Tag: venture capital

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The Smoke Signals of a Great Startup From the Lens of the Pitch Deck

best startup pitch deck

Founders often ask me, what slides on my pitch deck do I have to make sure I get right? The short answer, all of them. Then again, if you’re focusing on all of them, you’re focusing on none of them. So I’ll break it down by fundraising stages:

  1. Pre-seed/seed (might as well include angels here too)
  2. Series A/B

Since I spend almost no time in the later stages, I’ll refrain from extrapolating from any anecdotes there.

If you’re using DocSend, you already have the numbers for your deck viewership in front of you. As DocSend’s CEO Russ Heddleston said in his interview with Jason Calacanis, VCs often spend ~3.5 minutes on your deck. Though I’ve never timed myself, it seems to be in the same ballpark for myself as well. After all, it’s the deck that gets the meeting, not the deck that determines if you get funding or not.

Nevertheless, I hope the below contextualizes the time spent beyond the numbers, and what goes on in an investor’s head when we’re skimming through.

Pre-seed/seed

Team

  1. What is the biggest risk this business is taking on?
  2. Is the person who can address the biggest risk of this business on this slide?
    • And does this person have decision-making power?

Let’s say your biggest risk is that you’re creating a market where there isn’t one. Do you have that marketing/positioning specialist – either yourself or on your team – to tackle this problem? As much as I love techies, three CS PhDs are going to give me doubts.

Similarly, the biggest risk for a hypothetical enterprise SaaS business is often a sales risk. Then I need proof either via your network/experience or LOIs (letters of intent) that you have corporations who will buy your product.

Or if it’s a tech risk, I’ll be hesitant if I see two MBAs pursuing this. Even if their first hire is an ML engineer, who owns 2% of the business. Because it doesn’t sound like the one person who can solve the biggest risk for the business has been given the trust to make the decisions that will move the needle.

This might be a bit controversial, but having talked with several VCs, I know I’m not alone here. I don’t care about quantity – number of years in the industry or at X company. Maybe a little more if you were a founding team member who helped scale a startup to $100M ARR. I do care for quality – your earned secret, which bleeds into the next slide.

Solution/product

The million-dollar question here is: What do you know that makes money that everyone else is overlooking, underestimating, or just totally missed? If you’re a frequent reader of this blog, you’ll be no stranger to this question. I’ve talked about it here and here, just to name a few.

Or in other words, having spent time in the idea maze, what is your earned secret? Here are two more ways of looking at it is:

  1. Is there an inflection point you found, as Mike Maples Jr. of Floodgate calls it, in the socio-economic/technological trends that makes the future you speak of more probable?
  2. Is it a process/mental model that you’ve built over X years in the industry that grafts extremely well to an adjacent or a broader industry?

I believe that’s what’ll greatly increase the chances of your startup winning. Or at least hold your incumbents at bay until you reach product-market fit. If you’re able to find the first insight, then you’ll be able to find the second. And by pattern recognition, you’ll be able to find the third, fourth, and fifth in extreme velocity. It’s what we, on the VC side, call insight development. And your product/solution is the culmination of everything you and your team has learned faster and better than your competitors.

Of course, your product still has to address your customers’ greatest pain points. You don’t have to be the best at everything, but you have to be the best (or the only) one who can solve your customers’ greatest frustration. So VCs, in studying how you plot out the user journey, look for: do you actually solve what you claim this massive problem in the market is?

Series A/B

Traction

  • What are your unit economics? I’m looking for something along the lines of LTV:CAC ~3-5x.
  • Who’s paying?
    • For enterprise, which big logo is your customer? And who are your 5-7 referenceable customers?
    • For consumer:
      • If it’s freemium, what percent of premium users do you have? I’m looking for at least a 3-5% here.
      • If your platform is free, how are people paying with their time? DAU/MAU>25-30%? Is your virality coefficient k>1? 30- and 90-day retention cohorts > 20%, ideally 40%.
  • What does your conversion funnel look like? What part of the funnel are you really winning? Subsequently, what might you need more work on?

The competition

95 out of every 100 decks, I see two kinds of competitor slides:

  • 2×2 matrix/Cartesian graph, where the respective startup is on the upper right hand corner
  • The checklist, where the respective startup has all the boxes checked and their competitors have some percentage of the boxes checked

Neither are inherently wrong in nature, but they give rise to two different sets of questions.

