When I first jumped into venture, there was a wave of founders who believed that a great product will sell itself. But in the past few years, under the proliferation of startup content, discourse and amazing Twitter threads, while anecdotal, I’m happy to have seen far fewer founders who believe in that extreme.
Nevertheless, that dogma hasn’t completely disappeared. Rather than sales and marketing, I’ve realized this to be more the case on the fundraising front.
How often are you in the batter’s box?
This past week, a handful of pre-seed founders asked me for fundraising advice. On Monday, a founder I had chatted with at the beginning of the pandemic reached back out to let me know he was now starting to fundraise for a new idea. Naturally I asked him what he learned from the last idea.
To which he responded, “There weren’t enough investors interested in my last idea.”
I followed up, “How many did you talk to?”
“Twenty.”
That’s not nearly enough. Especially for what was his first institutional round. Moreover, like most other founders, he wasn’t an insider. As such, I believe he should have pitched to more. A lot more.
He’s not alone. Two other founders I chatted with felt they had already tried everything after getting rejected by 30 and 40 investors, respectively.
I mentioned in a blogpost back in April that if you’re an emerging fund manager raising a Fund I, think of it like raising 10 Series A rounds. For most Series A rounds, a founder talks to about 50 investors. So for a Fund I, you’re likely to talk to 500 LPs to close one. An LP I talked to for a blogpost that will soon come out chatted with a GP who pitched 625 investors to raise her first $18 million fund.
Why do I mention this? While this is equally true for emerging fund managers raising a Fund I — a fund that’s pre-product market fit, if the average Series A founder needs to pitch 50 investors, as a pre-seed founder, you need to talk to double that number. If you’re lucky, you can stop pitching sooner. But at the very minimum, you should expect that ballpark number. And that’s also why fundraising is a full-time job.
The more realistic your expectations, the more efficiently you can set up your pipeline, the faster you can get back to building your world-changing idea.
The takeaway
Never run out of leads. You never want to be in the position where you have to go back to someone who passed on you. Keep your funnel open. Every time you pitch a VC or an angel, especially those that say “No,” ask them: Which investor would you recommend who might be interested in what I’m building?
A lot of founders try to optimize for warm intros. But most people who say No to you won’t go out of their way to help you, especially asynchronously. They’d much rather spend time on their own portfolio companies. So, don’t add in asynchronous steps that would increase friction. You don’t need warm intros. You just need names. And if any investor gets recommended more than three times, it’s worth just cold messaging that person sharing that they came highly recommended from the investors you’ve chatted with so far.
For those who say “Yes” to you, it is likely you won’t ever reach profitability with the capital they gave. Early-stage investing, for instance, the pre-seed, luckily, is very collaborative. If you’re raising a $1M pre-seed round, that leaves room for a lead investor of $500K, $3-4 $100K checkwriters (emerging fund managers, syndicate leads, or active angel investors), and a bunch of smaller, but extremely valuable investors. Ask each for who they’d like their co-investors to be. Even if those recommendations don’t commit this round, collect the names for your next round.
During your first institutional raise — hell, even prior to that — you’re an outsider. No one’s heard of you. But there are still people out there who believe in the world that you want to create. You just have to find those early believers. Believers in you. Believers in the future you see.
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.
My friends who know me well know I have this concept I call work-work balance. And in sharing it with someone new, it’s usually met with a light chuckle. I never mean it as a joke. But nevertheless, people take it as my attempt to be snarky and witty.
I believe most of you, my readers, are familiar with work-life balance. A lifestyle that balances work and your life outside of work, often one that spends the capital earned though work. When I hear most people say it aloud, its most frequent use case is in avoidance of doing more work. But the underlying principle is that most people don’t enjoy the work they do. Rather, they find their joy and fulfillment in pursuing hobbies and passions outside of the confines of a 9-to-5.
Just like having a work-life balance is a privilege, having a work-work balance is, in my humble opinion, even more so one. Speaking of privilege, earlier this week, I had the fortune of hearing a rather profound line:
“If you do one thing in life that fuels and motivates you, then you should yourself lucky.”
So, in even talking about work-work balance, I admit I came from a position of privilege, but one I do not think is unattainable for those who also have the privilege of debating the technicalities of work-life balance.
Work-work balance is the balance of doing what you love doing with work that you need to do to continue doing what you love doing. To me, work that I enjoy doing — interesting projects — fulfills me. It gives me meaning and purpose in life. To best illustrate this concept, I’m going to have to steal Elizabeth Gilbert‘s line in a 2016 interview with On Being. It’s not the first, and it won’t be the last time I quote her here:
“Everything that is interesting is 90 percent boring.”
When you’re proud to have work be your identity
Starting something — anything that is going to be core to your identity, even if it is only briefly — is going to be unhealthy.
Being a great venture-backed founder is unhealthy. Starting a venture fund from scratch is unhealthy. Being a world-class content creator is unhealthy. Being a diligent and serial author is… well, you get it. Hell, even binge-watching the latest and greatest Netflix show is unhealthy.
It is also the difference between passion and obsession. One keeps you daydreaming; the other keeps you from sleeping.
I’m not advocating that everyone live an unhealthy lifestyle, but that the concept of work-life balance is a lifestyle that doesn’t fit everyone, but those who have not or have yet to find deep fulfillment in the professional aspect of their life. For those who have found their life’s work, work-work balance may be a more sought-after lifestyle. In working mainly with founders and emerging fund managers, their life stories seem to corroborate the previous sentence.
In the world of startups, I often tell founders, and have many a time, advised founders not to take venture capital. There is no shame in creating an great and fulfilling lifestyle business. But as soon as you take venture, that’s a different story. After all, another name for venture capital is impatient capital. It is the perfect permutation of not just ambition, but also of expectation. The greater you raise in venture, the greater the expectation.
A $10 million valuation is not a number indicative of your company value. In fact, I think the 409a valuation does a better job of that than what VCs price your company at. Rather, a $10 million valuation on a social media company is a bet that you have a 0.0025% chance — a 1 in 40,000 chance — that you’ll be as big as Meta. At least at the time of writing this blogpost. Equally so, a $1 billion valuation is a bet on the odds that you have a 1 in 400 chance to grow as big as Meta. As Uncle Ben said, “with great power comes great responsibility.”
And as such, the expectation and the will of your new bosses — your investors — is that you can scale a team that can help you capture that opportunity. And for VCs, or die trying. Many, if not most, great VCs would much rather you bat for the home run than walk a base. After all, the success of an investor is not defined by their batting average but the magnitude of home runs she or he hits. But I digress.
