The Earth has once again gone through another orbit around the only star within four light years from us.
In the past version of David, I’ve published many blogposts. Yet one of the most continual topics that owns real estate in my mind is the idea of the 99 unsolicited, but more importantly, non-googleable (figuratively speaking) pieces of advice. I’ve already published two blogposts on the respective topics of entrepreneurship and VC. And am now compiling more and an additional set of life hacks. I imagine, at some point, I will for other areas of my life I want to spend mind space on. Asking questions. Hosting interviews. Events. LP stuff. Just to name a few.
In other words, I am on a constant search for tactical pieces of insight in the corners of both the internet and safely kept (often unwittingly) in the grey matter in 7.8 billion locations. Or simpler, I want to know what others know.
I was listening to a podcast featuring James Clear earlier this year. And in it, he said something I completely agree with. “Almost every idea you have is downstream from what you consume. When you choose who you follow on Twitter, you’re choosing your future thoughts.”
In an age that offers us a wealth of information and a million topics, posts, comments, videos, and algorithms that will distract us, it becomes ever more prescient to be a great curator. It doesn’t even have to be for others. At the very minimum, for yourself.
The amount of time I’ve scrolled through metaphoric cat videos on YouTube is appalling. And I realize that whenever I do, I face a dry spell of ideas. Luckily only briefly.
As of now, the world’s top social media platforms’ algorithms work against us. It surfaces us content we are likely to enjoy. Content that is high likely to reinforce our confirmation bias, as well as availability bias of the world. And the biggest problem with that is we are fed cousins of the same information rather than new, and possibly dissenting information that would challenge our beliefs. After all, these apps’ goal is to keep us on the platform. Not to close the app and do something meaningful with our lives. I’m excited for the day we get to build our own algorithms for consumption. But for now, it has to be more manual.
James Clear also goes on to say in the same interview when Tim Ferriss asked how he chooses which books to read. “First thing is you got to be willing to quit books fast. If you have baggage around finishing books, then you’re just going to be stuck and you won’t move on quickly enough.”
I’m guilty of the counterfactual. I’ve long prided myself on seeing things through. In fact, I still do. But at least on the consumption part, I’m slowing down my rate of learning. This year, I’m going to start measuring the number of books, articles, and podcasts I fail to complete, as well as the number of long form content media (i.e. books, movies, articles, podcasts, etc.) that have inspired an idea or an output. The goal is to optimize for learning and insight rather than completion.
Since this is the first year I’m measuring it, I won’t be able to measure the delta. But I’ll leave this encased in amber for David v29.0 and future iterations.
Doing things that are unteachable
My sixth grade teacher once told me, “David, you should be proud [she] copied you. That means you have something worth copying.”
I, like many others, spent the first 22 years of my life copying and learning from someone else’s or multiple people’s playbook. And often still do. The four years after I worked on being different. From the words of someone I look up to, “Be interesting and interested.” Where I put more effort into being interesting — doing interesting things, having interesting perspectives, asking interesting questions. I worked to create things worth copying. And when I started this blog, I followed that same ethos. I did and will continue to do my best to share my findings and takeaways. So that others won’t have to fall through the same potholes as I did.
At least, that was my belief until December 8th last year.
I hosted an event. An event I’ve never been more excited to host. An event where I was intentional about as many details as I could. And a byproduct of being in the flow state at least twice a week. While I’ll likely spend another blogpost taking a deeper dive on this topic, it occurred to me that events, just like any other medium of consumption — movies, books, podcasts, shows, and so on — should be stories. And every story has a beginning, a middle, and an end. But more importantly, every great story has:
An inciting incident — something that compels the protagonist to leave their current timeline to embark on something spectacular
A main plot (with sometimes multiple side plots)
Character development — the protagonist, as well as other characters, grow over the arc of the story
An ending where the reader (viewer or listener) can imagine no other (tipping my hat to Robert McKee)
And to use the reader (et al’s) time in a way that is not wasted (tipping my hat to Kurt Vonnegut)
To my joy, it was as great if not greater than expected. The feedback was phenomenal. In my excitement and post-event high, I shared with many friends, colleagues, and family about how I thought about the event.
And to my dismay, while most were happy for me, a friend told me:
“You’re built different. I could never do what you do.”
In subsequent days, two other friends told me the same.
And it reminded me of something John Fiorentino once said. “The things that are going to be valuable are the things you can’t teach or copy.” While I was initially dismissive of this corollary, I now realize there might be some truth to it.
So, how does that change the stories I’ll share here or anywhere? In the past few years, every time I do something new, there ‘s usually a voice in the back of my head that asks me, “How would you catalog this adventure on your blog? What would be the title of the blogpost? What kind of title works best for SEO?”
Going forward, I’m going to ask that voice to hush. Not to say I won’t share my learnings, but I’ll preface now that my future writings may not be written for search engine optimization. It’ll be raw. And from title to body, a truer expression of what I want to share.
So where do I go from here?
I’ve hedged to be fair my entire professional career. I’ve done tons, which on paper, seems like a lot, but I’ve never fully spent time immersing myself in only one thing. And nothing but one thing. I’m context switching all the time, which probably means I live 20-30% less of a day than a focused person.
So I’m going to have to take more risks. ‘Cause I’m starting to believe that in order to do something that cannot be copied, I’m gonna need to focus more.
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.
“Magic is just spending more time on a trick that anyone would ever expect to be worth it.” —Penn & Teller
Five years ago, back in 2018, I would have never guessed. But I fell in love with the soles of another person’s feet. And I knew this was going to be one of the most tenacious people I’d ever meet.
I was introduced to “Ben” by a dear friend with one line, “No one can outhustle him.” “Ben” grew up with an insatiable appetite to learn, in a village located on the outskirts of Cairo. He would spend many days and nights in conversation with village experts and the village library, until one day he noticed he learned all he could have.
It just so happens that there’s a two-hour bus to Cairo that comes once a week. And that was how he found the libraries in Cairo, where he realized his interest in AI. But due to the bus’ odd schedules, instead of riding it, Ben chose to instead walk ten hours to Cairo every week. He’d then download, read, and print (to bring back to his village) as many Stanford PhD research papers on AI as possible. Sleep overnight at the bus stop. Then the next day, walk ten hours back to his village, where he’d continue with his reading for the week with all the loose leaf papers he had.
Needless to say, he had the feet to show for it.
I shared that story with a friend two days ago at the perennially-packed Superhot. We were chatting about the traits we look for in founders we back and the questions we ask to get there. The latter of which I’ve written about before. And at the early stages, the chief thing we look for is grit. There’s a tweet I stumbled on this week summarizes that rather nicely:
The problem is it’s so hard to see if a founder has the qualities of a “white belt who never quit” in just one meeting, even a few meetings. So, instead of sharing what questions we ask founders — most of which I know are designed to be reveal tells of grit, and are at least to my friend and his team, proprietary to some degree — I’ll share why grit matters, not just as a founder trait, but as a variable in the fundraising process, and a story that I hope will inspire you.
Candy versus the meal
One of the frameworks I love thinking about is the difference between how people think and what people talk about. This is by no means original. I actually stumbled across this when watching Malcolm Gladwell on Masterclass. For instance, when people watched the most recent Avatar movie, they didn’t say “Here’s the plot of the movie.” They talk about their favorite scenes or how great the performance capture was for underwater sequences. Neither is all-encompassing of the movie, but it gets people excited. That’s what word of mouth is.
Malcolm Gladwell calls it the meal and the candy, respectively. The meal is how people think — what people take home. They sit down with it and take time to process. The candy is what people talk about. The parts of the narrative that are easiest to share and remember.
From a go-to-market presentation I did earlier this year
Candy without the meal is clickbait. A meal without the candy means no one will talk about the good work you do. So you need both.
Similarly, in the world of venture, when I, like most other investors get excited about a deal, assuming it’s a good one, don’t talk about the whole pitch deck. Neither do I get super excited about sharing the one-liner unless it’s actually something unique. Like when a bike-sharing company pitched their one-liner as “We make walking fun.”
What I talk about is what’s cool and what stands out. That’s the investor’s word of mouth. And that’s how you fill a round. Or get people excited to help you find investors who will. Things I shared before include:
“That startup that hit 130% net retention.”
“Customers literally write love letters to the founders.”
“That founder cold emailed a Disney exec for 300 days straight to inevitably close their first enterprise deal.”
“This founder started a podcast as a growth engine to 1/ secure his first 10 customers, 2/ bring on one of the best advisory board I’ve seen to date.”
As you might notice, it’s almost impossible to guess what each company does above with just what I shared. And it sure as hell doesn’t get investors to conviction with just that. But they’re powerful enough for investors to take a second look at and talk about. Among the above, the absolute favorite thing investors love to talk about with each other is a founder’s ability to hustle. And subsequently, their Herculean efforts that demonstrate grit.
Years later, my friend on Wednesday was still talking about a founder he backed who waited in the cold outside an exec’s office until he got a meeting. Then found unique ways to turn 20 minutes into 30 minutes into hours into their first enterprise client.
