health during this time of self doubt.’
(when someone rejects me)”
– Stephanie, Female co-founder of a hedge fund and advisor to multiple companies
Dreaming and falling
“From my own experience the question of self-doubt sneaks in way too often in almost any entrepreneurial quest. It can happen that you have self-doubt 101 times a day about some totally banal things such as ‘can I name myself a CEO and put it on my LinkedIn profile if I just founded a business’.
“For me personally, those ‘light’ self-doubt questions are categorized more as decisions. Same as with food, just make up your mind on what you want to have for lunch and stick to your decision whether it tastes or it doesn’t taste good. And of course, if it did not taste well enough, make sure that you have learned the lesson for the next time.
“The real heavy self-doubt comes to surface when:
A. You are selling a dream, a vision or an idea, and B. When things are falling apart.
>> A.
“In situation (a), it can often happen when you don’t have enough pieces of tangible evidence, data points, intelligence, etc. to prove your point of view to yourself and others. People will say – your idea sucks, this is impossible, you don’t have the skillset, your team is not good enough, the market does not exit, etc.
“To ‘survive’ these situations and be able to thrive no matter the negative comments and feedback (which often can come from some of the most influential and successful investors and entrepreneurs), I always make sure that before I go out there selling my vision, I truly believe in my idea/dream and that I have done enough homework to personally assure that there is a decent chance for it to come to life. I bulletproof it for myself first before I take that and test it with the world.
“Moving forward with selling the dream, during the conversations I tend to come back to the narratives of others who did something great in the past and proved others wrong.
“As Nelson Mandela would say, ‘It always seems impossible until it’s done.’
“I read so many inspirational stories of successful innovators, scientists, philosophers, artists, sport athletes, and entrepreneurs. And I don’t hesitate to bring those examples up in a conversation to show that someone has done it before even though at the beginning no one recognized their potential or the potential of their idea.
>> B.
“For situation (b) when your project is failing, sometimes it is totally out of your hands (and that is sort of an easier scenario,) but sometimes you do tend to question yourself if you could have done something differently. You start developing self-doubt in your managerial and entrepreneurial competence. Especially when you read so many headlines about the success of other entrepreneurs that raised 100s of millions or exited their companies at some mind-boggling valuations.
“In those moments, I do two things:
I rationalize by going back in the past and rewinding all the small achievements we made along the way. While doing that, I express deep gratitude for every single small step I made. As an example, we never raised from a Tier 1 VC but we met a lot of them and with some, we had multiple rounds of conversations. I am deeply grateful for even hearing back from them, for every moment they took to review my deck and learn more about our project. Success is the path and the process itself, not the final outcome. And that is what I remind myself of, in case the self-doubt comes to surface.
I ask myself if I did put in my perfect effort because that is all I could have done. As Sam Altman said, one needs a great idea, a great product, a great team, and great execution. Even if you have all four of these you may still fail. The outcome is something like idea x product x execution x team x luck, where luck is a random number between zero and ten thousand. Knowing that at the end of the day we are only in control of our thoughts, intentions, and reactions I end up asking myself – am I a satisfied with my input and work and did I do my best and put in the perfect effort? And the answer to that question brings me to a rationale that is beyond self-doubt and is actually the basic building block of self-confidence. This really helps to turn doubt into a strength!”
I know that not every story will resonate. Some may never resonate. Some will grow on you over time. Others will find meaning into your life when you least expect them to. My purpose for starting this blogpost is to freeze these stories and life lessons in amber for when you find yourself needing them the most. Life’s not easy. Neither is it meant to be. But hopefully, you’ll find comfort knowing you are not alone.
At the end of the day, all advice is autobiographical. Or as Kevin Kelly, co-founder of WIRED magazine, once wrote, “Advice like these are not laws. They are like hats. If one doesn’t fit, try another.” What you’ve read above are the advice, stories, autobiographies. Anecdotes that hopefully shed more light into the elements of humanity many of us, including myself, have been scared to talk about.
A good buddy of mine made me watch a movie recently. It couldn’t have been more timely. He told me nothing more than this one line from that movie:
“We are all the unreliable narrators of each other’s stories.”
So I watched it. I won’t tell you the name of the movie or what it’s about, but if you use the above quote in your search query, you’ll find it. And if you’re like me, and so many others, who struggle with identity and your place in the world – either now or in the past, it’ll change the way you see the world and the people around you.
Thank you Taylor, Max, Janko and everyone else who made this piece possible!
#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!
There’s a notion in the venture market that LPs typically dislike GPs writing discovery checks. Though I’ve written about VCs writing more discovery checks (here and here) in the past two years, discovery checks have often been a function of investor FOMO (fear of missing out) and not playing their core game. The returns of any established fund are largely realized on big checks with ownership targets.
Of course, rolling funds, micro-VCs, and angels optimize for a different game. They’re spreading their net thinner, but also leveraging their relationships to get into oversubscribed rounds or putting really small bets into hopefuls. Proportionally speaking, if they make bad bets, they lose the same percentage of money, but on an absolute dollar amount, they lose far less. And, well, it’s much easier to return a $1M fund than a $100M fund. It’s also far less committal for LPs to invest in a small fund than a big fund intended to make their incredible returns. The small fund is the bet. The large fund for an LP is the money-making machine.
I was talking with a Venture Partner of a name-brand accelerator yesterday, and he offered a second perspective.
The reason discovery checks by larger funds don’t make any money is because it’s irregular and inconsistent. There often is no fund strategy behind it. That said, if you make discovery checks your core business, that means a fundamentally different strategy. Is that strategy consistent, predictable, and scalable? For accelerators, they’ve made writing discovery checks part of their fund strategy. Their game, at the end of the day, is “buying options.”