As a founder, you must love your work so much that it’s contagious. That it affects your investors, your team, and your customers. Why? Because in the course of building a rocket ship, there are a million and one things that can go wrong, and a million and two things that feel tedious, repetitive, and slow. And the work you enjoy doing must be so powerful that just the thought of being able to do more of it invigorates you through the long troughs between wins.
I say all this to every founder I’ve met who didn’t fall madly in love with their problem space and who expect venture funding. The going will get tough, and I, like many other investors, want to know that you have the grit to make it through this long, windy journey. Having a good pulse on work-work balance is one of a few proxies for that grit.
Of course, I do want to posit that a work-work balance doesn’t mean you should make prolonged sacrifices to your mental health, your sleep schedule, or your time with friends and family.
#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.
“Readily available quantitative information about the present is not gonna give you they key to the castle. […] If everyone has all the company data today and the means to massage it, how do you get a knowledge advantage?
“The answer is you have to either:
Somehow do a better job of massaging the current data, which is challenging; or you have to
Be better at making qualitative judgments; or you have to
Be better at figuring out what the future holds.”
Those are the words of the great Howard Marks on a recent Acquired episode.
When most of us first learned economics — be it in high school or college, we learned of the Efficient Market Hypothesis. In short, if you had access to both public and private information, you would be capable of generating outsized returns that outperformed the market.
The truth is that reality differs quite a bit. And that’s especially in early-stage investing. Investors often make investment decisions with both public and private information at their disposal. There is admittedly still some level of asymmetric information, but that depends on deep of a diligence the investors do. Yet despite the closest thing to a strong efficiency, there’s still a large delta between the top half and bottom half of investors. The gap widens further when you compare with the top quartile. And the top decile. And the top percentile. Truly a power law distribution.
Massaging the data
I’m no data scientist, although I am obsessed with data. But there are people who are, and among them, people I deeply respect for their opinion.
There’s been this relentless, possibly ill-placed focus on growth (at all costs) over the last two years. Oftentimes, not even revenue growth, but for consumer startups, user growth.
I want to say I first heard of this from a Garry Tan video. The job of a founder pre-product-market fit (pre-PMF) is to catch lightning in a bottle. The job post-PMF is to keep lightning in that bottle. Two different problems. Many founders ended up focusing on or were forced to focus on (as a function of taking venture money) scale before they caught lightning in that bottle. They spent less time on A/B testing to find a global maximum, and ended up optimizing for a local maximum.
Today, or at least as of September 2022, there’s this ‘new’ focus on retention and profitability (at all costs). But there’s no one-size-fit-all for startups. As a founder, you need to find the metric that you should be optimizing for — a sign that your customers love your product. Whether it’s the percent of your customers that submit bug reports and still use your product or if you’re a marketplace, the percent of demand that converts to supply. Feel free to be creative. Massage your data, but it still has to make sense.
From a fund perspective, equally so, it’s not always about TVPI, IRR, and DPI, especially if you’re an emerging fund manager. Or in other words, a fund manager who has yet to hit product-market fit. You probably have an inflated total-value-to-paid-in capital (TVPI) — largely, if not completely dominated by unrealized return. The same is true for your IRR as well. In the past two years, with inflated rounds and fast deployment schedules, everyone seems like a genius. So many investors — angels, syndicate leads, and fund managers — found themselves with IRRs north of 70% for any vintage of investments 2019 and after. Although an institutional LP that I was chatting with recently discounts any vintage of startups 2017 and after.
So the North Star metrics here, for fund managers, isn’t IRR or TVPI. It’s other sets of data. I’ll give two examples. For a fund manager I chatted with a few weeks ago, it was the percent of his portfolio that raised follow-on capital within 24 months of his investment because it was more than twice as great as the some of the best venture firms out there. Another fund manager cited the number of his LPs who invested in his fund’s pro rata rights through SPVs.
Making qualitative judgments
In this camp, these are folks who have an extremely strong sense of logic and reasoning. When a founder has yet the data to back it up, these investors go back to first principles.
In my experience, these investors are incredible at asking questions, like how Doug Leone asks a founder for their strengths and weaknesses. But more than just asking questions, it’s also about building frameworks and knowing what to look for when you ask said questions.
For instance, every investor knows grit is an important trait in a founder. More than knowing at a high level that grit is important, what can you do to find it out? For me, it boils down to two things.
Past performance. In other words, prior examples of excellence that they worked hard to get.
Future predictors. I ask: Why does this problem keep you up at night? Or some variation. Why does this problem mean so much to you? Why are you obsessed? Are you obsessed? Why is this your life’s calling? And I’m not looking for a market-sizing exercise here.
While I don’t claim to hold all the truths in this world, nor can I yet count myself in the highest echelons of startup investing, the most I can do here is share my own qualitative frameworks for thinking:
One of my favorite thought pieces on the internet is written by a legendary investor, Mike Maples Jr. of Floodgate fame. In it, he illuminates a concept he calls “backcasting.” To quote him:
“Legendary builders, therefore, must stand in the future and pull the present from the current reality to the future of their design. People living in the present usually dislike breakthrough ideas when they first hear about them. They have no context for what will be radically different in the future. So an important additional job of the builder is to persuade early like-minded people to join a new movement.”
Early-stage investors must have the same genetics: the ability to see the future for what it is before the rest of humanity can. And they back founders who are capable of willing the future into existence and create reality distortion fields, a term popularized by Bud Tribble when describing Steve Jobs.
When I first jumped into venture, one of the first VCs I met — in hindsight, a futurist — told me, “Some of the best ideas seem crazy at first.” A visionary investor is willing to take the time to detect brilliance in craziness. Paul Graham, in a piece titled Crazy New Ideas, proposed that it’s worth taking time to listen to someone who sounds crazy, but known to be otherwise, reasonable because more than anyone else, they know they sound crazy and are willing to risk their carefully-built reputation to do so.
For 10x founders and investors alike, the more you hear them out, the more they make sense. That said, if they start making less and less sense the more you listen, then your time is most likely better spent elsewhere.
In closing
As you may already know, a great early-stage investor requires a different skillset than a great public equities trader or a hedge fund investor. You’re more likely to work with qualitative data than quantitative data. Regardless of what archetype of a venture investor you are, you have to believe that we are capable of reaching a better future than the one we live in today. It is then a question of when and how, not if.