The thing is it’s rare to see this. Most people promise that they will, but the best founders have demonstrated this grit time and time again before, against seemingly impossible odds. And they’re only “impossible” if you’ve set lofty goals in the past and you did nothing short of your best to try and achieve it. I’ll give another example. One that I knew if he was to start another business, you knew he was going to make it happen.
Spoiler alert: He did.
From losing everything to acquisition
I first met Anthony at 1517 Fund’s quincentennial “anniversary” summit back in 2017, designed to bring together the world’s most divergent thinkers.
The first thing you notice about Anthony is that he had a small frame. A demeanor that belied his life experiences and the courage it took for him to share them. Yet, he has a way to command the attention of his audience.
He started his business back in freshman year of college delivering food to his fellow classmates at USC. It started off as a side hustle to earn some spare change. Something he didn’t expect would become something greater, until one day Mark Cuban came to USC to give a talk.
As the fireside chat ended sooner than expected, Mark polled the audience, “What if we did a live Shark Tank?” Anthony explained that while unsure if it’ll work, but not wanting to let a once-in-a-lifetime opportunity go, he decided to pitch this idea he’d been working on — which at that point, was not even an app, but just a series of text messages between friends who ordered food and friends who were willing to deliver them.
To his surprise, Mark loved it. Soon that snowballed into Anthony dropping out of school to focus on the business full-time. They got into 500, and he became a Thiel fellow. But one spring later, amidst the hype of a party in Vegas, he miscalculated a dive into the pool. Fractured his spine. And became paralyzed from the neck down.
In the ensuing months, his top priority was not to grow what became EnvoyNow, but to breathe, to drink water — to survive. His co-founders had promised him they would look after the business and that he should focus on recovery. So he did. Months passed. And while Anthony still sat in the occasional company meeting, he was focused on mobility and feeding himself.
A few more months passed by, and one day, his co-founders decided to visit him while he was still focused on recovering. And they broke the news. The business was stalling. Investors had lost faith. Moreover, both his co-founders had already lined up new opportunities and wanted to close the business down.
As I sat listening, I couldn’t help but wonder what I’d do in that situation. Anthony instead decided to go back full-time to the business and win back his remaining team and investors. He said, “I went back to our investors. I shared where we were at, which wasn’t good. And asked them to believe in me once more. They did once before, and as long as I showed I was still passionate about the business, I was banking on the hope that some will still continue to support us.” Luckily, a small handful did.
With renewed drive and determination, and a tough situation to get out of, within the year, they expanded to 16 schools and employed 1500 students around the nation. The rest is history. They sold to JoyRun. And Anthony went on to found more companies, including his current one, Vinovest, which he started 2019 and raised an A in 2021.
If you’re curious about the additional details to the story, there’s also a great 2017 Fortune piece cataloging his journey. I love the line Blake Masters, President of the Thiel Foundation, shared in that piece, “Good luck finding something that will hold [Anthony] back.”
In closing
There’s a fun little thought exercise a couple investors I know used to do (maybe still do). They first posed the question to me when I first jumped into venture, which is:
If you had two young founders… One went to MIT, graduated with a 4.0 GPA in computer science, and was summa cum laude. The other is a high school graduate, and instead of paying over $200,000 over 4 years, took every single MIT computer science course on Coursera in one year. All else held equal, who would you invest in?
Naturally, the answer biases towards the latter. Yet, in the past few years, or at least since I’ve been in the world of VC, there’s been a bunch of logo shopping and chasing the idea of “signal.” While no one says is explicitly, logos have become more important than the hustle.
Today, we’re in a tough market. One where we haven’t seen the light at the end of the tunnel. Hell, we don’t even know when we’re at the trough yet. Or at least, the lagging indicator that we are is a massive slowdown or lack of layoffs. Yet, we recently saw Google, as well as Microsoft and Amazon, go through cuts.
And so, it no longer matters who you’re backed by or where you’ve come from. As Engineering Capital’s Ashmeet Sidana said, “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.”
What matters is that you can make it out the other side. What matters is that you’re inventive and creative, that you can tighten your belt and put the pedal to the metal, and do what looks in retrospect as superhuman.
And that requires perseverance and the ability to learn. That requires spending more time on something than anyone would ever expect to be worth it. As you do so, you embark on what VCs call — insight development.
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.
“‘Mutation’ is simply the term for a version of a gene that fewer than 2 percent of the population has. […] Imagine enough letters to fill 13 complete sets of Encyclopaedia Britannica with a single-letter typo that changes the meaning of a crucial entry.” A fascinating line from David Epstein. One that makes you pause and think. I apologize that this is where my mind wanders to every time I read something that stops me cold in my tracks. The world of startups, at least in fundraising, is no different.
Let me elaborate.
While this is rather anecdotal, the average VC I know takes 10 or less first meetings in any given week. As an average of 500 emails land in their inbox every week, that’s a 2% chance of having your cold message land you a meeting. And that’s not even counting the heavy bias towards warm intros. In other words, to get noticed, you have to stray from the norm. A variant. A mutation.
The good news about being a mutated monkey with two left ears and an overbite hosting two dozen fangs is that unlike in nature, you can genetically modify and give birth to a mutated product of your choosing. While I probably could’ve used more floral language, I realize I’m also not writing a rom com, but a documentary capturing the cold realities of an investor’s virtual real estate. That has more eyes trying to peer into it than it has time, space, and most importantly, attention to open doors.
Your appearance on that stake of land is your debutante ball. The question is how will you grace the ballroom floor among a sea of people who have access to the same town tailors, dressmakers, and dance instructors as you do. A name. A subject line. And at most 50 characters to make a first impression.
The short answer is you don’t.
I also understand that in writing a piece on how to stand out in an investor’s inbox, I run the risk of sounding like every other Medium article who’s covered this topic before me. So, instead of sharing the five steps to get every investor to open your email, I’m going to share three examples, starting with some initial frameworks of how and some of my favorite thought leaders think about narratives.
As a compass for the below, I’ll share more about:
For the purpose of this essay, I’ll focus on cold emails, rather than warm intros. But many of the below lessons are transferrable.
The investor product
Blume’s Sajith Pai recently wrote a great piece detailing on what he calls the investor product. And how that is different from the content product — what customers see and hear — and the internal comms product — what your team members see and hear. Even in my own experience, I see founders often conflate at least two. They bucket it into the internal story… and the external story — bundling, ineffectively, the investor and content product.
In short, the investor product is the narrative that you tell your investors. A permutation of your personality and your vector in the market in a sequence you think investors find most compelling. That narrative, while not mutually exclusive, is different from the story you tell your customers. For customers, you are the Yoda to their Luke Skywalker. For investors, you’re the Anakin to the Jedi Order. The future.
Not all pitches are created equal
Just like expository writing differs from persuasive writing which differs from narrative writing, there are different flavors of fundraising pitches as well. Kevin Kwokboils it down to three.
Narrative pitches: What could be. What does the future look like?
Inflection pitches: New unveiled secrets. In Kevin’s words, for investors, “now is the ideal risk-adjusted time to invest.” Why is the present so radically different? Why is the second derivative zero?
Traction pitches: Results and metrics. How does the past paint you in glorious light? Admittedly, people rarely index on the past. So, traction pitches are on decline. It’s akin to, if someone were to ask, “What is your greatest accomplishment?” You say, “It has yet to happen.”
The truth is most early-stage founder pitches are narrative pitches, focused on team and vision. But the most compelling ones for VCs are inflection ones. One of my favorite investor frameworks, put into words by the an investor in the On Deck Angels community, is:
Do I believe this founder can 10x their KPIs within the funding window?
The funding window is defined as usually 12 to 18 months after the round closes. And usually the interim time before a venture-scale company goes out to raise another round. In order to 10x during the next 12 to 18 months, you have to be on either a rising market tide that raises all boats, or more importantly, the beginnings of the hockey stick curve in your product journey. Do you have evidence that your customers just love your product? For instance, for marketplaces, that could be early organic signs as demand converts to supply. In other cases, it could be the engagement rate post-reaching the activation milestone.
What channel does the pitch land in
While the message — the narrative — is important, the channel in which the pitch is received is just as, if not more important. As Reid Hoffmanonce wrote, “the cold and unromantic fact is that a good product with great distribution will almost always beat a great product with poor distribution.”
The truth is that email is a saturated channel.
While Figma’s Naira Hourdajian notes that this applies to any form of communications, not just politics, she put it best, “Essentially, when you’re working in politics, you have your earned channels, owned channels, and your paid channels.”
Owned — Anything you control on your own channels. Your website, blog, your own email, and in a way, your own social channels.
Paid — Anything you put out into the world using capital. For instance, ads.
Earned — Because others are not willing to give it to you and that it is their real estate, you have to earn it. Like press and in this case, others’ email inboxes.
On an adjacent point, the thing is most founders don’t spend enough time and effort on owned and earned channels when it comes to the content product. Both are extremely underleveraged. Many think, especially outside of the context of fundraising, and within go-to-market strategies, think paid is the only way to go. While powerful, it is the channel that carries the most weight post-product-market fit. Not pre-.
