Ever since I started my career in VC, I’ve been trying to understand the concept of “intuition”. Yet, it wasn’t after I’d seen over 500 pitch decks and met over 100 founders before I began to have an inkling of what intuition meant. In fact, embarrassingly so, when I first started at SkyDeck, Berkeley’s startup accelerator, I thought every other startup I met was gonna be a winner. After all, it was rather rare that a founder wouldn’t be excited about their idea at the first meeting. I was told again and again by investors, one of the key drivers for a startup is the founder’s passion. I thought, well, the numbers might not be there yet. But with this founder’s excitement, they’ll get there eventually. And quickly, I mistook “hopefully” as “eventually”. Two words with very different meanings.
You don’t have to be a full-time investor to know that I was quite off the mark. I soon and quickly learned that passion can be faked, especially in the first meeting. And on that journey, I realized how important having a large and deep sample size was. Large, in the sense of number of founding teams I was meeting. Deep, in the sense of spending longer hours with these teams. Of course, realistically, I couldn’t spend more time with everyone I met, but that also meant I shouldn’t just spend half an hour with them and call it a day. My general rule of thumb became I was going to meet every founder at least twice, and at least a week apart. This gave me:
- Time to cool my head from the excitement of the meeting
- Am I more, less, or just as excited to meet them in meeting two as I was in meeting one?
- If I were [insert my mentor’s name], would I do the deal? Why or why not?
- Sometimes, it was really helpful to put myself in the shoes of someone’s who’s way more experienced than I am.
- Time to approach the opportunity more analytically
- Does it align with the macro trends I’ve seen?
- Do they have some early semblance of product-market fit? Why can that be an early proxy for it?
- Would I be a power user?
- Is their origin story enough to compel them towards this idea for the next 7-10 years? Are they meant/”destined” to do this?
- Would they be able to succeed without me? Without funding?
- Is venture funding a path they need to take towards growth? What about equity crowdfunding? Bootstrapping? Reaching profitability via a tweak in their business model?
Of course, there were, are, and will be exceptions.
Alfred Chuang of Race Capital recently shared his “co-founder test”: “People asked me so well, how do you determine this is a company you want to invest in. In early stage, I say if this company I want to co-founded with, that I will, in any moment jump on my own two feet in the building, the company would have found this, I don’t do it. Wow. Right. That’s where the conviction come from. Right? This is the ultimate gut test, you don’t pass that gut test, you don’t do it. So I urge the founders on either side to say, Well, think of me as your co-founder. If you don’t think of me as a co-founder, don’t do the deal with me.”
I recently tuned into one of Basecamp‘s Jason Fried‘s latest interviews, in which he describes how he chooses to pursue projects based on feel. Particularly when he gets the goosebumps. Similar to him, and I’m sure many others, I regret far more of what I say yes to than what I say no to. It’s not that I jump in knowing I will regret my decision. In fact, I’m usually pretty sure I won’t. Nevertheless, in only a rare few circumstances, is it a full-body yes, as Tim Ferriss would call it. VCs, as with any investor or buyer, aren’t immune to buyer’s remorse.
When imagining what could go right – the greatest, most impactful possible upside, does it send happy chills down my spine? Am I riffing off their energy and actively throwing ideas out? Am I unconsciously trying to hit my limit on words per minute? If so…
Some investors call it intuition. Others call it conviction. I’m gonna need my own pretentious phrase. Let’s call it the goosebump test.
My goosebumps will undoubtedly evolve over time. It will react to new stimuli, based on my accumulated knowledge and experience. It will also learn from the scar tissue that will form in the future. While I will try to follow my goosebumps as much as I can, they will undoubtedly also fail me at times. Just like how I wouldn’t be as excited now by some of the startups that got me excited back at SkyDeck, I imagine there will be a healthy handful that I do now that my body will learn from in the future. And I will continue to do my best to codify my learnings and share my scar tissue for myself and on this blog over time.
Photo by Stephen Leonardi on Unsplash
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