This year in my resolution, I aim to be more vulnerable by “opening up about the potholes ahead, not just the ones in the rearview mirror”, to quote Jeff Wald. So I’m going to take a step closer to doing so.
Yesterday, my buddy asked me a question that didn’t sit well with me. Not because he was rude, nor because he meant to offend me. In fact, for all intensive purposes, it was entirely innocuous. But it was a question that got me to really question my beliefs and do an impromptu performance review of myself. He asked:
“Out of all the startups you’ve met with and had the chance to source, how many do you regret passing on? Which one or two stands out to you the most?”
I paused for a second. But when words arose to my mouth, my reply was simple. “I don’t think I have any regrets.” As soon as I said that, I immediately felt this gnawing feeling that something was wrong. I’ve always chosen to live life without regrets. And though this may seem to run parallel to my mantra, I knew deep down it wasn’t meant to be.
Luckily, I have had more time to introspect than otherwise during this pandemic. There are 3 possibilities as to why I have no regrets:
- It’s too early to tell which ones will be home runs.
- I’m not being selective enough, aka I have a flawed investment thesis.
- I don’t have the kind of quality deal flow I would like.
While optimistically, I hope it’s the first possibility. After all, it’s only been 3 years since I embarked on this journey. And there probably is a small proportion of startups that will go on to prove me wrong. Realistically, it’s a permutation of the latter two.
Currently, I pick about 40-50% of my inbound (referrals/intros, cold pitch emails/messages, various networking apps) and 100% of my outbound (assuming they get back to me) to have a conversation with. Of those, I usually find 1 out of every 10-15 that I continue the conversation with from an investment standpoint. And out that pool of founders, I usually end up referring 50% of them. Meanwhile, I still try to be helpful in some capacity to everyone else, but only spend about 20% of my time to do so. From a high level, I couldn’t see anything wrong with this funnel. At least, not until my buddy asked me that question.
Sourcing is one of those things that’s easy to pick up, but difficult to master. And now, I feel, not just conceptualize, how steep this learning curve is. There’s a saying in the industry that “luck only gets better with success.” But I have yet to pay the admission fee for my luck to start compounding. So there’s 3 things I have to do:
- Reevaluate my current deal flow by analyzing inbound sources and the empirical quality from each (# of startup I’ve introed/total # of startups received from X source).
- Hit up the investors I know to help me create a more robust thesis.
- Double down on helping my existing deal flow reach their aggressive milestones, until hopefully, the first can hit the ground running.
On the brighter side, it’s great that I’m iterating on this now before I become a checkwriter.
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