The former, the graph, often leads to the trap of including vanity competitors. For the sake of populating the graph, founders include the logos of companies who hypothetically could be their competitors, but when it comes down to reality, they never or rarely compete on a deal with their target user/customer. April Dunford, author of Obviously Awesome, calls these “theoretical competitors.”

A simple heuristic is if you jumped on a call with a customer right now and ask: “What would you use currently if our solution did not exist?”, would the names of the competitors you listed actually pop up during the call? Or with a potential customer, what did they use before you arrived? For enterprise software, Dunford says that startups usually lose 25% of their customers when the answer to the above question is “nothing”. When your greatest incumbent is a habitual cycle deeply engrained in your user’s behavior, you need to either reposition your solution, or find ways to educate the market and greatly reduce the friction it takes to go from 0 to 60.

The latter, the checklist, usually sponsors a second kind of trap – vanity features. Founders often list a whole table’s worth of “awesome features” that their competitors don’t have, but many of which may not resolve a customer’s frustration. And on the one that does, their competitors have already taken significant market share. The key question here: Do all features listed resolve a fundamental problem your customers/users have? Which are necessary, which are nice-to-have’s? Are you winning on the features that solve fundamental problems?

The question I ask, as it pertains to competition, in the first or second meeting is: What are your competitors doing right? If you were to put yourself in your competitor’s shoes, what did they ace and what can you learn from the success of their experiment?

Financial projections

  1. What are you basing the numbers off of?
  2. What are your underlying assumptions?

How fast do you claim you can double the business growth? Is it reasonable? If we’re calculating bottom-up, can you actually sell the number of units/subscriptions you claim to? What partnerships/distribution channels are you already in advanced talks with? Anything further than 2 years out, for the most part, VCs dismiss. The future is highly unpredictable. And the further out it is, the less likely you’re able to predict that.

I also say financial projections for Series A/B decks is because only with traction can you reasonably predict what the 12-month forward revenue is going to look like. Maybe 18 months, depending on your pending contracts as well. In the pre-seed/seed, when you’re still testing out the product with small set of beta users, it’s hard to predict. And pre-seed/seed decks that have projections without much traction are often heavily scrutinized than their counterparts that don’t have that slide.

In closing

Of course, that doesn’t mean you should neglect any slide on your deck. Rather, the above is just a lens for you to see which slides an investor might allocate special attention to. If you can answer the above questions well in your pitch deck, then you’re one step closer to a winning strategy not only in fundraising, but in building a company that will change the world.

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Rolling Funds and the Emerging Fund Manager

library, rolling funds, startup investment

In the past few months, Rolling Funds by AngelList have been the talk of the town. Instead of having to raise a new fund every 2-3 years, fund managers can now continuously accept capital on a quarterly basis, where LPs (limited partners, like family offices or endowments or fund of funds (FoF)) typically invest with 1-2 year minimum commitments. Under the 506c designation, you can also publicly talk about your fundraise as a fund manager. Whereas the traditional Fund I typically took 11 months to fundraise for a single GP (general partner of a VC fund), 11.9 if multiple GPs, now with Rolling Funds, a fund manager can raise and invest out of a fund within a month – and as quick as starting with a tweet. AngelList will also:

  • Help you set up a website,
  • Verify accredited investors,
  • Help set up the fund (reducing legal fees),
  • And with rolling funds, you can invest as soon as the capital is committed per quarter, instead of waiting before a certain percentage of the whole fund is committed as per the usual 506b traditional funds.

Moreover, Rolling Funds, under the same 506c general solicitation rules, are built to scale. Both for the emerging fund manager playing the positive sum game of investing upstream as a participating investor, and for the experienced fund manager who’s leading Series A rounds. In the former example with the emerging fund manager, say a solo GP investing out of a $10M initial fund size, 20 checks of $250K, and 1:1 reserves. Or the latter, $50-100M/partner, writing $2-3M checks. Maybe up to $7-10M for a “hot deal“, which by its nature, are rare and few in between. In the words of Avlok Kohli, CEO of AngelList Venture, Rolling Funds are what funds would have looked like if they “were created in an age of software”.