Of course, I don’t believe that these three archetypes are mutually exclusive. They are more representative of spectrums rather than definitive traits. Think of it more like an OCEAN personality test than a Myers-Briggs 16 personalities.
To sum it all, I like the way my friend describes venture investors: pragmatic optimists. Balance the realities of today with how great the future can be.
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.
On the second half of a late summer Friday, as I was overlooking the singed blades of the parched grass in our front yard, I found my good friend, Andrew, in my inbox. An inbox that was about to be empty from filing an eclectic collection of investor updates, food science analyses, tech articles, and my weekly subscription of Substack extraordinaires into my Read Later folder.
An email headline in boldface. All it would take would be two clicks. Two clicks to add to my party of internet writers I would be conversing with over a Saturday morning of roasted hojicha tea. Instead, I clicked once. Just once. And I’m glad I did.
Andrew started writing again. Pen to paper. Or rather, finger to keyboard. And that, that was worth celebrating. I, like many of his other friends, had been starved, deprived, relieved of his prose given his busy schedule. In it, he postulated the relationship between commitment and conviction.
“Commitment helps you stay on the path. Conviction is what calls you to the path in the first place.”
In sum, the pre-requisite for commitment is conviction. And so, it got me thinking about the source of conviction…
From inspiration
For decades, athletes have tried to break the 4-minute mile. According to British author John Bryant, since 1886. “It had become as much a psychological barrier as a physical one. And like an unconquerable mountain, the closer it was approached, the more daunting it seemed.”
But it wasn’t till May 6, 1954, did Roger Bannister break it with a time six-tenths under the mark. As soon as Bannister did it, 46 days later, another did. One year later, three runners broke the once elusive 4-minute barrier in one race.
The thing is, nothing technological had changed in the world when all these runners post-Bannister broke the four minutes. Nutrition hadn’t drastically improved. Neither was there drastic evolution in the technology of shoes. Yoram Wind and Colin Crook argues it was a mindset shift. The impossible was possible.
We see the same notion today in the world of emerging markets. In these markets, the first wave of unicorn founders is usually spearheaded by Harvard and Stanford grads building X for Latam or Y for Africa. For instance, both of Grab’s founders are HBS graduates. Gojek’s Nadiem is no exception. Nubank’s David Velez holds a similar Stanford GSB degree. So does Cabify’s Juan de Antonio. Rappi’s founders are also Stanford alumni. And the list goes on. They come with the Silicon Valley mindset in a market underestimated by not only the broader world but by the homegrown talent themselves. I like the way a Midwest founder-turned-investor once put it, “My mind is in Silicon Valley, but my feet are in the Midwest.” The same is true for this first wave.
And once they’ve proven it’s possible to reach unicorn status, the second wave follows quickly after.
Most people follow in the footsteps of our predecessors. Older siblings are the same for their younger siblings. Parents are that for their children. While I’m not a parent yet myself, I do aspire to be that for my children. Equally so, that’s why we need diverse representation in media, in positions of power, and in stories.
For many, conviction comes from examples to disprove the limitations of our own imagination.
From emotion
For a handful of others, conviction comes from a deep desire to prove or disprove.
When Michael Phelps’ eight gold medals in Beijing were on the line, their coach Bob used what the French team was boasting on the papers as motivation in the locker rooms. “The Americans? We’re going to smash them. That’s what we came here for.” And soon after, the world was blessed with one of the greatest races to date. A race of which the Americans — the underdogs — pulled a miraculous spectacle of conviction and resolve.
For founders, you need obsession, not just passion. Many of the best ones have a personal vendetta — a deep, unquenchable desire borne out of time spent in the idea maze. Every successful founder needs to perform 10-15 miracles in the startup to household name journey. Trials by fire that are meant to deter the fainthearted.
After chatting with a number of limited partners (LPs, folks who invest in venture funds) over the past two months, I’ve realized the thread of founder obsession continues here. That investor-market fit is not just a function of professional experience but also of life experience. Once again, a deep desire to change the world from personal frustrations and the hope that no one will ever have to go through what they went through.
In closing
Earlier this year, Reed Hastingsshared a profound line with the graduating class, “[stories are] about harnessing the human spirit.” Conviction starts from the story we tell ourselves. The story itself is bound by the limitations of our own imagination. And conviction happens to be the belief that we can will our imagination into existence.
Michelangelo once said, “The sculpture is already complete within the marble block, before I start my work. It is already there, I just have to chisel away the superfluous material.” Commitment is the dedication to your conviction. A devotion to say no to distractions and yes to the person you want to be.
We live in a world filled with shiny objects. So, ask yourself, do you want what others want? Or what you truly want? Is your conviction inherited or innate?
I was listening to the latest episode of the All-In podcast, and David Friedberg echoed a similar notion for the greater human race, “What differentiates humans from all other species on Earth is our ability to tell stories. A story is a narrative about something that doesn’t exist. And by telling that narrative, you can create collective belief in something. And then that collective belief drives behavioral change and action in the world.”
#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.
When I was in New York last week, I had the fortune of catching up with one of my favorite people inside the rustic walls of Il Buco. Needless to say, an hour and a half was not enough to contain months of development and change. So, to continue our tea, the next day, after she met up with the one of the heavyweights in her industry, she asked:
“How do you keep your enthusiasm in check but show it to the extent that shows respect to the person and also have a conversation as equals?”
In sum, how do you fangirl/fanboy without losing your composure?
I don’t. It happens less frequently now, but I still do.
In fact, even when I try not to or attempt to convince my conscious self, this is just another human being doing their best to live the life they want, there’s something that my eyes do without fail every single time. Here’s to hoping it’s not painfully obvious to the other person.
In fairness, I actually don’t know what I look like when it happens. I can just feel and SEE it through my eyes every time. In fact, I don’t even know what this phenomenon is called. Or if there’s a word for it. If I were to describe it, it’d be if the thousand-yard stare and diplopia had a baby.
It’s completely involuntary. All my other senses and cognitions work just fine. And when it happens, I start blinking a lot more which usually recalibrates my gaze.
Physiological response aside, over time, I’ve simmered down my ability to respond into two ways, especially when my brain decides to turn off. One for each situation.
I’m prepared. For instance, this is a scheduled meeting, or I know I will see this person at an upcoming event.
I’m unprepared. The canonical serendipitous elevator ride. For instance, bumping into them at an event. Or true story, we happened to both be helping to carry A/V equipment backstage post-show.