In the context of fundraising, I always tell founders I work with to always be fundraising, just like they should always be selling. There’s a saying that investors invest in lines, not dots. But the first time you pop up in someone’s inbox is, by definition, just a dot. Nothing more, nothing less. Rather, you should start your conversations with your future investors before you kickstart your fundraising. Ask for advice. Host events that you invite them to. Interview them on a podcast or a blogpost. Feature them in a TikTok reel. (Clearly, I spend the bulk of my time with consumer startups).
As you might have guessed, sometimes it has to be outside of the inbox. To get their attention, there are two ways you can pick your channel:
Target powerful channels in an innovative way,
Target powerful, but neglected channels,
And, target new and upcoming channels.
As such, I’ll share an example for each.
Powerful channel used in an innovative way: Email
In one of Tim Ferriss’ 5-Bullet Friday newsletters recently, I found out that Arnold Schwarzenegger handwrites all his emails.
Source: Tim Ferriss’ 5-Bullet Friday — Jan 13, 2023
It’s brilliant. Genius, I might say. I don’t know how much intentionality went into why Arnold does so, but here’s why I think it’s brilliant.
If you’re sending it to someone who owns a Gmail, you’ve just given yourself 100% more real estate (albeit ephemeral) in their inbox. If their inbox is set on Gmail’s default view. Additionally, via the attachment name, that’s 10-15 characters more of information you can share at just a glance. Or at the minimum, if they’re reading via the compact view, an extra moniker that most emails do not have. A paper clip. To a reader’s eyes, it draws the same amount of attention as a blue check mark on Twitter or Instagram.
Once they click open the email, instead of plain text, your reader, your investor, sees font that stands out from all the other email text. A textual mutation that leads to curiosity. Something that begs to be read.
Powerful, but neglected channel: Physical mail
When I started in venture, I didn’t have a network, but I knew I needed one. Particularly, with other investors. After all, I didn’t know smack. I quickly realized that email and LinkedIn were completely saturated. One investor I reached out to later told me that he doesn’t check his LinkedIn at all, since he got 200 connection requests a day. So, it begged the question: Where must investors spend time but aren’t oversaturated with information?
Well, the thing is they’re human. So I walked through every step of what a day in the life of an average human being would go through, then guesstimated if there were any similarities with an investor’s schedule. Meal time, time in the bathroom, when they were driving or in an Uber (but I don’t run a podcast they’d listen to). And, like every other human being, they check their physical mail. Or someone close to them, checks them.
I knew they had to check their mail for their bills (a surprising number of investors haven’t gone paperless). But it couldn’t seem sales-y because they or their spouse or assistant would immediately throw it out. That’s when I decided I would write handwritten letters to their offices.
The EA is the one who usually sorts through the stack, and is someone who also doesn’t get the attention he/she deserves. Nevertheless, I believed:
Handwritten letters are going to stand out among a sea of Arial and Times New Roman font.
The envelope had to be in a non-white color to stand out against the other white envelopes. So, I went to Michael’s to buy a bunch of blue and green envelopes. Truth be told, I thought red was too much for me, and often carried a negative connotation.
The EA or office manager has to deem it not spam or marketing, so including a name and return address is actually a huge bonus, AND a note that doesn’t seem market-y on the envelope (i.e. thank you and looking forward to catching up).
At the end of the letter, I’d write I’d love to drop by and meet up with them in the office. Then I’d show up at their office within the week, and say, “I’m here to see ‘Bob.'”
The EA would ask if I had an appointment, and I would say that he should’ve received a letter in earlier in the week that let him know I would be here. Then, the EA would go back and ask if ‘Bob’ was free. If not, I’d wait in the lobby until they were, without overstaying my welcome. If they weren’t in the office, I’d ask to “reschedule” and book a time with them via the EA. Which would then officially get me on their calendars.
New and upcoming channel: Instacart
In a blogpost I wrote in 2021, I recapped how Instacart got into YC:
Garry Tan and Apoorva Mehta have bothshared this story publicly. Apoorva, founder of Instacart, back in 2012, wanted to apply to Y Combinator. Unfortunately, he was applying two months late. So he reached out to all the YC alum he knew to get intros to the YC partners. He just needed one to be interested. But after every single one said no, Garry, then a partner at YC, wrote: “You could submit a late application, but it will be nearly impossible to get you in now.”
For Apoorva, that meant “it was possible.” He sent an application and a video in, but Garry responded with another “no” several days later. But instead of pushing with another email and another application, Apoorva decided to send Garry a 6-pack of beer delivered by Instacart. So that Garry could try out the product firsthand. 21st Amendment’s Back in Black, to be specific. In the end, without any precedent, Instacart was accepted. And the rest is history.
In the above case, Instacart in and of itself was the emerging platform of choice. The application portal and email here were both saturated and had failed to produce results. What I missed in the above story is that the 6-pack arrived cold, which meant that the product worked and could deliver in record time. A perfect example of a product demo, in a way the partners were least expecting it.
In closing
Siddhartha Mukherjeeonce wrote: “We seek constancy in heredity — and find its opposite: variation. Mutants are necessary to maintain the essence of ourselves.”
Variation — being different — is necessary for the survival of our species. That’s what evolution is. That said, what worked yesterday isn’t guaranteed to work tomorrow. ‘Cause that same mutation that enabled the survival of a species has become commonplace. The human race, just like any other species, replicates what works to ensure greater survival.
The same is true for great ideas. A great idea today — even the above three — will be table stakes at some point in the future. Thus, requiring the need for even newer, even more innovative ideas. Hell, if it’s not via my blog, it’ll come from somewhere else. With the rise of generative AI — ChatGPT, Midjourney, Dall-E, you name it, if you’re average, you’ll be replaced. If you don’t have a unique voice, you’ll be replaced. Some algorithm will do a better and faster job than you will. As soon as more people start using the afore-mentioned tactics, the above will no longer be original. As such, I don’t imagine the case studies will age well, but the frameworks will. That said, the only unsaturated market is the market of great. To be great, you must be atypical. You must go where no one has gone before.
For those interested in startup pitches that stand out, specifically how to think about compelling storytelling, I highly recommend two places that inspire much of my thinking on the topic:
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.
“A true friend is one who stabs you in the front.”— Oscar Wilde
Many years ago, in what seemed like another lifetime, I made a girl cry. Nothing to boast about. In fact, even today, I’m quite embarrassed that I did so. In a negotiation where I prioritized one small committee in a club’s priorities above the priorities of other committees, I felt that I was right in every way. I conceived a million reasons why rationally I was right — cost, our future members’ preferences, down to the stable marriage algorithm. I fell prey to pride and ego. And she broke down. Instead of apologizing, I walked away, asserting that the data supported my case.
The next day, I found solace among classmates and friends. They told me I didn’t do anything wrong. That they would’ve done the same thing. That the facts proved I was right. Until that evening, a good friend and someone I’d known since middle school, said, “You’re fucking stupid.”
He told me to drop everything and to go apologize in person right that instant. To hell with data and facts. He said that I forgot the very first principle of any negotiation… that there was a human being on the other side. And I didn’t treat her as one. He was the one person who opened my eyes up to the ego I was blinded by. So I did. In my realization, I felt terrible and even worse for needing someone else to tell me that I had to. But that’s the friend I needed. That’s what I needed to hear.
Something you might have realized if you’re a frequent visitor to this small piece of virtual real estate is that I’m not perfect. Nor do I pretend to be. The above example is evidence of that.
I was reminded of that when I was listening to Jonathan Abramson Venture Unlocked earlier this week. Where they brought up the topic of being founder friendly — a term that indubitably carries a lot of baggage. From the VC side, it’s jargon that’s been thrown around so much over the past decade, it’s lost its luster and meaning. From the founder side, many founders frankly just don’t get what it means. Why? Because no one actually defines it.
Over the years, I’ve seen and heard explicit and implicit definitions, including:
Not firing the CEO (even when they don’t do a good job)
Helping the founder grow as the company and CEO job description grows
Having answers to every question the founders ask
Asking (good) questions
Telling the founders what to do
The thing is, all the above are right and wrong at the same time. It’s situationally dependent. Ok, maybe except the last one. That one’s wrong all the time. Something you realize pretty quickly is that the investor is not in the driver’s seat. At best, we sit shotgun.
So, what does “founder friendly” mean?
Jonathan Abrams and the 8-Bit team says, “Do no harm.”
Fred Wilson says, “Saving your company from yourself may well be founder friendly.”
To YC, it’s being honest, transparent, responsive, and acting in the best interests of the company, shareholders, employees, and founders.
The truth is everyone has a different, but similar definition. Like product-market fit, it’s hard to measure and an amorphous term. It’s obvious in hindsight. But mysterious in foresight. Yet, as a founder, there are still many telltale signs on how helpful an investor actually will be.
Leading indicators to helpfulness
One of the reasons I love working with smaller checkwriters — be it angels or emerging fund managers — is that they often punch above their weight class. They’re insanely responsive. And are often more helpful than their check size. They may not be able to single-handedly fill the round, nor can their check get you to profitability, but they’re there when you need them. In other words, they hit high on the check size-to-helpfulness ratio, which I’ve written about before.