I’m not gonna lie, Rolling Funds really are amazing. Given the bull case, what is the bear case? And how will that impact both emerging and experienced fund managers?

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Predictions Are Popular

Predictions are in season. It started back during the holidays. A number of my friends, colleagues and folks online have been making predictions of what is going to happen this year. And I’m sure some are sure to hit. Many to miss. Since I’ve been reasonably active on Quora and given my role in the startup community, many people have asked me: “What are some of the best startup ideas to start in 2021? In 2022?”

Over the past year, the pandemic became a forcing function for late majorities and laggards of the adoption curve to pick up newer social and technological trends. Subsequently, accelerating many timelines. Timelines that would have otherwise been realized two, three, maybe even five years out.

  • Social is back.
    • Consumer social has been back. The pandemic has saved on average 2-3 hours of travel time per day for the average worker, job-permitting. At the same time, quarantining has reduced, if not eliminated, many in-person interactions with friends. More time means people seek to find more places to place their attention.
    • Enterprise social is here. The pandemic has forced many businesses to go remote. Similarly, there’s been a migration away from metropolitan/urban areas to save on rent, as well as an opportunity to not be shackled by geography in the past few months. Now, as well as “post-pandemic”, businesses, as well as individuals, are looking for new ways to improve efficacy, communication, and culture at work. In efforts to both retain and attract talent.
  • Impact-driven and socially-responsible businesses are hot.
  • Diversity in the board room is gaining traction. And it’s created ripple effects in the financial world. LPs are demanding venture funds to invest in diverse founders. At the same time, when diverse founders consider which investors to bring on, they look at if the checkwriters at the firm are diverse. Some investors have acted proactively; some reactively. Nevertheless, the cogs are moving.
  • E-commerce, entertainment, streaming, gaming, remote tools, edtech are all up.
  • SPACs and 2020’s string of IPOs have created many “overnight” millionaires.
  • Investing in the stock market, in alternative assets, in syndicates, and more mean more capital is being recycled back into the economy at various stages.
  • There is more capital available at the early stages. New angels. More startups. Just like pre-seed/seed is the Series A from a decade ago, more institutional investors will move upstream. Who knows, there may be a pre-pre-pre-seed round one day.
  • Innovation around the home office space is building momentum.
  • Unsurprisingly, Zoom fatigue is real, which will only led a hand in hybrid work-life models post-pandemic. Equally so, innovation around virtual meetings is only a matter of time.
  • Oculus brought down the price of a VR headset to be as much as a video game console, which means more people can and will adopt VR. Leading to larger markets and more diverse consumers for VR/AR. More startups.
  • Mental health has taken center stage, where it had previously been overlooked or disregarded.

When will the pandemic end? I don’t know.

When will we get vaccines? While experts have given us an expected date, I also don’t know.

When will “normal” return? I’m willing to bet it’s on the magnitude of years rather than months. Then again, will “normal” ever return? I might be completely wrong, but I’m willing to bet the “normal” we knew will never return. But instead, we’ll have a normal 2.0.

In truth, I can only answer what I see in my very narrow periphery. And by definition, there are a hundred-fold more that are in my blind side. And the thing is, what I’ve thought of I guarantee many other founders have already seen, tried, or are trying. What I’m looking for this year, and every year, is what I haven’t thought of yet. But when I hear and see it, it’ll click. Everything I know will make sense.

Investors are lagging indicators of innovation.

Founders are the leading indicators. Listen to them.

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The Four Traits of World-Class Startup Founders

Proportionally speaking, I rarely make referrals and intros. Numerically speaking, I set up more intros than the average person. Frankly, if I made every intro that people have asked of me, I’d be out of social capital. It’s not to say I’m never willing to spend or risk my social capital. And I do so more frequently than most people might find comfortable. In fact, the baseline requirement for my job is to be able to put my neck on the line for the startups I’m recommending. The other side of the coin is that I’ve made more than a few poor calls in my career so far. That is to say, I’m not perfect.

I only set up intros if I can see a win-win scenario. A win for the person who wants to get introduced. And a win for the person they will be introduced to. The clearer I can see it, the easier the intro is to make. The less I can, the more I look for proxies of what could be one.