When I’m prepared…
The goal here is to know the other person better than they know themselves at the point in time. This is the same mentality I carry into both conversations in public and private spaces. The former with interviews, fireside chats, and panel discussions. The latter in the form of coffee chats, dinners, happy hours, and the like.
Depending on the timeframe, I come prepared with a different number of questions. But generally, for every 30 minutes, I come with three questions.
The first question is to establish rapport. And it’s always a personal one. I almost never start the conversation with pure “business.” This sets the tone for the rest of the conversation, as well as how candid they will be with you.
You’ll have to do your research. Some may require more digging than others. That said, don’t take it too far by finding their home address or social security number. Here, I usually look for fun facts. Like they did street dancing back in high school or they love going to stand up comedy shows.
If you’re going to take away one thing with this question, it’s to surprise and delight.
For the second one, which is usually the optional question if we’re short on time, I love understanding people’s inflection points. For example, why did they go from consulting to acting? Or from an art gallerist to a VC?
Not just the fact that they went through a massive delta, but I love understanding what they were thinking before, during and after they made the transition. Was it a decision that was supported by their family and/or peers? Was it a difficult decision to make? What got them over the activation energy to commit to this new lifestyle?
The third question is akin to the one I always advise founders to think about when talking to investors. Why would this investor be the best dollar for your cap table? Similarly, even if you’re not raising money, what kind of question can only the person in front of you answer? Or very few others can? It’s usually a function of their work or life experience, where they end up becoming uniquely positioned to talk about that topic.
As a prelude to this last question, I usually preface why this question means a lot to me. Why do I need this answer? Show that you have spent time in the idea maze. Time thinking deeply about the topic already. Naturally, anything that is googleable is off-limits here.
You have one chance to make a great first impression. Don’t waste it.
Cutting it short
Just as it’s important to start the conversation on a high note, in my opinion, it’s even more important to end the conversation on a higher note. As such, I have a three rules of thumb:
Never overstay your welcome. It’s always better to cut the conversation short than to end with awkward silence. Be extremely acute to where the clock is compared to how much time you’ve asked of them.
Have a go-to phrase (or phrases) to end the conversation. One of my favorites is, “As with all great conversations, we ran out of time before we ran out of topics.” (The cat’s out of the bag, so now I need a new one.)
Follow up within 12 hours of the conversation with notes from the conversation, and action items on your end. For instance, if the other person shared advice with you that you solicited, be sure to act on it. Come back two weeks to a month later and share the results of your findings. As you might suspect, bring a pen and paper for the conversation. People really respect it when you take their thoughts seriously. During, and even more so, after.
If possible, pay it forward, and when that time comes, don’t be afraid to share it with the source of the advice.
When I’m unprepared…
While still worthwhile in the former situation, you need to be able to break the ice quickly and give others a reason to listen to you for just two more minutes. People are naturally busy. And if you disrupt their normal flow of life, their whole goal while you are speaking to them is not how they can talk to you more, but about how they can get back to doing what they were doing.
Just as much as you will be unprepared, they will be too. As such, you need to disrupt their flow even momentarily. Your short 10-second bio needs to generate emotion and curiosity. Oftentimes, that is not your title. For instance, one that I like using with folks who I know to be lighthearted and have no context to the startup world is, “I get paid to be the dumbest person in the room.” Self-deprecating humor really does help for folks who can and have time to take a joke.
Other than your short bio, always have 2-3 questions handy via muscle memory that are good to ask in almost any situation AND would give you immense insight. I’ll share one of mine, and likely many more in the future with my DGQ series on this blog.
In your line of work, what differentiates the great from the good? Not just the good from the bad, but how do I tell the very best from the ones that have yet to get there but are still a cut above the rest?
Practice these again and again. In front of a mirror. In the shower. Or while you’re driving. Until they become second nature.
In closing
The important thing to remember is these people don’t owe you anything. And sometimes, while you can’t give them what they want, you can make that amount of time you have with them amusing. Insight doesn’t just come in the form of answers but also questions that get others to think in ways they didn’t before. Going back to one of my favorite Kurt Vonnegut lines:
“Use the time of a total stranger in such a way that he or she will not feel the time was wasted.“
#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.
Over the week, I was revisiting some of the Instagram posts that I had saved over the years, and I re-discovered one of my favorites by Christoph Niemann sharing his kudos to the late Kurt Vonnegut.
Most of all, Vonnegut’s advice on writing applies just as much to other forms of storytelling. And if you know me, I was immediately reminded of pitching.
Teach your investor something they didn’t know before.
A lot of investors claim to be experts, and even more are seen as experts. Too often, founders blindly listen to what their investors tell them to do. As Hunter Walk of Homebrew once said, “Never follow your investor’s advice and you might fail. Always follow your investor’s advice and you’ll definitely fail.”
YouTuber Derek Muller just came out with a great video on the ideal variables that manifest expertise. Two of such variables are:
Valid environments – environments that are predictable and have minimal attribution to luck
Quick feedback loops
The problem with venture is that our feedback loops are incredibly long and drawn out. Oftentimes, it takes 7+ years to fully realize any kind of financial outcome, although there are many red herrings of outcomes in between, like new funding, brand-name investors, users (rather than customers, or people who actually pay for your product), mass hirings, and so on. Because our feedback loops are slow and luck plays a huge role in success, it’s hard to differentiate true experts in the field. All that to say, every investor is learning to be better, to have more data, to make better judgments than the next.
And if you can show that you know something worth our time again and again, it’ll be worth paying our tuition money to you.
That said, I don’t want to discount how some investors can be really helpful in particular areas that have valid environments and fast feedback loops. For instance, code, A/B testing distribution strategies, ability to help you raise your next round within a certain timeframe, or get you into Y Combinator. The determinant of success in the afore-mentioned has clear KPIs versus their own financial success in the fund.
Give the listener someone to root for.
Aka you. Why you?
Mike Maples Jr. once said, “We realize, oh no, this team doesn’t have the stuff to bend the arc of the present to that different future. Because I like to say, it’s not enough. […] I’d say that’s the first mistake we’ve made is we were right about the insight, but we were wrong about the team.”
“I’d say the reverse mistake we’ve made is the team just seems awesome, and we just can’t look past the fact that they didn’t articulate good inflections, and they can’t articulate a radically different future. They end up executing to a local maximum, and we have an okay, but not great outcome.”
There’s a category of founders that are going to win no matter if an investor chooses to invest or not. Most typically like riding this train. They have to do little to no work to be recognized as a great investor.