The first meeting
Interestingly enough, the first meeting is quite telling of how helpful investors are — regardless of the decision outcome. It could be in the form of investor intros, strategic advice, hard questions to consider, or key hires to make. In fact, they’ll make you feel like you got back days if not weeks, out of a 30-minute meeting. If you, as the founder, get nothing out of the first meeting, then you likely won’t get much when they are on your cap table. The most helpful investors don’t waste time. Not theirs. But more importantly, not yours either. They know that each time you meet with them is time away from building. And they’ll make that time worthwhile.
As an investor, the golden standard should be to be helpful in every meeting. And I don’t mean ending the conversation with “Let me know how I can be helpful.” That’s reactive.
For one of my good friends, that means that if he takes a meeting with you — whether he chooses to invest or not, he will write a 3-5 page bug report on your product. For some of my other friends, it’s that if they take a meeting, they’ll nine out of ten times set up an intro. Instead of asking “How can I be helpful?”, one should ask “What do you need help on?” or “What are the biggest obstacles that prevent you from reaching your 6-12 month goals?” Then, proactively trying to find some way to help.
That said, the afore-mentioned investors’ bar for taking a meeting is rather high.
Response rate
Another proxy for helpfulness is how fast they reply to your emails. Many of the investors who I know are insanely helpful have a system to respond to founders quickly. Moreover, if the decision is a ‘No’, they don’t shy away from sharing that and why they decided to pass. Of course, the latter is not possible for every inbound pitch. But at the very minimum, are table stakes if you’ve already jumped on an initial live conversation with them.
Here, within 24 hours is epic. 48-72 hours is great. And anything longer becomes a dime a dozen.
Inactive founders sing them high praise
It’s always important to do your homework on your investor. One of such ways is talking to other founders they backed, especially the ones who are no longer founders or no longer pursuing the original idea they were backed on. Active portfolio companies are likely to still give lip service to their investors, especially when they are a large portion of their cap table. So, when you ask, “Was this investor helpful?”, you’re likely to get an overly politically correct answer. Rather, the question I recommend asking is:
“If you were to start a new company, who are the three investors — big or small — on your current cap table that you would kill to have back on?”
Conversely, if you talk to former portfolio founders, they’re likely to be a lot more honest as they don’t have a currently active relationship with the investor. Or if they still do, the investor must have done something right.
Lagging indicators to helpfulness
While not the intended purpose of this blogpost, I can’t help but shed some additional context for investors out there. In my recent conversations with GPs and LPs, I noticed a common thread among the GPs who are capable of raising a fund even in a down market. It’s that the founders they back who went on to raise A, B rounds, or greater, come back to invest in their early believers. The people who made a difference in these founders’ lives.
So, whenever I meet an emerging GP asking for fundraising advice, one of the first questions I ask, outside of these five questions which determine if they’re ready to start a fund, is:
Have any of the founders you backed before committed to your fund?
Goodwill and helpfulness builds flywheels. When your founders go on to win, if you’ve been helpful, they’ll want to pay it back.
Tangentially, it’s why the team at Ludlow Ventures says, “There is no greater compliment, as a VC, than when a founder you passed on — still sends you deal-flow and introductions.” So, getting deal flow from founders you pass on means, either:
They still want something from you; or
You were really helpful that they want to send all their best founder friends to you.
Hopefully, it’s the latter.
In closing
At the end of the day, no one’s perfect. Not the founders. Not the investors. No one. And it’s okay.
In the current world of chaotic down markets, high interest rates, and more, this is the time to build goodwill. This is the time to be truly founder friendly. If you have less liquidity, you can always help in many ways outside of pure capital. After all, capital for founders is a means to an end, not an end in and of itself. Sometimes it’s just being honest, candid, and transparent with the founder.
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.
In 2016, I jumped into the VC world, knowing no better than what my forefathers and foremothers taught me. Outside of a handful few, many of the people I looked up to and sought for advice had been in the business for less than a decade. In effect, they started their investing career after the GFC (Global Financial Crisis) in 2008. While they still bore more scar tissue than I did, I learned quickly that the one question to ask founders early on was “What is your last round’s valuation?” or “What valuation are you seeking?” For the latter question, the implicit answer we sought out for was their 12-month revenue. And subsequently, their valuation multiple. In Mark Suster‘s words, we were “praying to the God of Valuation.” But really, their exit multiples matter more than the entry or current multiple.
For fund managers and partners, the question was “What is your IRR or TVPI?” or “What’s your AUM?”. Rather, the answer we should be seeking isn’t some function of their portfolio’s valuations, but the quality of the businesses they invest in.
To be fair, I failed to fully appreciate the latter answer until this year.
The odds aren’t bad, but that doesn’t mean they’re great
Jared Heyman wrote a great piece last year on the probability of success for YC startups. After parsing through the data, he found that after a couple years of survival, a startup is just as likely to go through an exit (i.e. acquisition or go public) as it is to fail (i.e. inactive). Additionally, ~88% of startups reach resolution (exit or inactive) around the 12-year mark.
It’s also interesting to note that the average time it takes for a YC company to exit (if they exit) is seven years. In fact, the time horizon has shortened in the past few years from an average timeline of nine years to five. Of course that’s pre-2022, so the time to exit is likely to increase once again to the mean or longer as:
Markets are less liquid. Valuations drop. Rounds are smaller. Buyers are less eager to buy. Founders have less access to liquidity and exit opportunities. As such, the markets will demand more proof from founders of market traction.
Investor sentiment is guarded, echoing Howard Marks. I haven’t seen the newest numbers but at best, I imagine we’ll see more capital go towards existing investments, maintaining overall investment volume. At worst, a decline of capital deployment, outside of ephemerally “hot” industries, like generative AI.
Investors’ key worry is investment losses. Investors up and downstream become more risk averse.
Interest rates are rising to curb inflation, leading to a debt investor’s market rather than an equity investor’s. Founders are likely to turn to expensive debt instruments (and many already have). Higher interest rates also mean greater return expectations from investors.
Jared does note in another piece that “while YC startups may cost 2-3 times as much as their non-YC peers to investors, they’re worth 6-7 times as much in terms of expected investor returns.” It’s great to be an LP in YC, but tough to be choosing YC startups. Of course, at the very end there’s a gentle reminder that VCs (and angels) are defined by the magnitude of their successes rather than the number of their failures (and successes). Just because a portco gets to an exit doesn’t mean it’ll be a fund returner. With shifting markets, this will be as true for YC under Garry’s leadership as for any other fund.
Of course, I don’t mean to pick on YC. They do a tremendous job of picking founders. And it’s true that they have set the golden standard for startup accelerators. It’s just that the above data was easily accessible.
Portfolio consistency
Interestingly enough, Oliver Jung, Airbnb’s former VP International, wrote half a month later that Adinvest’s Fund II made him $200 on every dollar he invested in the fund, largely because of a 1000x Adinvest II made into Adyen.
That’s a phenomenal outcome! To make investors back $200 on every dollar invested is definitely one for the books. The question becomes (and I have no inside scoop on this): How did the rest of the portfolio do? Was Adinvest’s Fund II purely based on luck or is there a consistent model that can be replicated in future funds?
For that question, it begs another. If we took out Adinvest’s investment in Adyen, what is the DPI (distributions to paid-in capital) of the rest of the fund? That will dictate Adinvest’s ability to raise a subsequent fund, at least from the larger, more sophisticated LPs. A great and consistent portfolio may look something a little like this.
Given that the average fund’s returns (with a large enough portfolio i.e. 100 portcos) normalizes to a 3x gross return — venture’s Mendoza line, 3-5x would put you in the ball park of good. High single digits would put you in the great category. And double digits would put you in epic.
And if Adyen really was the sole outlier success, did the GPs have the conviction to double down in subsequent rounds? If so, how did they earn their pro rata?
Sometimes all you need is one investment to push you from a nobody to a somebody, but if you’re intent on building a multi-decade-long career in the space, your founders should see you in the same or better light than those equipped with asymmetric information (i.e. those who read about you in the media).
While many Fund I’s and II’s may not have a reserve ratio, were the GPs and LPs able to continue to invest via SPVs? By doubling down, it’s the difference between a strategy to win and a strategy not to lose. How much of Adinvest’s AUM does their investment in Adyen account for? And being a fund manager means balancing oneself on the tightrope between the two strategies. In doubling down, that investment becomes a larger percent of the capital you manage (AUM). If you lose, you lose much more. If you win, you win a lot more.
Of course, this is true for any fund. I ended up overly picking on the case study of Adinvest to illustrate the point, but I have nothing against the great success Oliver, the other LPs and the team at Adinvest did have. On a broader spectrum, the purpose of having many shots on goal is theoretically so that you will have a few outliers. So your fund can grow based on a consistent strategy.
There are many times when all you have is that one outlier (often still in paper returns, not distributions yet). It happens. I’ve seen it happen. But if that one doesn’t work out, how forthcoming are you with your “disappearing TVPI?” I imagine a lot of investors who are planning to raise in 2023 will come face to face with these questions, having made big bets on hot startups in the last two years. Will you shrug it off? Or will you candidly share the lessons in which you learned?
The above is just something I’ve thought about a lot more as I see more emerging GP fundraising decks, as they boast about their angel portfolio (if they did have one).
In closing
There’s a proverb that goes: A broken clock is still right twice a day. You can be the worst investor out there, but with enough swings at bat, you’ll still be able to hit some outliers.