This largely has been my framework for introducing founders to investors, as well as potential hires, partners, and clients. Over the years, I realized that I’ve also been using the same for people who would like an intro to someone above their weight class.

Below I’ll share the 4 traits – not mutually exclusive – of what I look for in world-class founders.

  1. Insatiable curiosity
  2. Bias to action
  3. Empathy
  4. Promise fulfillment
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My Top Questions to Ask Portfolio Founders When Doing Investor Diligence

I’ve recommended in a number of essays on this blog the importance of founder-investor fit. That founders should always do their diligence on potential investors, like here and here. And for a more robust understanding, asking founders in their current and previous portfolio, specifically the ones that didn’t work out. Some of my favorite questions for (ex-)portfolio founders:

  • How has [insert name] been helpful for you in your founder journey?
  • What was [insert name]‘s involvement like when shit hit the fan? Do you remember specific examples?
  • If you were to build another company (if applicable), would you work with [insert name] again?
    • If they are building another company in a relevant field, and if they say “yes”: Why haven’t you?
    • What are scenarios in which you would, and ones you wouldn’t?

Then think to yourself, were those pieces of advice actionable? Did the context help or detract from your initial disposition? Your goal isn’t to point fingers, but to paint a more holistic picture of who you might be working with closely for the long haul.

The best investors can inspire founders to think on wavelengths they might not have considered before. Some may hurt when you first hear them, but if your investors truly care, they mean well. The only reason the truth hurts is because it is the truth. And it’s your job as the founder to do your best to fix it.

The red herring

When a founder responds to the above questions with, “X investor just spent less time with us”, it’s not enough to say that an investor isn’t great.

Each VC always has his/her first and foremost duty and responsibility to the partnership. By simple economics, most of their investments won’t work out. Investors generally understand that they have to:

  1. Spend more time with the winners ’cause they’ll return the fund (and then some, hopefully),
  2. And cap their time commitment with the ones who won’t return the fund.

While that isn’t an excuse for VCs to only focus on maximizing returns (i.e. selling your IP, forcing an acquisition, unjustly firing the founder), it is something that founders should keep in mind. When you raise venture funding, just be aware of the fact that investors need to prioritize their time, especially when the going gets tough. And while it is usually implicit in the investment, a great investor/board member will often have that conversation explicitly with you at the beginning.

This notion, on the other hand, contrasts with angel investors, who are often investing out of their own net worth. So the dynamics, as well as commitment level, for angels is different. Angels often have between tens to hundreds of active investments at a time, meaning their time allocation per startup is much more limited than a VC. For context, a VC is usually actively involved in 3-7 investments at a time, meaning they’re going to be more involved per startup.

In closing

At the end of the day, the world of entrepreneurship, and business more broadly, is a relationship-building industry. And it’s extremely hard for an investor to build great relationships and a reputation if they have a track record of burning bridges. With founders. Even other investors – downstream and upstream.

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The Investor I Am Working To Be

I wrote an essay exactly a week ago about welcoming tough founder narratives. In it, the prerequisite to play in VC is to be open-minded – to “stay positive” and to “test negative”. I’m reminded of something Tim Ferriss shared in his recent interview with Jim Collins, “It is not that beauty is hard to find, it’s that it is easy to overlook.”

In a world where it is my job to evaluate people who stretch the margins – to stretch “common sense”, it’s easy to be cynical. On the same token, it’s also easy to be incredibly optimistic. As Blake Robbins of Ludlow Ventures puts it, “the best venture capitalists [are] able to perfectly toe the line of optimist vs. pessimist.”

Since then, partly due to the semi-recent influx of investment talks I’ve seen and been a part of – the holiday mad dash, if you will, I’ve had some time to myself to re-center my purpose in the venture world.

The role of an investor

As someone on the investing side of the table, it is our job to check founders’ blind sides. To consider things they may not be aware to even consider. Drawing parallels between seemingly orthogonal parts of the business that we know because we’ve seen hundreds, if not thousands of businesses. For example, if you’re creating a plug-and-play solution – a product whose main selling point is its ease of use, the more you have to spend on your customer success team, the less effective your product is.