Then, there’s the cohort of founders that may or may not win on their current idea, but their investors really, really, really want these founders to win. These founders are the underdogs. They’re also the ones with often the craziest of ideas. Even more so, they’re the ones that if they win, these founders will redefine the world we live in today.
As a founder, you have two jobs when fundraising:
You need to find the partners who really, really want you to win. As the great Tom Landry says, “A coach is someone who tells you what you don’t want to hear, who has you see what you don’t want to see, so you can be who you have always known you could be.”
You need to give these partners the ‘why.’
And I promise you that ‘why’ is not because of straight facts, but because of a story. Why should people help you get what you deeply want?
Every character should want something, even if it’s a glass of water.
Speaking of what you deeply want, almost every founder I chat with pitches me their raison d’etre. A selfless reason to cure the world of cancer. Metaphorically speaking, of course. That’s cool. You can tell that to the press. It’ll make great PR.
Rather I care about the exact opposite. What is your selfish motivation? This is a question I personally like asking founders. Your selfless motivation keeps you going during the day, during peace-time, when things are going just right. Your selfish motivation keeps you up at night, when s**t gets tough. When no one else believes in you except for yourself.
I want to know that you want that so badly, that you’re able to go the distance. And if that same thing is something that your investor can relate to, then you have a match made in heaven.
Every sentence must do one of two things — reveal character or advance the action.
Let me revise the above. Every slide must do one of two things — reveal character or advance the action. Anything else is superfluous. That means, outside of your core slides — problem, solution, action plan/financial projections, rising conflict (aka competition, blockers and risks), and your team slide, everything else is superfluous. Or at least, save it for your data room.
I’m sure some investors would debate me on this, but every investor has a slightly different framework. The above is my own perspective. That said, every slide should give an investor 10% more conviction towards investing in your business — capping out at 70%. ‘Cause after 70, any additional information (in the first meeting) has diminishing returns.
Start as close to the end as possible.
No investor cares about which hospital you were born in, but they do care about when the fire first started. And they care about your inflection points, even if that’s still ahead of you.
Be a sadist. Show awful things that happened to the characters.
Grit is one of the hardest founder traits to measure over a 30-minute meeting. Even after prolonged and deliberate interaction, most of the time it’s still hard to grasp this amorphous quality. But if you ask most investors what is the number one trait of a great founder, it’s either grit or passion. The latter of which often serves as a proxy to grit.
If you’re regular here, you know one of my favorite quotes of late is Penn and Teller’s. “Magic is just spending more time on a trick than anyone would ever expect to be worth it.“
Past performance is not a predictor of future progress. But it really does help. A lot. In a startup’s lifespan to becoming a leading business, there are 10-15 trials by fire. And for each one of those, the founders are required to pull off nothing short of a miracle. In fact, this next year will be exactly one of those tribulations for 99.9% of companies.
So, show moments in your life where you were able to pull off a miracle. And a miracle, by definition, is when the odds are heavily stacked against you.
Show excellence. Walk your listeners — your investors — through the journey of how you tasted glory. How you were able to achieve the seemingly impossible. Personally, this is why I love backing professional athletes, veterans, and chefs. Three fields (of, I’m sure, many more) that you really need to eat s**t to be one of the greats.
Write to please just one person. Don’t get pneumonia.
Every pitch should be tailored. Why would this investor be the best dollar for your cap table?
No investor (even if it’s true) wants to be just another investor. They want to be THE investor. Make them feel special. When you propose to your partner for marriage, you tell them why they’re the one for you, not why you’re the one for them. You get down on one knee and tell them why they are amazing. Not the other way around.
Give your readers as much information as possible as soon as possible.
The one-liner matters. It is the first point of interaction with your startup, and oftentimes, may be the last. Don’t shroud it in mystery and jargon. If you’re ever stuck here, remember Brandon Sanderson‘s First Law of Magic:
“Your ability to solve problems with magic in a satisfying way is directly proportional to how well the reader understands said magic.“
Equally so, the subject line of a cold outreach email serves the same purpose. This is especially true, when you’re reaching out to someone who you can reasonably assume has hundreds of emails in their inbox per week. For reference, and for the most part I’m a nobody compared to the partners at a16z of Lightspeed or Benchmark, and I get about 50 cold inbounds per week.
So, in my opinion, your subject line should have no buzzwords (well, because everyone’s using them). Think of it this way. Say you’re an author selling your new self-help book. And say your greatest distribution channel are likely bookstores in airports. If everyone in the self-help section has an orange cover with bold blue words, you want to be the one black and white cover book. And if everyone has black and white sleeves, you bring out the neons.
In the context of email subject lines, instead, you should include numbers. What is the one metric that you are killing it at? Just like what I recommend folks write in their email forwardables. Instead of “Invest in the Leading BNPL Solution in Latam”, use “BNPL startup growing 50% MoM”. Give the exact reason why your investor should be excited to invest in your company. Don’t save it behind eight clicks — Email, Docsend link, and another six clicks to get to the slide of importance.
People can only tell different, not better, unless it’s 10x. Mediocrity is a crowded market, so don’t waste your time there. Taking a quote out of Pat Riley‘s book, “You don’t wanna be the best at what you do; you wanna be the only one who does what you do.”
In closing
Storytelling is an emotional discovery. The facts don’t change, but a great pitch or story weaves seemingly disparate facts into a compelling narrative. One that inspires action and draws curiosity. In a saturated world of attention, you are fighting for minutes if not seconds of someone’s time. Make it valuable.
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.
When asked to write a complete story in just six words, Earnest Hemingway famously said, “For sale: baby shoes, never worn.” Six. Simple. Words. Words that even a first grader would understand. One can extrapolate profound meaning through not only what is explicitly said, but also what is implicitly not said. In fact, arguably, the impact of such a short statement is not in the former, but in the latter. Some people call it a hook. Others, a teaser. On YouTube, clickbait. In the world of startups, the one-liner.
I’ve written about the power of the one-liner before, as well as shared it many a time with founders at Techstars, Alchemist, CSI Tech Incubator, WEVE, and during my own office hours. Most founders I see focus on the whole pitch deck. Smarter founders focus on selling the problem and why it means a lot to them. The smartest tell a simple, but powerful story. Focus comes not from a surplus of information, but an intentional deficit. One of my favorite examples of focus comes from mmhmm’s pitch deck – the very same one that led to $31 million in funding pre-launch. While not every founder is as fortunate to have the accolades that Phil and his team has, what every founder can have is the same level of precision and focus.