In the world of investing, you’re guaranteed to be wrong more often than you’re right. But I’ve seen many that do a lot of stuff ‘wrong’ and still have a winning fund. The big question… and the question, sophisticated and institutional LPs are asking is: Is it repeatable?
So, even if you did hit some home runs, is your success repeatable?
One last footnote. In talking with a number of investors who’ve been in the business for more than a decade, I’m starting to realize that selling (i.e. knowing when to sell and how much to sell) is just as important. An art and a science. I’ve written about it before (here and here), but I imagine I’ll revisit the topic again in long form soon. Especially as I see more discourse on the topic and funds close and liquidate in the near future. From great ones like Union Square Ventures to those who need to return some DPI to raise their next fund.
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.
This year I learned a lot. From the fact that most of my readers love to read my blogposts on Wednesday 2PM Pacific to how I could get general partners — some of the smartest people in VC — to be vulnerable and candid to how to set up an SPV from scratch (without the help of any platform). It’s been a rollercoaster. And I loved every second of it.
My blog grew modestly. No hockey-stick curve. And that’s okay. I enjoyed inking each word. To me, that’s what makes this blog worth it.
I’ve written 87,000 words, with over a third fewer posts than last year. I want to say I was busy. And I was. But another equally true reason was that I was scared to disappoint. I wasn’t content publishing half-baked ideas. And it sucks when I know I wanted to write more. How? Because as of today, I have 53 drafts just sitting in my WordPress folder. With 245 total published essays, that’s a sixth of my thoughts I withheld or postponed because I thought: “They’re not good enough.”
Comfort is powerful. And earlier this year I found myself resigning to habitual cycles I had developed in the year prior. A fear manifested into reality. So I made a promise to myself to escape the clutches of complacency.
But while I hesitated on the writing front, I chose to take risk elsewhere. I took big bets. For one-way door decisions, bets I didn’t wait for a 100% conviction on. And just jumped when I got to 70%. As a function, I had many firsts.
It’s the first economic downturn I’m living and working through (2008 and the dot com era don’t really count as I was still in grade school).
For the first-time I broke my streak of writing weekly since the inception of this blog. While I can blame servers and bugs, the reason was simple. I just wasn’t prepared enough.
I set up my first SPV (special purpose vehicle) from scratch. With a s**tload of help, but yes, from incorporating to legal docs to setting up bank accounts, and so on.
I started interviewing LPs in fireside chats — something I never imagined I would end up love doing or be capable of doing.
I hosted my first social experiment-like event paid for and sponsored by investors for investors, rather than my usual audience of thrill seekers. Based on the feedback, I’d say it was a success. Many learnings and an indispensable village helping behind the scenes. A handful of things that could have been better. But a night of surprises. And I learned — something I hope to share more in the future (as I have larger sample sizes) — events, just like books, movies, shows, podcasts, and so on, are stories. And stories have settings, character developments, plots, a climax, and an end where the audience can imagine no other (to steal a line from Robert McKee).
Additionally, I…
Took my first vacation, not touching any work at all, in six years;
Went to my first traditional Vietnamese wedding; hell, travelled to Southeast Asia for the first time;
Successfully made fruit chips en masse;
Realized my favorite photo mode is portrait mode;
Built my first PC;
Put together my first career manifesto — my professional raison d’être.
And it’s still not enough.
But I digress. While I wrote far fewer posts, 2022 was the year I wanted to make things count. As Muhammad Ali once said, “Don’t count the days; make the days count.” The below, while I wish I had a longer list, are the blogposts that counted.
2022’s Most Popular
The below are the essays that I published during 2022, and generated the most views, ranked from most to 5th most:
The Emerging LP Playbook – I never expected this one to take the top spot this year. Borne out of a personal curiosity and an attempt to better understand the black box industry of LP investing, ever since Andrew Gluck put “emerging” and “LP” back-to-back on a Zoom call, I had to learn more about it. The truth is I only knew a handful of known LPs at the time, but I’m happy this piece has expanded the horizon for not only myself, but everyone else out there who’s read this curious piece. It answers just one nexus question: For a first-time LP, where do you start?
99 Pieces of Unsolicited, (Possibly) Ungoogleable Startup Advice – I’m a collector. And have been so for a while. Specifically, a collector of quotes. I have journals dedicated to them. When the pandemic hit, I had a thought, what if I collected 99 soundbites (some albeit my own) about being a founder? All tactical. And each will share an actionable lesson. And I shared them. I didn’t know how long it’d take, but I knew that 99 sounded like a good number.
What Does Signal Mean For An Early-Stage Investor? – The word ‘signal’ has been thrown around quite a bit in the last two years — 2020 and 2021, if you’re a time traveler and reading this in the future. For instance, an investor would look for ‘signal’ before investing in a deal. In the above blogpost, I break down exactly what ‘signal’ means. And I imagine, in whatever time period governed by FOMO (fear of missing out), ‘signal’ will rhyme.
99 Pieces of Unsolicited, (Possibly) Ungoogleable Advice For Investors – Just like the one I wrote for founders, soon after, I thought I’d put a list of 99 soundbites for investors. And as I jumped at the opportunity to work with the brilliant team at On Deck Angels, I was living and breathing everything about investors — from angel investing to fund investing. Of course, you can sense my heavy bias towards to latter.
All-Time Most Popular
The funny, yet in hindsight, unsurprising, thing, is that the below are perfect examples of the power law, collectively generating 90% of the views ever on my blog. The below ranked in view count popularity:
The Emerging LP Playbook – I wrote this piece for myself and other investors looking to be LPs. Unsuspectingly so (at least in foresight), this piece generated a huge amount of excitement not only with my initial intended audience — who, I thought, was a niche audience — but also among many VCs and angels out there. I rarely write in hopes to change people’s minds. I’m not much of a persuasive writer, but rather I hope my words offer oases for people searching for answers in a desolate desert. But of the feedback I’ve gotten, it has surprisingly changed a number of people’s minds about LPs, as well as about different asset classes to invest in.
10 Letters of Thanks to 10 People who Changed my Life – To this day, it still baffles me how this is the most perennially popular essay I’ve written. The SEO keywords I’ve optimized for here are all related to Thanksgiving, yet the fact that search engines bring me new readers every single week without fail is an enigma I’m still unravelling. That said, I am thankful to everyone who’s given me and the 10 people I am deeply thankful for that year the attention and time out of your busy schedule.
How to Pitch VCs Without Ever Having to Send the Pitch Deck – Teach them something new. Many founders who’ve worked with me can attest that that’s been my favorite line to lead with when they ask for fundraising advice. This blogpost and the person behind it (who’ll stay anonymous for now) is the reason for that.
#unfiltered #30 Inspiration and Frustration – The Honest Answers From Some of the Most Resilient People Going through a World of Uncertainty – (Part two of which you can find here.) Interestingly enough, I knew this one would stand the test of time. Something we learn in Econ 101 is that business cycles come in booms and busts. And they oscillate between great times and bad times. The human emotion, our daily lives, and our careers are no exception. Collectively, I queried 42 world-class professionals about their greatest motivators. What keeps them going? I ask them two questions, but the catch is they’re only allowed to answer one of them. These pieces are a gentle reminder that bad times, like good times, never last.
Most Memorable Pieces in 2022
In writing each of the below, I felt the needle move forward. Not for the world or for the people immediately around me. But for me. That I myself took one small essay forward, but a disproportionately giant leap in the way I thought about the world around me. Each is the culmination of not just a few hours of writing, but of many things more. Provocative conversations. Research deep dives. And generous people.
In no particular order, if I were to hide pieces of my 2022 soul and mind in Horcruxes, they would be in the below:
The Emerging LP Playbook – You’ll realize that this blogpost appears in all three lists. The first two are outside of my control. But the reason it appears here is this piece catalyzed a spark that’ll come more into fruition in 2023. A spark that emerged from realizing the massive information asymmetry between LPs and GPs. Hell, even between LPs.
How to Develop Intuition as a Rookie Startup Investor – This dates as far back as 2017, when I first inked the thought in my notebook. The thesis was simple. Intuition — one’s sixth sense was a subconscious function of the mastery of the other five senses. But then, I felt ill-equipped to explicitly describe what other investors were feeling, and over time, what I was feeling as a function of what I was thinking. In it, I share each of the questions I consider and their respective answers that inform each of my senses (sight, hearing, taste, etc.).
How do You Know if You Should Professionalize as an Investor? – I love asking questions. To the point, and I don’t mean this in a tongue-in-cheek way, that often the best way to answer a question is with another question. I’ve gotten the above question many a time this past year, and this piece is a permutation of what helps me get to first-principles thinking when it comes to: Should you raise a fund… or stay an angel?
Five Tactical Lessons After Hosting 100+ Fireside Chats – I love hosting interviews. I really do. Part of it is due to the fact I love asking questions. The other half is… well… the average coffee chat is 30 minutes long. Half of it disappears after exchanging pleasantries. So, the big question is: How do you get more time with people you respect? One answer among many is by giving them a stage. That said, as I was doing my homework to be a better MC, the information out there is either paltry or too generic. So I made a promise to myself that as I do more myself I’ll share all the non-obvious lessons I learn. So that others can do better than me. And I hopefully, get to learn from them as they get better.