Of course, we merely provide insight and context to a situation, but it is the founders who have the final say.

The brand of an investor

Craig Thomas, an LP, wrote on his Substack last month: “Brand is arguably the only thing that resembles a moat in traditional venture capital.” To summarize Nikhil Basu Trivedi words briefly, brand here is constructed by how strong the synergy between the various forms of acquisition channels (i.e. content, performance marketing/ads, virality/word-of-mouth) and the players in the ecosystem (i.e. founders, investors, LPs, operators, talent, etc.) are. In simpler terms, brand is about who knows and how well they know what you stand for.

Increasingly, in the world of venture, while “picking” the right investments via conviction and a thesis still matters, it’s becoming a world of VCs “getting picked“, as Fred Destin of Stride.VC tweets. This is especially true for the deals that investors expected outsized returns on – effectively, uncapped upside.

Craig provides a great graphic for why brand matters. The blue-dotted line, which he calls the Mendoza Line for VC firms, represents y = x + b. And the best VC firms have b’s where b > 1.

Craig Thomas’ chart plotting the relationship between brand and AUM (assets under management)

He points out that the fallacy here is when firms prematurely scale. Increasing their AUM (assets under management) before establishing and growing their brand. And it’s something I’m not keen on falling for.

Seen in another light, Correlation Ventures did a study that found almost 65% of venture-backed deals fail to return on investment. And only 4% make outsized “magical returns”. Proving that b > 1 is truly easier said than done.

returns on venture backed startups is very low in most cases based on data from Correlation Ventures

There’s a saying in venture: Luck only gets better with success. It’s largely described in the context that it only takes one epic investment to get you on the radar. And I believe building a successful brand is a leading indicator of success. Of course, having a strong brand and having outsized returns are not mutually exclusive either. In a 2015 Medium post, Blake quotes Brett deMarrais of Ludlow Ventures, which I think acutely sums up what it means to be a great investor. “There is no greater compliment, as a VC, than when a founder you passed on — still sends you deal-flow and introductions.”

As you might have guessed, I’m on the brand-building phase. Craig wrote: “Brand is reputation and access.” A great brand leads to better deal flow, which leads strong signals for downstream investors. Which leads to a stronger brand. Analogized, it’s what Reid Hoffman has said all these years: “a good product with great distribution will almost always beat a great product with poor distribution.” As an investor, a VC is their own product.

In closing

To quote Ruben Harris’ first boss in Ruben’s recent interview with Garry Tan, “To become a billionaire, help a billion people.” Through a mutual friend, I first met Ruben, Artur, and Timur back in ’18 around the inception of Career Karma and when they were hosting office hours at their apartment for folks who wanted to break into tech. At the inflection point in my career, I went to one of these to meet the individuals I had only been communicating over emails with. And within 5 minutes, Ruben said: “Here’s who you’ve got to talk to…”. And gave me 2 names I hadn’t even considered reaching out to beforehand. Both ended up being great influences on my growth.

True to their mission, even prior to the founding of Career Karma, they’ve been playing the connective tissue between talent, education and occupation. From their podcast to their company, the triple threat have created an impressive brand and community of givers and hustlers. And I highly recommend checking out their podcast to hear some of their community’s stories. Here’s one of my favorites. Congratulations on your A led by Initialized, Ruben, Artur, and Timur!

Similarly, that’s the investor I’m working to be. While I still have miles more to go in building a brand, I believe I’m taking steps in the right direction.

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2020 Year in Review

I’ve written 102 essays on this blog in the past year, plus some change, spending an average of 1-2 hours per piece and a range from 30 minutes to 2 weeks. An average of 1,200 words per post. While not mutually exclusive, over half of which were on startup topics. One in three described the venture capital landscape. 36 (excluding #0) #unfiltered blog posts, where I share my raw, unfiltered thoughts about anything and everything. 16 on mental health. A surprising 13 on cold emails and its respective ecosystem. And my first public book review. Some didn’t age well, like The Marketplace of Startups. Some will stay evergreen.

25% of my blog posts I started writing at least 48 hours before the publish date. 1 in every 3 (-ish) of the afore-mentioned, I rewrote because I didn’t like the flow. For every 2 essays I wrote, 1 of which I had to wrestle deeply with the thought of imperfection. In effect, half of my essays were a practice to overcome my own mental stigma of “writer’s block.” Yet after over a year of writing, I realize that I’ve become prouder of my writing than when I started.

