Photo credit : Sergei Gladyshev Hotspot Media
For those of you who have been following this blog since its inception know that I draw a lot of inspiration and wisdom from the likes of Fred Wilson, the managing director and partner at Union Square Ventures. Fred is also the first blogger who inspired me to think more about venture investing. Fred has written a post about Keeping it Simple in venture investing. I could not agree more to this. My own experience has been the same. Here is a short excerpt if you have not read Fred’s post yet:
The point of these stories is that aha moments come around every so often and you just need to let them grab you and take you a foundational investment. You don’t need to do much due diligence on these. I did none on Twitter, Coinbase, or Dapper. What I did do is use the products, get in the game, feel the power, and get conviction.avc.com
You will be surprised to know that I have seen many investors and VCs in this journey and many have no idea how to really build something. I can say without exaggerating that less than 2% of them actually do the digging part themselves i.e. use the product, get in the game, feel the power or get conviction. They usually want it all gift wrapped and they usually don’t want to do any work themselves. I used to be appalled by this but not anymore because I have understood this game, they are good at raising money and looking good to their investors i.e. LPs or limited partners. They don’t really have to work for the Founder or the startup, they just need to show they are working. The good tell tale on this bad behavior is when investors say things like “this is too early for us“, “can you get another Venture firm to validate your market?” or “can you get an industry expert to help us with due diligence?” This is not venture investing, this is also the reason why very few of those people build in public because they cannot show what they actually do. If you as a founder come across investors like that run to the hills, they are not worth your time.
So what is venture investing, you ask? It is having faith, belief and conviction that a different and better future can be built. It is contrarian thinking. Having blind belief is futile, that is not what I am saying. The only person who can invest with faith, belief and conviction is someone who has walked the path with founders and understands this different and better future. Founders are the only group of people who build something from nothing. It is important to know what to do in this journey. Founders don’t have all the answers themselves and that is ok but if investors also don’t know how to build the company then it creates all sorts of conflicts. I notice a lot of people think that venture investing is a money problem, actually it is not. Money only solves money problem. Look for investors who have walked the path with founders and taken them to promised land. It takes a lot out of you, a lot more than money. I can say this after a decade of working with founders. I don’t write a lot about my track record or success rates because I thought it was premature to write about that until I survive for a decade. I have survived for a decade now, heart attack and all. I am yet to lose a team, i.e. every single team that I have invested in and worked with has seen promised land. Either they were acquired by another company for greater value than I invested at or have become profitable and continue to operate and grow. I do not take what I do lightly I spend more time with all the founders. When I say work, I mean I really spend time with them in building the company. I feel I have the right background and mindset to do this; I was not always good at it but as they say practice makes perfect and I have gotten better but I am far from perfect.