When Should You Sell Your Shares As An Investor? – Selling is really an art more than science. Like investing, often obvious in hindsight, but painfully scary in foresight. And to be a great investor, you have to distribute your earnings. And in order to earn, you have to turn something illiquid into something liquid. This piece was one of my first explorations behind what makes selling hard and how some of the best do it.
Quirks That Just Make Sense – Maybe there’s a bit of recency bias here, but this is something a few of my friends have known about me for a while. I just never had a good excuse to talk about it publicly. (Weird that I thought I ever needed an excuse to). But my good buddy Matt brought me out of my shell a few weeks back. And together we put together a piece about the quirks we carry and the origin story of each. Coincidentally enough, just watched Garry Tan’s video yesterday about a similar topic.
In closing
Cheers to a year of life lessons, friendships, skills and experiences acquired that were well worth the ride! And many more to come! If there’s ever any topic you would like me to write about in the future, don’t hesitate to let me know. I have two nominations already.
To peruse one of Kurt Vonnegut‘s lessons, I hope to continue to use your time in a way that you feel is not wasted.
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.
It’s not often I get to work with someone I deeply respect on the content front. In fact, in the history of this blog, I’ve never done so before. But there are a rarified few in the world that if I was ever given the chance to work with them, I’d do so in a heartbeat. Tom White is one of them. As someone who I had the chance to work briefly with when our time at On Deck overlapped, he is someone I’ve been continually enamored with — both in how he commands the English language and in how intentional and thoughtful he is as an investor.
So when Tom reached out to collaborate on a blogpost for the Stonks blog, it was a no-brainer. And, the below is that product on how founders can own their fundraising process.
David’s note: Tom never ceases to amaze me on his ability to meme anything.
It’s a tale as old as time.
After a good meeting and a great pitch, the VC across the table (or on your screen in this day and age) offers a forced smile and utters: “Thanks again for making the time. Let me circle back internally and we’ll get back to you if we’re interested.”
If you have ever fundraised as a founder — hell, if you’ve ever fundraised, period — you have heard those fatal few words many more times than you care to remember. Though frequently said, the pangs of disappointment and frustration that they impart seldom fade away.
Fear not fellow founders!
To ensure you never hear those dreaded words again, we turned to the one and only David Zhou. A “tenaciously and idiosyncratically curious” writer and investor per LinkedIn, David pens the inimitable, brilliantly-named Cup of Zhou, scouts for a number of VCs, and helps run the On Deck Angel Fellowship.
Your ability to raise capital is directly proportional to your ability to inspire confidence in potential investors.
I’ll get into that, however, first a brief aside.
One of my favorite lines in literature comes from the seventh book of the Harry Potter franchise: Harry Potter and the Deathly Hallows. Inscribed on the golden snitch is a simple, but profound phrase: “I open at the close.”
In many ways, that line alone echoes much of the world of entrepreneurship. Whether backcasting from the future as Mike Maples Jr. puts it (i.e. great founders are simply visitors from the future) or breaking down your TAM to your SAM then SOM, the greatest founders — no, storytellers — start from the end. They share the future that they wish to see and distort today’s reality to fit into that predestined mold. Without further ado, my five tips on willing the future you want to see via successful fundraising.
1. Measure Founder-Investor Fit
Before you dive into talking with every investor under the sun, you must first understand there are more investors out there than you possibly have time for. You will never pitch every single one, nor should you. You need to be judicious with your time.
As you raise your first institutional round, you’re seeking out early believers. Julian Weisser — an investor with whom I’m lucky enough to work — calls this belief capital. You’re selling a promise, a vision.
And let’s be honest, at pre-seed there is no amount of traction that will convince any investor with numbers alone.
You see, it’s all about narrative building.
More on that below, but for early investors, it’s about whether they not only believe, but are also willing to fight for the future you collectively desire.
2. Close the First Meeting
I recommend that many founders with whom I work ask a two-part question heavily inspired by my conversation with Hustle Fund’s Eric Bahn for my emerging LP playbook: “Critical feedback is important to me in my journey to grow as a founder and a leader. So I hope you don’t mind if I ask, given what you know about my startup and myself: On a scale of one to ten, how fundable am I?”
To be honest, the number they give is inconsequential. That said, if they give you a ten, get a term sheet on the spot.
The more important question is the following one: “Whether I didn’t share it yet or don’t have it, what would get me to a ten? What would make this startup a no-brainer investment?”
Collect that feedback.
Put it in your FAQs.
Incorporate it into your next pitch.
Test and iterate.
I was listening to Felicis Ventures’ Aydin Senkut on Venture Unlocked recently and he mentioned that he iterated on his fund pitch deck every single time he got a no. And by the time he received his first yes from an investor, he was on the 107th version of the pitch deck.
As such, the answer to the second question should help you preempt and address concerns—explicit or implicit—in future pitches.
I discovered the below courtesy of the amazing Siqi Chen. Per a 2015 Harvard study, most people believe that people make decisions by:
Observing reality
Collecting facts
Forming opinions based on the facts collected
Then, making a rational decision.
But the reality is, people do not. People aren’t rational and investors are no exception.
Like everyone else, investors:
Are presented with facts.
Fit facts into existing opinions.
Make a decision that feels good.
Most of these opinions are not explicit. It’s neither on the website nor laid out in the firm’s thesis.
The good news is that most investors will share the same reservations. If one investor hesitates about something, another will likely do so. The best thing a founder can do is to address it before it comes up.
For example, if an investor tells you that if you have a better pulse on the competitive landscape, you would then be a ten. In the next version of the pitch, you might say “You might be thinking that this space is highly competitive, and you’re right. At a cursory glance, we all look like we tackle the same problem and fight over the same users. But that’s when this space deserves a double take. Company A is best in class for X. Company B is second to none in Y. But we are world-class in Z. And no one is offering a better solution for Z. Not only that, customers are begging for solutions for Z. One in every five posts on Z’s subreddit asks for a solution like ours. But if you look at the responses, no one has a perfect solution for it. In fact, people are duct taping their way across this problem. Not only that, in the past three months, since we shared our product on the subreddit, we’ve had 10k signups to the waitlist with 500 of them paying a deposit to get early access to our product.”
On that note, I don’t think it’s worth trying to change the original investor’s opinion after they share such feedback. Most of the time, you’ve unfortunately lost your window of opportunity. If it takes X amount of information for an investor to form an opinion about you, it takes 2-3X the amount of effort and time — if not more — for him/her to change said opinion and form a new one.
Lastly, per Homebrew’s Hunter Walk: “Never follow your investor’s advice and you might fail. Always follow your investor’s advice and you’ll definitely fail.”
3. Schedule the Second Meeting during the First
Say the vibes are right and you get the impression that the investor really loves your product and/or your problem space and/or you as a person. When you’re raising your first institutional round, it’s either a “Hell yes” or a “No.”
Open up your calendar at the end of the first meeting and schedule your next meeting there and then, but be sure to give the VC enough time to talk with his/her team and also suggest where their firm might want to dive deeper. Give three options for topics to dive into the next meeting. For instance:
The team and future hiring plans
The vision and financial projections
The product, demo, and team’s current focus
From there, have the investor pick one of the above before your next meeting. If they don’t, say something along the lines of: “During this conversation, you seemed to love to hear about the product, so we’d love to dive deeper into the product the next time around unless you prefer one of the other two options.”
Also, start tracking which paths seem to convert investors faster. For example, if 30% of the investors you talk to jump into diligence after hearing the vision, but only 15% convert after the product path, lead with the vision one first next time. “Most of our investors fall in love with us after hearing about the vision, and would love to share more on that at the next meeting.”
The moral of the story is simple: make it easy for your investor to say yes to the next meeting.
4. Realize that ‘No’ is merely a ‘Yes’ in Disguise
If you get the feeling that it may be a no, ask the investor, “What firm/investor do you think I should talk to who might be a better fit for what I’m working on?”
Do not ask for introductions. An introduction will come naturally if an investor is really excited about you. Additionally, even if the investor who passed does introduce you, a natural question will be: “Why didn’t you invest?”
This sets you up for failure because the other investor’s first impression of you will be negative. The only exceptions are if the reason is outside of your control. For instance, they’re raising their next fund since they don’t have any more to deploy out of the current fund, or they’ve recently changed their investment thesis away from what you’re building.
But I digress. What you should do instead is collect a Rolodex of names.
Never ever run out of leads. You never want to be in the position to beg someone who turned you down for money.
When a certain investor gets mentioned more than once — ideally at least three to four times — that’s your cue to reach out to them. “Hey Tom, we haven’t met before, but I’m currently fundraising for David’s Lemonade Stand. And four investors highly recommended I chat with you on the product, given your experience in food-tech and how you helped Sally’s Lemonade Bar grow from 10 to 500 customers.”
5. Use Investor Updates
Send interested investors weekly investor updates during your fundraise and monthly ones after its conclusion. Share important learnings, key metrics, and your fundraise’s progress.