Hence, quite literally, the one-liner wields an underestimated, but extraordinary power to focus.
Most founders fall in two camps. Camp A, they come up with their one-liner haphazardly – often an abbreviated and diluted version of their more complete product description. In Camp B, they fill their one-liner with every buzzword imaginable in hopes of capturing the attention of investors and customers alike.
And well… I lied. There’s a Camp C, which is some amalgamation of Camp A and B. Rather than the best of both worlds, it’s the worst.
Camp A – Brevity via dilution
Founders here try to cover as much ground as possible, using as little words as possible. If you fail, you’re left with holes in your logic, which leave your investors in confusion. And any doubt left uncovered is a recipe for rejection.
If you somehow succeed, in combining three words into one and five words into two, you leave yourself open to sounding generic.
Camp B – Sounding smart
Your one line may seem special in the moment. You’ve hit every keyword that an SEO consultant would suggest. And Google is without a doubt going to pick up on it. Seemingly so, you’ve done everything right. But for everyone who will pick it up, the only people who won’t are the people who matter. Your initial customers and your first investors.
The companies who can afford to be generic are those who have won already. The big names. Google, Facebook, TikTok, Slack. You don’t need to define what Google or Slack is to the average person. Their target audience knows exactly what you mean without you explaining it. Last I checked, Slack’s slogan is to be your “digital HQ”, which makes complete sense, given their product, but it wasn’t always that way. Slack started off as the “Searchable Log of All Communication and Knowledge” – Slack for short. And at one point, Stewart Butterfield called email the “cockroach of the Internet.” But it’s because of such provocative statements, like the latter especially, that capture the world’s attention. As such positioning in a one-liner is paramount.
You, on the other hand, assuming you’re a founder that is still very much pre-product-market fit, are fighting an uphill battle. You’re an outsider. And as such, you need to elicit emotion and curiosity in one line. Jargon just won’t cut it. It might get your investor to click on your email, and maybe even a first conversation, but rarely an investment.
Why? You’re competing with every other team that is using that exact same permutation of buzzwords. And trust me, it’s a lot. The reality and the paradox is you’re not unique, neither is your idea, until you can prove you are.
The importance of the one line
There are three kinds of investors that are immediately impacted by your one-liner, in the order of least to most impacted:
Angel investors
Conviction-driven firms
Consensus-driven firms
As a function of their check size, angel investors make decisions quickly. Subsequently, if you can nail your 30 minute chat, their memory of you isn’t likely to atrophy over 48 hours, or until they come to an investment decision. Angels also often make their investment decisions on gut, rather than deeper diligence that firms are known for.
Why? Diligence costs money, in the form of legal fees, and time. The latter comes in the form of opportunity cost. If they’re an operator angel – a full-time founder or operator and part-time angel, they won’t have the time to spare on doing additional homework. If they’re a full-time angel, they have their hand in so many startups that spending more time on you, the founder, is keeping them from making other great and quick decisions in other founders. At the same time, many – I dare even say, most – angels index more on “signal” than actually what you’re building.
Equally so, it is also in the nature of conviction-driven firms (firms where each partner has complete jurisdiction over their investment decisions), and solo GPs, to make decisions quickly.
The party you do have to worry about is consensus-driven firms – firms that require consensus from the partnership to move forward on a decision. This is equally true for SPVs and syndicates. Here, you are playing a game of telephone – from coffee chat to partnership to second meeting to partnership meeting (if not more). With every step of friction, the likelihood for drop-off increases. The last thing you want is for your startup’s purpose and product to get lost in translation between people who haven’t even had the chance to touch it yet.
And in all of the above instances, relaying intention, not jargon, is your most powerful tool in your toolkit. What is the query or problem that your customers/users have? How can you address in the simplest but most understandable way possible?
I’ll elaborate.
The one-liner in practice
Years ago, when I first started in venture, I had the serendipity of interviewing a bike-sharing startup for the purposes of an investment opportunity. And I remember asking the founders what they did. To which, they replied, “We make walking fun.”
Needless to say, I was quite perplexed. I knew exactly what they were trying to solve. They weren’t a shoe company or a fitness app or a pedometer. The world had already seen first movers in China and India tackle this problem, but it had yet to reach the Western world by storm.
And the founders laid it out quite simply. If I chose not to take a 10-minute walk to a friend’s house, assuming I had both, would I rather drive 2 minutes, or take a 5-minute bike ride? Expectedly, I picked the latter. Rather than competing with cars which had become a rather saturated market, and neither of the founders had the chops to build a self-driving one, it’s much easier to compete with an activity everyone is forced to do – no matter how rich or poor you are. The equivalent of what Keith Rabois calls a “large, highly fragmented market.” Albeit, maybe not with the lowest NPS score out there.
Unsurprisingly, it became one of my favorite stories to share, and one I swiftly shared with many investors then. They’ve since become one of the most recognizable unicorns around. But for now, I’ll refrain from sharing the name of the company until I get permission to do so.
Lenny Rachitsky also recently came out with an incredible blogpost, which includes the one-liners of some of the most recognizable brands today, like Tinder, Uber, Instagram, and more. In the below graphic from that blogpost, you’ll realize not a single one has any jargon in it.
The words you subsequently use in that one line determine where in the competitive landscape you lie. For instance, in the scope of messaging products, if I say email, you immediately think of Gmail or Superhuman. If I say instant messaging, you think of text, Messenger, or Whatsapp. If I mention corporate or work, you think of Slack. All of the above are messaging products, but how you frame it determines its competitors.
I’ll give another example. Say, calls. If I say call, you think of phones. On the other hand, if I say meeting, you think of Zoom or Google Meet or Microsoft teams. And if I say casual call, you think of Discord.
Your competitors aren’t who you say they are; they’re who your investors think they are.
The goal of the one-liner
The greatest one-liners elicit:
Emotion
Curiosity
While they should do their job of describing your product, your one-liner is your CTA. For customers, that’s downloading the app, or jumping on a sales call. For investors, it’s so that you can get them to open your pitch deck or take the first meeting. Don’t skip steps. Your one-liner won’t get you a term sheet. So, don’t expect that it will.
Your goal is to tease just enough that investors become curious and get over the activation energy of requesting or scheduling a call.