It’s a call option. Accelerators invest $100K for 5-10% to buy the rights for the next round. The money is being made in the follow-on, not on the initial bet. And if there’s a fund strategy to deploy 100 checks of a $100K, there’s a systematic approach to writing discovery checks. This is why many accelerators include a provision for pro rata of $0.5-1M in a future round. And they’re unwilling to budge on that, even if a founder comes back and wants to seed that allocation to downstream investors.
Why would an entrepreneur take the $100K that comes with the $500K-$1M option down the road? Accelerators and a lot of angel funds out there are willing to write you, the founder, the check faster and with less debate than other investors on the market.
There’s also a reason many accelerators focus on software rather than other potential areas of investment. A $100K check will get you much further for an asset-lite software company than a deep tech or hardware company. The same amount of cash can bring a software company to market, while a hardware company stays in R&D.
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Earlier this month, I saw quite the thought-provoking tweet from Ashley Brasier.
“I took a cue from General Patton, who thought that the greatest danger was not that the enemy would learn his plans, but that his own troops would not.”
-Trader Joe (aka Joe Coulombe) on the need to sell to everybody – not just to your customers, but also to your employees
Whether it’s a function of confirmation and availability bias or lesser-known leadership secret, I saw similar themes pop up everywhere from Phil Libin of Evernote and General Catalyst fame to Kelly Watkins at Abstract to Colleen McCreary at Credit Karma. And because of that, I thought it was a topic worth double-clicking on.
There’s the age-old saying: Leaders lead. Managers manage. And a CEO is frankly a marriage of both. While there are the canonical examples of Musk and Jobs, a CEO both leads with her/his vision but also manages expectations.
“I think the most important job of a CEO is to isolate the rest of the company from fluctuations of the hype cycle because the hype cycle will destroy a company. It’ll shake it apart. In tech the hype cycles tend to be pretty intense. At mmhmm we are very much in the Venn diagram of two hype cycles. There’s a general hype cycle around video, which is going to be way up and down over the next few years. […]
“There is also a hype cycle around early and mid stage startup investment. It’s super volatile, now more than ever, because of potential changes in the tax laws, interest rates, and inflation. So you’ve got these two very volatile areas, video and startup investment, and we are sitting right in the bull’s eye of that. This means that my most important job is to isolate the team so that we don’t float based on the ups and downs of the current. Make sure we have enough mass and momentum to go through it, meaning we don’t change what we do based on the hype cycle.
“And that takes capital, which is why we have to raise some capital to do this. It also takes understanding of where you’re trying to go and knowing where you’re going is not based on the hype cycle. You have to have a long term conviction about that. You may be wrong. The conviction could turn out to be wrong, but you’re not going to know that based on day to day fluctuations of excitement or month to month. So have a clear direction of where you are going and then make sure the ship has enough momentum so it doesn’t matter what the waves are doing, you’re still going relatively straight.”
Kelly Watkins, CEO of Abstract, also said in an interview: “People might think the job of the CEO is to make a lot of decisions, but I see my job as setting the tone for the company. People look to leaders to gauge their own reactions in a situation. So if I’m running around like a headless chicken or my tone is on a really high frequency, people graft off of that.”
Similarly, I wrote an essay a year and a half ago. On Sun Tzu and how a leader’s job is setting the tone for her/his company. In short, your team follows you and is a direct function of:
How much they trust you, and
How well they understand a leader’s commands (the why, the how, and the what)
As a caveat, one might disagree with the what, and maybe the how, but a strong team believes in the same why.
In another interview, Colleen McCreary of Credit Karma once said: “Founders, in particular, are always looking to move onto the next thing, but people don’t come along the journey that quickly. So you have to slow down to be consistent, stay on message and tell employees how they’re going to define success. Because if you don’t focus on what really matters, people will hang their hat on an IPO or the stock price as being the determinant of success, and it’s just hard to unwind.”
And why does all this matter?
As Ben Horowitz wrote in his book What You Do Is Who You Are, “Culture is a strategic investment in the company doing things the right way when you are not looking.”
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You may have noticed that after only two essays including an audio reading, I’ve stopped. Initially, I wanted to pair audio with every essay as an alternative to reading the essay. But over the past few weeks, partly due to an increase in workload, recording my audio became a seemingly arduous task for me. A frictional step. A barrier to entry. Not that it takes long to record, but editing my own speaking quirks and breaths (oh boy, if you only knew how great this mic was at picking up every breath. I sound like I have sinus problems.) in each clip accounted for an additional half-hour usually. And that same frictional step left me with a backlog of recordings that I had to do, even though the content was ready. Which:
Slowed down my production schedule (at the time of writing this blog post, I have five fully written blog posts I’ve been meaning to put out, but held back due to recording procrastination)
Became an excuse to myself of why I couldn’t produce content on the same schedule as I used to
Going forward, I’m not going to give myself that excuse. I will record audio to accompany an essay, on two conditions:
For essays I personally really like and have time to record for
Retroactively, if you, my readers, reach out and want an “audiobook” version of your favorite pieces on this blog. I won’t be able to fulfill every single request, although I’ll do my best to, but I’ll prioritize the ones with more requests.
So, please bear with me. The goal is still for me to read every blogpost. I’m working on being able to do all the above more efficiently. I’m testing out new formats as time allows. A couple things I’ve tried so far:
Getting a pop filter to filter out high-pitched consonant sounds
Finish writing before I head to bed and waking up earlier and recording at 6am
None has fully resonated just yet. And it really makes me admire the work of audio engineers and voice actors and actresses each passing day.
Stay tuned!
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