Be sure to induce FOMO in your updates. Not in the sense that your round is closing soon, rather, that you’re at an inflection point right now in both your product and the market. Two example prompts:
Why are you within the next 12-18 months “guaranteed” (I also use this word hesitantly) to 10x against your KPIs?
Is the blocker right now a market risk (which leaves a lot for debate, and most investors will choose to wait for a future round) or an execution risk?
How have you de-risked your biggest risks?
Taking this a step further, you need the courage to “fire” an investor. If an investor doesn’t get back to you after two emails, it could just be that they’re busy. If they don’t get back to you after eight or nine emails, they’re just not interested. My rule of thumb is always three emails each a week apart for each investor. I have seen founders who have done more, but I would not recommend any fewer.
Regardless, whatever number you decide on, the last email ought to try to convert them. For examples:
“Since you haven’t gotten back to me yet about your interest, I assume you’re not interested in investing. As such, this will be our last investor update to you. If we are wrong, please do let us know.”
Interestingly enough I’ve seen more investors start conversations by this last email than by the very first. Remember to treat your fundraise like a sales pipeline; A/B test different copy and see which lands the best.
Concluding Thoughts
Remember, fundraising is a lot like life: it’s simple, but far from easy. It requires grit, determination, and a healthy dose of elbow grease. Despite current market conditions, forge ahead! Follow Jim Valvano’s lead and “Don’t give up. Don’t ever give up!”
Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!
Any views expressed on this blog are mine and mine alone. They are not a representation of values held by On Deck, DECODE, or any other entity I am or have been associated with. They are for informational and entertainment purposes only. None of this is legal, investment, business, or tax advice. Please do your own diligence before investing in startups and consult your own adviser before making any investments.
Last Friday, one of the greatest operators and super-connectors I know, who also moonlights as an angel investor, asked me: How do I know if I should professionalize as an investor?
Undeniably, a great question. But before I share my answer to her question, I thought it’d be best if I first elaborated on what “professionalize” means in this context. It’s a term we have used more than once here at On Deck Angels. And as a result, it has spilled over into the vocabulary I use even outside of venture. But in the context of investing, professionalize is where one would go from an amateur, part-time investor to a full-time investor. Either working at a fund, starting their own syndicate or fund, or as a full-time angel.
The thing is, to be a career startup investor, you have to be lucky. The capital required to have a seat at the poker table is high. While there are many platforms — from Republic to Wefunder to Titan Invest — that are working to democratize access, the truth, for now, still is that to access the best deals, you’re either lucky as a network leader or as a capital allocator. In other words, do you know the best and most entrepreneurial talent? And do you have a frick-ton of money?
And given that some element of luck on top of skill is table stakes, I felt the best response I could give wasn’t in the form of a statement or opinion, but in the form of five questions.
Why do you invest? What compels you to continue investing?
What are two positive adjectives you would use to describe your sibling*? What are two negative adjectives you would use to describe your sibling*?
*Or life partner, or someone you know really really well.
Have you ever laid someone off and regretted it? Why did you regret it? And at point after the event did you notice your regret?
If not… as an investor, have you ever said no to a founder and regretted it? Why did you regret it? And at point after the event did you notice your regret?
Of the five people you hang out with most, what are common traits that at least two of them have? List as many as you can.
If you were to start a fund or syndicate tomorrow, what would you call it?
So before you keep reading, I would recommend pausing. And to pull out a notepad and jot your own answers down to the questions above. It’s a useful exercise I ask myself, and evidently others as well, if you’re looking to professionalize as an investor.
When you’re ready, keep reading beyond the below image, as I’ll share my rationale behind the above questions.
*Author’s Note: Effectively, I was trying to space out the questions from the rationale of why I ask them below as much as I could, so that the below text wouldn’t influence your thinking (if you plan on doing this exercise).
Motivation – Why are you an investor? The underlying motivation matters. Are you in it for money? To pay it forward? To prove someone or some notion wrong? How fleeting is your motivation? Raising a fund is a decade-long relationship. Raising three is two-decades long of a relationship. So, the question is how deep is your motivation. Can it last multiple decades?
Strengths/weaknesses – This question is adapted from Doug Leone’s. People often describe others in comparison to themselves. For example, if I say Joanna is funny, by transitive property, I believe Joanna is funnier than I am. If I say Kai is smart, I believe Kai is smarter than I am. I often find this question to be much more useful in understanding a person than just asking for their strengths and weaknesses. After all, adjectives are, by definition, comparative words.
Standards – This question is a riff on Matt Mochary’s. If your answer to the question is no, then you don’t know your bar for excellence. Why does your bar matter? There’s a saying that A-players hire other A-players because they know just much it takes to win. B-players, on the other hand, know they’re not as good as A-players, but on average, still want to feel superior, so they hire C-players. A-players can stand B-players, but can’t stand C-players. So eventually, the A-players leave your company. Why does this matter for an investor? You need to be able to differentiate between an A-player and a B-player. The difference between a great founder and a good founder is a fine line, and most people miss it. If you want to have a chance at being a top decile investor, you need to know. After all, people often learn more from loss than from gain. For the second part of the question, being a great investor — or to be fair, a great anything — is all about the velocity in which you learn. Speed and direction.
Deal flow – This question is a proxy of where you’re going to the majority of your early deal flow, and likely who and where you’re connected the most with. The follow up would be do you get enough quality deal flow from people with these traits. In other words, if you had the capital, are you confident you could put at least $250K to use every quarter? If not, stay a scout or raise a syndicate instead of a fund. Until you can build up to this.
Legacy – Building a fund is multi-generational. Just three funds would be a 20-year relationship. And the best funds often outlive the founder(s) themselves. So the biggest question here is what kind of legacy are you trying to build? Or are you trying to build one? This legacy, founded upon your values, determines how you plan for succession and who you raise to be your firm’s next leaders.
In closing
Of course, the five questions aren’t an end-all-be-all. There’s still the ability to think through fund strategy and portfolio construction. There’s fund admin. The back office. Tech stack. Picking strategic markets where you have an unfair advantage. That said, if you can answer the above questions well, you’ll have a compelling narrative to either fundraise from LPs or join a larger fund.
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.
“If you look at all big human achievements, like flying to the moon, for instance, it’s all based on large scale cooperation. How did humans get to the moon? It wasn’t Neil Armstrong flying there by himself. There were millions of people cooperating to build the spaceship, to do the math, to provide the food, to provide the special clothing, and the funding.
“The big question becomes: why are we capable of cooperating on such a large scale when chimpanzees or elephants or pigs can’t?
“It’s the ability to invent and believe fictional stories.”
For any big achievement, and I’m specifically reminded of the recent news with FTX — for FTX to get as large as it did at its peak — it was a monumental achievement. It was the work of many, rather than a single individual. It was the result of many buying into this narrative that Sam Bankman-Fried shared. That includes his team. His customers. His investors, from Sequoia to Tiger to Softbank to Coinbase. Many of whom are smart people who gave into the velocity of the market the last two years.
Source: Sequoia article on FTX While I’m not sure how I feel about founders playing games during the meeting, I can’t deny the vision isn’t compelling.
To be fair, and this is not to condone the wrongdoings of the FTX team, every founder’s job is to distort reality. To put the human race on a fast track towards a future that is non-fiction to the founder, but fiction to everyone else. A world that isn’t false, but has yet to come. As author William Gibson once said, “The future is already here — it’s just not evenly distributed.”
I also love the thesis of Alexia‘s fund, Dream Machine. We make science fiction non-fiction.
Founders pitch their answer to: What will the world look like? Investors, customers, and talent then make bets with their time and money on which future they would like to see happen and the likelihood of it happening.
FTX is no exception. The fine line is when a founder does get creative, it is imperative for them to have a moral compass, which seems like SBF didn’t have. And of the million and one things they’ve done wrong (no board, giving loans using customer money, fraud, etc. and some more that are more questionable in nature, like political donations, etc. — none of which from what little I know are things I would ever endorse), I have to say they nailed their marketing and messaging. They got a lot of people excited about it fast. It’s easier to get people excited about the future of money than the future of fintech or the future of crypto.
The past week has been an insane week for crypto, namely when FTX filed for bankruptcy. And while there are many different angles to it, I took it upon myself to revisit a podcast episode from two months back where Nathaniel Whittemore, FTX’s former Head of Marketing, shared his marketing insights. Namely, around their 2021 Super Bowl ad.
A Super Bowl ad two years since its founding date. If nothing else, that’s impressive. Moreover, they got Larry David who has been known to never appear on ads to do it for them.
But what I found to be very powerful is Nathaniel breaks down why they chose to do a Super Bowl ad in the first place:
“People always focus on how much [an ad] costs. ‘This ad costs X.’ Which in a vacuum seems so high. […] What I think that analysis doesn’t take into consideration:
“The number of people actually watching those ads. If you’re gonna get X people with an ad that costs a $100,000, but then, 50x that with an ad that costs $5 million, that’s the same ratio.
“But the more important piece is that at least in America, the Super Bowl is the literal one moment each year that people not only are not annoyed with ads, but it is an active part of the experience that they’re having and they’re excited.”
He also does caveat that it doesn’t mean a Super Bowl is good for every kind of marketing campaign. But more so for brand-building, as opposed to product marketing or lead gen.