To summarize a point I elaborated on in a previous blogpost on the psychology of curiosity, there are five triggers to curiosity:
Questions or riddles (i.e. a puzzle they can solve but others can’t)
Unknown resolutions (i.e. cliffhangers – though not something I’d recommend for a one-liner, you’re running on borrowed time)
Violated expectations (i.e. the afore-mentioned bike-sharing startup)
Access to information known by others (i.e. FOMO)
And reminders of something forgotten (i.e. empathy when they were founders or in the idea maze)
To share a few more examples, using Lenny’s list of one-liners:
Violated expectations – Dropbox, Uber, Duolingo
Access to information known by others – Tinder, Spotify, Amazon, Zillow
And reminders of something forgotten – hims, Pinterest
Just like any other human, investors are prone to all of the above. Use that to your advantage. And as you might have suspected, your one-liner depends on your audience. Different people with different goals and different backgrounds will react to different triggers.
In closing
There’s a fine balance between clickbait and a great hook. A balance of expectations versus reality. If you were to take anything away from this essay, I’ll boil it down to three:
You should promise just enough to get people excited and curious, but not more to the point where the reality of your actual product, or even your pitch deck, is disappointing.
Less is more. The simpler your one-liner is, the easier your message will spread. No one will remember the exact words of your 7-minute pitch.
Have some element of shock value to elicit curiosity – not only initially with said investor, but also with others he/she will share with.
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.
There’s this distinct memory I have from when I was 11. It was the second to last day of sixth grade – somewhere in the middle in the sweltering ’08 June heat. Despite efforts to hold them back, it was the first time in a long, long time that I cried in public. On a day when everyone was obsessed with signing yearbooks and bragging about summer vacation plans, my core teacher, Mr. S called one of my classmates and I up to his desk.
As soon as I realized his usual smiling demeanor was nowhere to be found, I knew something was very wrong. It turned out that my classmate had submitted the exact same final project as I did – one that I had painstakingly created over two months to be what I believed to be the most ingenious final project my sixth grade teacher would have ever seen. I don’t remember who that classmate was. Hell, I don’t even remember if they were boy or girl.
Between salty tears and choked hiccups, “She… she cop-… copied me,” I stuttered to Mr. S.
All I remembered was that the next few minutes flew by in a watery blur trapped above the floodgates beneath my eyes. I failed to hear a single word he said. I just stood standing facing the beige walls behind Mr. S’s desk. He pulled my classmate to the side to a conversation I was not privy to.
As time went on, my eyes drifted further up, hoping gravity would be kind to my waterworks today, until I was staring right where the west wall and ceiling met. And right on that horizon, I saw the words he hung against that beige wall since the beginning of the school year. A meme. Borderline, a dad joke.
Opportunity is now here.
But the ‘w’ and ‘h’ were so close together, when I first walked into Mr. S’s classroom, I thought it read: Opportunity is nowhere. When I asked, he once told me, “You know there’s a fine line between opportunity and lack thereof.” In a chuckle befitting of a dad, he continued, “The only difference is that you have to give yourself some space.”
And for the briefest moment, I remembering smiling just a little then.
After chatting with my classmate for a few minutes, they solemnly walked back to their seat and sat down. He beckoned me over, and waited a few seconds so that my sniffles wouldn’t drown out his soft, but firm voice.
“David, you should be proud [she] copied you. That means you have something worth copying.”
To this day, that line stays in my head rent-free.
Interest is a two-way street.
Eight years later, after crafting the perfect cold outreach email to someone I really respected, I received the most meaningful rejection email to date from her. Just four words. “Be interesting and interested.”
In fairness, it took me a few weeks before those words clicked, which I wrote about here. I was definitely interested in her background, but I hadn’t given her any reason to be interested in me. I wasn’t interesting. Or at least, I hadn’t painted myself to be an interesting person.
Interest comes in many forms. The ability to be useful. Being a host of exciting or inspiring stories. Strategic value. Bragging rights. Simply put, you need to have something that people want. They either want something from you, or they want to be like you. In Mr. S’s words, “something worth copying.”
Of course, maybe there’s a world where you don’t want people to know. For instance, Max Levchin once shared in Founders at Work. “If you patent [software], you make it public. Even if you don’t know someone’s infringing, they will still be getting the benefit. Instead, we just chose to keep it a trade secret and not show it to anyone.”
Or you might make your VCs sign NDAs. Which most of us aren’t a fan of.
In closing
If there’s anything you take away from this essay, it’s that:
I used to be crybaby, and
Have something worth people’s time and interest.
It doesn’t matter if you’re copied. Hell, it’s good that you’re being copied, or that there are similar ideas in the market.
At the end of the day, it’s not about the idea; it’s about execution. No one can beat you at being you. Do things that excite you. Do things that, if you were someone else, you would want to hang out with you.
Don’t ever have someone you meet with feel like they’ve wasted their time. Rather, make them feel like they got time back from meeting with you. That’s when you feel the magnetic pull of the people around you. And that’s when the people you want to meet and learn from will want to learn from you.
I’m once again reminded of two quotes. One of my recent favorites.
“Magic is just spending more time on a trick than anyone would ever expect to be worth it.” – Penn & Teller
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.
When your message lands in someone’s inbox, do they let out a sigh of relief – excited to click into that email – or are they dreading to click it open – knowing fully well that you may be tracking their open rate?
Your brand is what people say about you when you're not in the room. It's their first reaction when they see an email from you in their inbox. You build that brand – or not – with every interaction.
If you’re helpful, and I don’t mean that you think you’re helpful, you’ll get the former response. Communication, or for that matter, feedback and help, is not measured by what leaves your mouth, but by how much reaches the other person’s ears. If otherwise, you get the latter.
As the saying goes, a friend in need is a friend indeed. It is no less true in the world of startups. Your brand is built on times when others need you most. And there are two types of moments when others need you most:
When they’re in deep shit, and
When they’re an outsider.
The former needs no introduction.
There are 10-15 moments in a startup’s journey when shits hits the fan. And if you’re on speed dial when that happens, founders will remember you for life.
So, let me elaborate on the latter.
Insiders and outsiders
Who’s an insider? Insiders are:
Founders of unicorn startups
Early team members or executives at $1B+ companies
Investors who were some of the first ones to back at least one (ideally many) unicorn companies
Or best friends with at least one of the world’s top investors (or any of the above)
Who’s an outsider? Everyone else. That’s 99.99% of people out there. And I might be missing a few 9’s after the decimal.
Seedscout’s Mat Sherman wrote a great Twitter thread at the beginning of this year, one I’ve cited here and here about how founders who are outsiders can win at fundraising.
The no bullshit guide to raising angel funding/venture capital as an outsider.
