Learnings from One Year Venturing
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Looking Back
Be humble. Be curious. Be kind. Be helpful. Be genuine.
These are the five most essential learnings from my past year assisting with my firms’ private investments. These are just good things to practice in life but are especially true in venture. People want to work with kind and curious people, so be that person – it should be the minimum expectation. With that in mind, I’d like to use this post to walk through some of the things that I have learned looking for deals this year as well as some of the mistakes that I have made along the way. Self-reflection is always critical, and I think being honest with oneself is the only way to improve. This post looks backward so that I can better move forward.
Be Humble
Venture is a peculiar business. Success is determined by being right ~10-20% of the time – potentially less. It could take 8+ years to find out if you’re right, and on top of that, founders might not even want to take your money, no matter how enthusiastic you are about their work. That combination alone provides three reasons to be exceptionally humble in this business. Additionally, venture decisions are often more difficult given the early stage of many of the companies and the wide range of possible outcomes. As an investor, you gather as much information as you can and decide whether to pursue the opportunity further or pass. Much like not knowing whether your investments will succeed, you likely won’t know how big a mistake these passes might be for a long time. You can try your best to identify successful companies and be helpful along the way, but ultimately, the founders and their colleagues build the business that makes you successful. In the end, start-up success is rare. It only takes one look at this chart to see that.
There should only be humility left over after all that.
Be Curious
Ask the dumb questions. When you’re investing in private companies, there are a lot of unknowns. Questions help uncover answers to at least some of these. It isn’t helpful to invest in a business you don’t understand, and it isn’t helpful for founders to have investors who don’t understand their businesses. These less informed investors are the ones who will suddenly have a bunch of questions after a bad stretch.
These will be long partnerships, and both the founder and the investor must be on the same page. I always find that questions help build a relationship from the start. Ask good questions, and the relationship gets stronger. If I can’t understand the founder’s answers, it’s probably not the right opportunity. When I first started looking at private companies, I would sometimes be afraid to ask a question I thought I should know, and getting over that fear is crucial. It won’t guarantee success, but it can’t hurt it! For me, part of getting over this was always coming to meetings prepared with a list of questions and doing work ahead of time. It might be more work upfront, but you’ll learn more in the long run. Let me repeat; learning is the job! You cannot beat that. So, learn a ton and then ask great questions to learn more. It’s a cycle that quickly pays off and it is also kind of a superpower. Founders want investors who are excited about their business just like they are, and an investor’s curiosity helps both founder and investor identify successful partnerships.
Be Kind
This one is straightforward. Don’t be a jerk. Although this leaves a lot of leeway for what else to be, it is a solid starting point. What I mean by this is making sure to do the little things the right way. Some examples: 1) Ask questions from a place of curiosity, not from a place of interrogation. These are long relationships; you should start with trust. The way questions are asked is the starting point of all this. 2) End meetings on time. Most of the time, the founder has a limited amount of time to talk, so be respectful when the time comes to end the meeting. At a minimum, ask if they have time for a few additional questions – don’t force them to cut the meeting off. 3) Follow up promptly. If someone made an intro to a founder for you, send them a thank you after that meeting ends. If you commit to a timeframe for a follow-up, meet that commitment. 4) Ask follow-up questions in a single email. Don’t be the person who sends multiple follow-ups with questions. I’ve been this person. We don’t like this person. Just try your best to get everything you need answered in one email. It’s polite. It’s appreciated. 5) Last, send helpful “pass” emails. We can’t back every start-up we come across; however, we can be honest with these founders and give them feedback in the pass email. Initially, I would send a pass email that didn’t provide a lot of detail, thinking, “I’ll just try to stay friendly with the founder.” That isn’t useful - I realized this and changed. Now I always try to be honest in my pass emails and explain why we are passing. You never know if it will be helpful, but it might trigger something to help the founders be more successful or address future questions from other investors earlier on in the process. Because of this, I always spend time on the pass email. I recently saw this tweet, and I now try incorporating something similar into my passes.
Three things I like about a company.
Three hesitations/concerns (actionable, if possible) - humility sprinkled throughout. The avg founder understands their business way better than I do.
Be Helpful
Again, straightforward but hard to execute. To the extent possible, be helpful. And offer little things that can mean a lot to founders. For instance, we like to do deck reviews for founders. We started doing this after a founder took some time to meet with me, and I wanted to return the favor. When he sent me his deck, I did as detailed a job as possible to help them refine the presentation. They were very appreciative: “This deck has gone through feedback rounds from 4 or 5 VCs now, and this is some of the best, most detailed feedback so far - thank you so much!”. We weren’t even investing in that company. However, the time spent was worth it from a couple of angles: 1) We learned about a new business and more about marketplaces; and 2) we learned that reviewing decks was useful and helpful to founders. Be helpful as often as you can whether that is making introductions, writing reports, or anything else. Get creative with it.
Be Genuine
This one I will keep super short. Just be yourself. These are long roads ahead, and good partnerships are critical to success. By being yourself, you can help everyone involved identify the right people to be surrounded by.
In The End
Doing all the above is tough. Probably impossible. I know I will fall short at times, but if I try, I hope to add value along the way, meet some great people, learn a ton, and make good investments. I’m only a little more than a year into all of this so I probably got a lot wrong here, but it was fun to step through some things that I think I’ve learned. I’ll plan to do this again next year and see how I did!