To echo that, David Sacks wrote a great piece on the importance of having an operating philosophy which I’ve referenced on this blog before. In it, he finds it incredibly powerful for companies to aggregate product updates and marketing campaigns in four big “lightning strikes” (each quarter) rather than have tidbits of information floating around every week.
Of course, companies like Twitch, Salesforce, Apple, and Google have taken it a step further by having a large launch event once a year. As Sacks mentions, “It’s not just about the external marketing value. There’s a huge internal benefit from setting dates and deadlines in order to hit a public launch.” It drives excitement and a narrative that both customers and future customers, as well as team members can get behind. The world is waiting. Your team is shooting to meet and beat expectations. And that’s incredibly motivating.
What does this mean for the crypto narrative?
A friend who took a hit from the recent series of events asked me at dinner last night, “What does this mean for crypto?”
Of which I think Yuval does a better job explaining it than I could. In the same podcast episode, he explains, “Not everybody believes in the same god or in any god. But everybody believes in money. And if you think about it, it’s strange because no other animal even knows that money exists. If you give a pig an apple in one hand and a pile of a million dollars in the other hand, the pig would obviously choose the apple. And the chimpanzee the same. And the elephant.
“Nobody, besides us, knows something like money exists in the world. The value of money doesn’t come from the paper. Most of the money in today’s world is not even paper; it’s just electronic data moving between computers. So where’s the value from? It’s from stories we believe.
“We are at risk of the whole thing collapsing. It happens from time to time in history. Inflation to some extent is that. The value of money is not what we were told it is. And inflation can sometimes hit thousands of persons and millions of persons. Eventually, the money becomes worthless.”
I don’t personally believe crypto will become worthless at any predictable point in the future. In fact, I think it has a great future ahead. Just a little early for its time from an infrastructure perspective. But, it is a non-zero possibility. That said, the more institutions, especially larger ones like FTX, that use crypto as the currency of faith, collapses, the more the faith behind the story of crypto will waver. And with repeated bad players, it is a race between mass adoption and the rate faith deteriorates.
For as long as the exchange currency is in dollars, crypto has still yet to be widely adopted. For instance, the value of crypto is pegged as a function of the dollar. As of the day I’m writing this on November 16th, 2022, if you type in bitcoin in Google search, the first search result is that Bitcoin is worth 16,768 US Dollars. In other words, as long as crypto is measured in dollars, the story of the dollar is stronger than that of crypto.
In closing
I’m not here to share my latest scoop or an update on the current situation about FTX. Twitter is filled with these already. Plenty of smart individuals have already covered all the ground I would ever even think about covering. I don’t keep my finger on the pulse of crypto and FTX nearly as much as my friends and colleagues.
Really, the purpose of this blogpost is really my curiosity that in order for FTX to get the notoriety that it has today, the team must have done something really well. And in my eyes, it’s not the product or the business, but the narrative in which they built. So, if someone at HBS or GSB isn’t writing a case study on this, they should.
P.S. Had to pass this to two friends at 6AM this morning to see if this blogpost was even worth publishing. Bless their hearts for their support so early in the morning.
#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.
Two weeks ago, in an On Deck Angels workshop, one of our community members asked: “What do you recommend to do to increase access to allocation and top-performing deals?” To which I responded briefly with my belief that investors should always try to win their right on the cap table — whether it’s in the current round or the next. And, there are four ways to win that right:
Go early.
Being a valuable asset to the company.
You are never too good to chase the best.
Get to know the lead investor. Specifically, in their mind, be different.
As a footnote to all this, Founder Collective did a study a year or so ago where they found the 30 most valuable companies in the world raised half as much and were worth 4x the 30 most funded companies in the world. So, while hot rounds are great and all, there’s no telling that they’ll be the most valuable companies in ten, even five, years’ time. All that to say, I realize I’m writing this blogpost in a down market — likely only a few quarters of many more before we see the end of this recessionary period. The truth is, there are probably not as many hot rounds as there are before. But they still exist. And as an investor, you want to be ready for when that happens. While you set yourself up to have a prepared mind for getting picked, focus on picking.
To take a deeper dive on getting picked…
Just like it’s important for a founder to find product-market fit, it’s equally as important for an investor to find investor-market fit. Think of your check or your vehicle as a product in and of itself. As an investor, you are either great at picking or great at getting picked or both. For the purpose of responding to the above question, I’ll focus on the latter — getting picked.
It’s a three-sided marketplace where your customers are your LPs, founders, and your co-investors. Of all the above, to be fair, LPs loving you doesn’t necessarily get you better access to deals, so we’ll save that discussion for another day. And while there are many factors to getting picked, it boils down to two things:
Founders love you
Co-investors love you
In both scenarios, you get proprietary access to deals. As Sapphire’s Beezersaid, “‘proprietary deal flow’ is not really a thing.” Proprietary access, on the other hand, is a thing.
Lenny Rachitsky and Yuriy Timen put out a great piece on activation rates recently. In it, there’s one line I particularly like, when they defined the activation metric:
“Your activation milestone (often referred to as your ‘aha moment’) is the earliest point in your onboarding flow that, by showing your product’s value, is predictive of long-term retention.”
The product, your fund or check. Retention, how likely they are to keep you on their speed dial (for a particular topic or function). And there are two distinct qualities of a great activation metric: “highly predictable” and “highly actionable.”
Highly predictable: The founders know exactly what they can get from you. The value you give isn’t vague, like “we invest in the best early-stage founders.” a16z can afford to say that. You can’t.
Highly actionable: Knowing what value founders can get from you, they know the exact types of questions to ask you to best extract that value.
The earlier you are in your investing journey, the more obvious you should make the above.
Taking the product analogy in stride, how do you get to a point where your customers get to your activation milestone? Where they form a new habit around keeping you top of mind?
How do you get founders to love you?
In my mind, there are two ways we can measure if founders love you:
For founders you’ve invested in: If they answer with your name to “If you were to start a new company, who are the first three investors you would bring back to your cap table?”
For founders you haven’t invested in: You get (great) deal flow from founders you passed on.
Tactically, in combination with being predictable and having your value be actionable…
Go early. Be the first check in when they’re still non-obvious. This of course requires a combination of luck and conviction. The latter is more predictable than the first. Be bullish when others are bearish.
Being a valuable asset to the company. Founders have 2 jobs: (a) make money and (b) hire people to make money. As an investor, everything you do is directly or indirectly involved in that. Also, when a founder fundraises, I would ask them what they plan to do with that money (i.e. hire VPs, more engineers, scale to X # of customers), and see if you can be preemptively helpful there.
You are never too good to chase the best. This is something that I picked up from a Pat Grady video some long while back. But to win the best deals, you go to where the founders are, don’t expect them to come to you. That’s how Sarah Guo, Pat’s wife, won a lot of deals that Sequoia wanted to get into.
How do you get co-investors to love you?
The best way to measure this is your co-investors proactively invite you to invest in future deals together.
The best way to get there is to:
Get to know the lead investor. Specifically, in their mind, be different.
Their lead investor might have a large portfolio where they can’t be as helpful to every investment they make. Try to squeeze in the round and be insanely helpful to their/your portfolio. And over time, as you co-invest in more deals, they’ll keep you top of mind for future ones.
For this one, it pays not to be generalist. I don’t mean as a function of industry but as a function of how you add value to your portfolio. Someone who can do everything is less desirable than someone who is really good at just one thing. Say, hiring executives or getting FDA approval or generating PR buzz. Interestingly enough, responsiveness is also a differentiator. I heard an investor say recently that the value of an investor is determined not by what happens during the meeting, but in between meetings. And I completely agree. The cap table doesn’t need another investor. The cap table needs people who will increase the chances of the company’s multi-billion dollar outcome.
The takeaway here is to not be better, but to be different. People can’t tell better, but they can tell different. That’s why the word differentiated is used so much. Have a differentiated approach. Have a diversified portfolio. On the other hand, having a better generalist strategy than a16z or Sequoia is hard to measure. While it may be true in the long run, better is difficult to measure in foresight, but obvious in hindsight. Just like product-market fit. Hard to pinpoint in the windshield, but obvious in the rearview mirror. It’s better to be the in a pool of one than a pool of many. Be the one CEO coach. Be the one who helps founders build robust communities. Or, be something that no one expects. Like Charlie Munger, be the best 30 second mind in the world.
Another reason I left this in the co-investor love section is that while being different does help you stand out to founders, there seems to be a lot more logo chasing from founders. Differentiation, unfortunately, falls short of brand recognition. I genuinely hope that this does change in the next few quarters.
In closing
While the question that inspired this blogpost is meant for hot rounds, the same holds for just being a great investor. One thing I’ve told many applicants to On Deck Angels is that we look for folks who are excited about putting investor on their resume and is willing to put in the legwork to become a great investor. The above is one of many paths to become one.
Arguably the above is how to be a great champion of people. The investor part comes with luck and having an eye for great talent, ideally before others. Betting on the non-obvious before they become obvious.
The best startup investors are disciplined and constantly learning. Some might argue that they may not have the time to entertain hot startups in general. Or at least startups when they are hot.
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.