If you take the other side of the table as an investor, specifically an early-stage investor, our job is to increase the aperture at the top. We define the archetypes of founders who will get funded by downstream capital. We decide what the funnel looks like. Simply put, we decide what obvious looks like.
Helping one outsider become an insider
If you’re someone who’s excited about putting ‘investor’ on your resume and is willing to put in the legwork for at least a decade to become a great one… Frankly put, if you intend to make early-stage investing your career, then you need to bet one someone non-obvious. Just one. You don’t need to help every founder out there, but every founder you do promise your time to must be worth it.
To me, there are four obvious reasons to bet on one non-obvious founder:
Brand: You’re building a long-term career in the venture space. This/these founders are going to be your reference checks when you raise a fund. And even if you don’t, the startup world is small. Gossip – both good and bad – travel fast. What makes or breaks a business is not in the capital, but in the people. Venture investing is in the business of people.
Deal flow: When that founders’ teammates goes off to build their own businesses, they’ll remember what you did for the founder(s). As such, you’ll be the first person they call when they start great companies.
Value-add: You gain tactical operational expertise. You learn the most when shit hits the fan, not when it’s smooth sailing.
Empathy. You understand to your core what it’s like to build a business today, which will be invaluable in relating to and with founders. Founders you work with in the future know you are capable of being truly founder-friendly, and that it isn’t just lip service.
In closing
When you bet on one non-obvious founder, you don’t have to invest in them (although that would help your own track record). But you need to be on their speed dial. You need to be willing to pick up their calls on weekends and at 2AM in the morning.
It’s going to be tough. Not nearly as tough as being the founder her/himself, but still tough. And it might not go according to plan. In most cases, it doesn’t. But when that founder tries again. You’re there again. Eventually, with superhuman grit and persistence, both of you (and more) will get there.
That is how you build a brand in the world of venture capital. Something I’m personally working towards.
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.
The Warriors went through one hell of a season. Even as someone who doesn’t live and breathe basketball, watching Stephen Curry this past season, especially during the finals with the Celtics was a thrill out of this world. He is undeniably one of the greats! Yet it’s fascinating to think that the world didn’t always see him as such. From being a 3-star recruit to the 256th-ranked player in 2006 to 7th pick in 2009, Curry’s gone a long way.
Stephen Curry really went from a 3-star recruit and the 256th-ranked player in the 2006 class to a 4x NBA Champion and the best 3-pt shooter in history. Absolutely incredible. pic.twitter.com/LLb8J3O33K
Though he recently won an Academy Award for Best Original Score for his music on Dune, Hans Zimmer‘s early music career was not easy. He had been thrown out of eight schools and only had two weeks of piano lessons. Yet today he is undeniably one of the greatest composers of our time.
When Stan Lee first pitched Spider-Man, his publisher thought it was “the worst idea I have ever heard.” The publisher himself told one of the greatest storytellers: “First of all, people hate spiders, so you can’t call a book Spider-Man. Secondly he can’t be a teenager—teenagers can only be sidekicks. And third, he can’t have personal problems if he’s supposed to be a superhero—don’t you know who a superhero is?'” The rest… is history.
In the making of Star Wars, George Lucas was rejected time and time again – from Disney to United Artists to Universal. And the one bet that 20th Century Fox took on him was for only a budget of $8M, that eventually became a $10M budget, when at the time, the best blockbuster films all had budgets of $20-30M. Yet, today Star Wars stands as one of the greatest cultural assets of the 20th and 21st century.
In the world of startups, the world’s most valuable companies are worth more than four times and raised half as much as the world’s most funded companies. Funding, in many ways, is a proxy for investor optimism in the early days that this company will be the next big thing. But investors, like any other person, can be wrong. In fact, startup investors are often wrong more often than they’re right. But it also goes to say the world’s best companies are non-obvious, in the non-consensus. In other words, underestimated.
As the above graphic shows, even if one picks right, we still grossly underestimate the potential of outliers. After all, humans are terrible at tracking nonlinearities:
The Post-it note was an result of a failed experiment to create stronger adhesives. But Dr. Spencer Silver, its inventor, kept at it, which led to his nickname as “Mr. Persistent” because he wouldn’t give up. Today, Post-it notes are sold in more than 100 countries, and over 50 billion are produced every year.
Google, one of the most recognizable names today, struggled to raise capital and find customers in the early days. Who needed another search engine? For 1.5 years, every search company approached by Larry and Sergey to consider Google’s tech turned them down. The pair funded Google on their credit cards and couldn’t even afford to hire a designer so regressed to minimalism.
Tope Awotona, founder of Calendly, started three failed businesses and emptied his 401k to fund Calendly. Yet despite his hustle and persistence, most VCs he talked to turned him down. Despite starting in 2013, it wasn’t till 2021 that Calendly had their A-round. Calendly took much longer to get the attention of external funding than many of its counterparts. The company is now one of the most popular scheduling tools and worth $3B.
But even when people got it right, they still underestimated the upside.
Even when Kleiner eventually backed Google, legendary investor John Doerr couldn’t believe it when Larry Page believed that Google could get revenues of $10B.
When Bessemer invested in Shopify, Bessemer thought that the best possible outcome for Shopify was a 3% chance of the company exiting at $400M. As of the time of this essay, it’s worth over 100 times more with a market cap of $43B.
If you invested in Amazon on the first day in 1998 at $5, most people would have sold at $85 in 1999 – a 17x in less than two years. But if they held to today, they would have made a multiple north of 600x. That said, selling itself is more of an art than a science.
… And the list goes on.
As Warren Buffett says, “the rearview mirror is always clearer than the windshield.” Our fallacy with estimation is painfully obvious in hindsight, but dubitably unclear in foresight.
Early on in my venture career, an investor once told me a profound statement. One that I still remember to this day. The best ideas – and often the leaders of tomorrow – often seem crazy at first. And because they’re crazy, they’re nonobvious. They’re in the non-consensus.
As Steve Jobs says, “the ones who are crazy enough to think they can change the world, are the ones who do.” The world’s most transformative individuals and businesses take on many more headwinds than those optimizing for local maxima. But history shows us that those that dream big consistently outperform those optimizing for marginal improvement. While there is nothing wrong with the latter, I hope the above anecdotes serve as a reminder rejection is not a sign of failure. Rather, it’s a sign that most people have yet to see what you see.
Your job is to teach them to see what you see. After all, the only difference between a hallucination and a vision is that other people can see a vision.
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.