So, as the year is transitioning into the next, I thought I’d take some time to reflect on my growth 100 (+2) posts after starting this blog. Let’s call them superlatives.

Top 10 most popular

Ranked by total views per post, the 10 posts readers visit the most.

  1. #unfiltered #30 Inspiration and Frustration – The Honest Answers From Some of the Most Resilient People Going through a World of Uncertainty – I asked 31 people I deeply respect to share some of their greatest drivers and darkest moments in life and how they got through them. You can find part 2 here with 10 more thoughts.
  2. My Cold Email “Template” – My friends have asked me for years what I write in my cold emails, and now, what and how I write my cold outreaches are available for your toolkit.
  3. Fantastic Unicorns and Where to Find Them – An essay on the parameters and the mental models investors use to find “unicorn” startup ideas.
  4. When Investor Goodwill Backfires – What It Means to be Founder-Friendly and Founder-Investor Fit – How founders can do investor diligence before signing the term sheet and also how to best manage founder-investor dynamics
  5. #unfiltered #24 How long do you take to prepare for a talk? – A Study about Time Allocation
  6. How to Build Fast and Not Break (As Many) Things – A Startup GTM Playbook
  7. 10 Letters of Thanks to 10 People who Changed my Life – Every holiday season I write thank you letters to the people I deeply respect. It’s one of the best times of the year to reconnect. These are the letters I wrote in 2019. Here are also some I wrote this year for more context.
  8. #unfiltered #18 Naivety vs Curiosity – Asking Questions, How to Preface ‘Dumb’ Questions, Tactics from People Smarter than Me, The Questions during Founder-Investor Pitch
  9. #unfiltered #11 What I Learned About Building Communities through Social Experiments – Touching Jellyfish, Types of Social Experiments, The Thesis, Psychological Safety and Fairness
  10. The Marketplace of Startups – While many of the remarks on this blog post are now obsolete, largely incited by the 2020 Black Swan event – COVID, the two questions at the end of the blog post are the two I still like to ask founders today.

Personal favorites

While not every one of these got the limelight I had hoped, each of these are ones I felt great pride in being able to write on.

Most challenging to write

I had been wrestling with how vulnerable I can allow myself to be in the public space. Writing this post was frightening, but I’m glad I did. It cascaded into deeper conversations with my friends, colleagues and readers, but also inspired more blog posts after this about mental health.

#unfiltered #26 Am I At My Best Right Now?

In closing

I first started this blog with the intention of chronicling my own learnings in the amazing world of venture. While I couldn’t guarantee it would be helpful to every individual reading my humble meandering, I could, at least, guarantee what I write has been or continues to be instructive for me.

Within the first month it had evolved into an FAQ and a means to provide value to as many founders as I can when one day the number of people I want to help exceed my available bandwidth. Wishful thinking at the time, but a cause that inspired me forward. After the first six months, with the introduction of the #unfiltered series, I began to write to think – a way to flush out simple, unrefined ideas to more robust concepts. While I’ll forever be a work in progress, I began to make new dendrite connections that never existed before. In a way, I was and am still chronicling my own journey in hopes that it will continue to guide people beyond my immediate sphere of influence.

Thank you, each and every one of you, for accompanying me on this journey we took yesterday and the one we’ll take tomorrow. And I hope this cognitive passport will continue to serve as your cup o’ Zhou (/joe/) weekly.

Cheers, and I’m excited for the adventure ahead!

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How Do We Welcome the Founder Narratives Behind the Curtains

Being a founder is one of the toughest jobs in the world. Resilience and grit are two (or one) of the indispensable traits of a 5-star entrepreneur. And most, if not all, investors establish grit as the baseline in founder selection, as opposed to the topline in various other careers. While I don’t mean to discount other career paths, all of which I have incredible admiration for, I can only speak in the world of venture where I spend most of my time in.

Yet that same persistence could very much be the same double-edged sword that makes or breaks you. In October, Ryan Caldbeck wrote about his decision to step down as CEO of CircleUp. It was and is one of the most candid pieces I’ve read about the founder journey to date. In it, one section particularly stood out. “Persistence was my superpower. But now I’ve now come to understand that persistence is a double-edged sword, and my decision not to take a break, to not take more off my plate, hurt me, my family and the company. That was the biggest mistake of my career.”

In the founder journey, there exist many moments a founder’s resilience is stress-tested. To get their first customer. To scale to a team of 10. 30. 100. To get their first investor. To raise their first institutional round. But the last thing a founding team needs is for some of their greatest evangelists – their investors – to create counterproductive friction. While it’s presumptuous of me to say that all friction is counterproductive, some friction and additional perspective is necessary to help founders make better, more informed decisions.

In his same essay, Ryan shares a feedback email he wrote to his former board member, as that member’s participation in the company had become “counterproductive”, “vindictive”, and even “destructive”. Unfortunately, these stories happen more often than I would like. It is why many founders believe investors are the gatekeepers to their startup’s success. But we’re not. We don’t have the right to be. On the same token, that’s exactly why it’s so important for founders to deeply consider founder-investor fit.

Michael Freeman found in 2017 that entrepreneurs are 50% more likely to report a mental health condition. Being a founder is lonely. But it doesn’t have to be.

Anton Ego’s words

A few weekends back, my friend and I re-watched my favorite movie. And as the movie faded into music, Anton Ego’s words echoed in my head. While it’s not the first time this quote has appeared in the venture world, it certainly won’t be the last:

“In many ways, the work of a critic is easy. We risk very little, yet enjoy a position over those who offer up their work and their selves to our judgment. We thrive on negative criticism, which is fun to write and to read. But the bitter truth we critics must face is that, in the grand scheme of things, the average piece of junk is probably more meaningful than our criticism designating it so. But there are times when a critic truly risks something, and that is in the discovery and defense of the new. The world is often unkind to new talent, new creations. The new needs friends.

“Last night, I experienced something new, an extra-ordinary meal from a singularly unexpected source. To say that both the meal and its maker have challenged my preconceptions about fine cooking is a gross understatement. They have rocked me to my core. In the past, I have made no secret of my disdain for Chef Gusteau’s famous motto: ‘Anyone can cook.’ But I realize, only now do I truly understand what he meant. Not everyone can become a great artist, but a great artist can come from anywhere. It is difficult to imagine more humble origins than those of the genius now cooking at Gusteau’s, who is, in this critic’s opinion, nothing less than the finest chef in France. I will be returning to Gusteau’s soon, hungry for more.”

For VCs

One of my favorite investors often says, “stay positive, test negative.” While the greatest strength an entrepreneur can have may be grit, the greatest strength an investor can have is optimism.

Optimism in the world. In markets. In startups. But especially people. That even if one venture doesn’t work out, for the people I’ve had the opportunity to stand behind, I know one of their pursuits eventually will. It’s only a matter of time and luck.

That same optimism is a leading indicator for open-mindedness. As people who build our careers at the top of the funnel, it is our obligation to cast our net outside of what is most familiar to us. There will be a number of ideas and belief systems entrepreneurs have that challenge our own. And in many ways they should, as founders are on the frontlines of innovation, they are aiming to be “right on the non-consensus“, to quote Andy Rachleff. When I first got into VC, that same investor who said “stay positive, test negative”, shared another word of advice, “Some of the best ideas seem crazy at first.“

George Bernard Shaw once said something similar as well, “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.”

Optimism isn’t only isolated to ideas, but also to the people – the “unreasonable” women and men – behind those ideas and the decisions they make. These innovators aren’t perfect, yet somehow many of us expect them to be. And that dichotomy has created this unfair dynamic that stunts innovation more than we think. I have so much respect for the funds that have set aside capital to invest in founders’ wellbeing, like Felicis Ventures, Freestyle, Crosscut, and more. And I hope many more will follow.

The stories we tell

Over the past few months, I’ve had a number of conversations with founders, friends, and readers about “mental fitness” and “emotional hygiene”. If I could borrow two of my friends’ vernacular. And I’ve learned that we humans are such amazing storytellers.

These powerful narratives has kept the human race alive all these millennia. Before the written word, it was the art of the spoken word, passed down from generation to generation, that held tales of ancestral origins of where to hunt and where to migrate to each season. The same stories have started and ended wars. They have helped us conquer impossible odds. Some narratives today are compelling enough for us to buy a new product or to end a conglomerate.

Yet these exact stories, especially the ones we tell ourselves, can cause stress, anxiety, and depression. The ones that the people we care about and respect tell us can carry even more weight. From role models, parents, managers, friends, mentors, teachers, peers, and more.

In closing

I realized, in conversation, these past few autumn months, more than ever, the power of sharing those stories. To share that we’re not alone and that together, we may learn more than the sum of our individual parts. I understand that it’s no easy task. Even for myself, I debated for the longest time whether to share that I’m not at my best right now. But I’m glad I did. The feedback from the people around me I’ve gotten since brought forth clarity and solace. Similarly, six of my friends, who publicly shared how they get through their toughest times (Pt 1, Pt 2), told me after how grateful they were to have an enormous weight lifted off their shoulders.

Top photo by Nong Vang on Unsplash

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When Investor Goodwill Backfires – What It Means to be Founder-Friendly and Founder-Investor Fit

A few Fridays ago, I had the fortune of reconnecting with a founder, backed by some of the most recognizable names in the Valley and exited his business last year to a juggernaut in the data space. Now working on his second startup. And he brought something extremely curious to my attention. “Investors shouldn’t be too founder-friendly.”

I’ve talked to hundreds of founders and seen thousands of pitch decks in my short 4 years in venture capital. Yet, that Friday was the first time I’d ever heard that. And it was too bizarre for me not to double-click on. The fact that the sentence also came out of a founder’s mouth and not an investor’s bewildered me even more.

Continue reading “When Investor Goodwill Backfires – What It Means to be Founder-Friendly and Founder-Investor Fit”
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#unfiltered #33 Inspiration and Frustration Pt. 2 – What Drives Some of the Most Resilient People Forward

A few weeks ago, I published Part 1 of this post on inspiration and frustration. In that time, its reception has been uplifting. Easily my most popular and well-received blog post to date. It also happens to be one of my favorite posts to have published so far. So, I thought I’d continue to ask people about their cocktail of emotions now, the below two questions:

  1. What is the one thing that inspires you so much that it makes everything else in life much easier to bear?
  2. What is stressing/frustrating you so much right now that it seems to invalidate everything else you’re doing?

But, each person can only choose one of the above two questions to answer.

Three of the below candid responses are people I asked from the first cohort, while the other eight are people I thought would add a new degree of freedom on perspective. All of which were drawn more to their inspiration than their frustration.

And as such…

  1. It takes a lot of things to inspire and motivate… rather than one individual thing. – Model, writer, founder
  2. I’m inspired to have a hand in making the world better for everyone through technological progress! – Venture capitalist
  3. I’ve made friends with a girl from my neighborhood grocery store and a stranger opened a door wide for me so I could run towards the train and not miss it. – Founding partner/CEO, investor, community manager
  4. When you start to understand that life is bigger than just you and me, there’s a shift in perspective that brings meaning and purpose to our lives. – Zynara Ng, public speaking coach, video producer, TED speaker
  5. We have the means to weather our current circumstances. – Business professor, consultant
  6. We have struggled to find an extremely valuable and painful problem to start with. Nevertheless, someone will figure it out. Why not me? – Startup founder
  7. We just got a new addition to our family. […] I look forward to future conversations about life and deep topics with him, just like this one! – Startup founder, podcast host
  8. We just tend to judge ourselves more harshly because we have our entire past and lived traumas that we judge ourselves by. – Senior policy aide
  9. Their thank you letters, pictures, and stories of how Vinder has changed or saved their business/life solidifies to me that I’m on the right path. – Sam Lillie, startup founder, hiker
  10. Since this goal is so long term and grand, it’s easy to realize that small things don’t matter. – Sohum Thakkar, engineer
  11. In a world that falls short of showing us unconditional love, I can live my life in such a way that I can be that source of acceptance that others need. – Engineer, writer
Continue reading “#unfiltered #33 Inspiration and Frustration Pt. 2 – What Drives Some of the Most Resilient People Forward”
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