It’s been two years since I’ve fallen down the rabbit hole of venture capital and it’s been an amazing adventure so far. I am incredibly grateful for the opportunities I’ve had, from meeting incredible entrepreneurs making their ambitious vision come to life, to getting a behind-the-scenes look at strategy; negotiation; and decision making, to joining an incredible community of driven peers looking to change the world by funding the next big ideas.
These two years have taught me a lot but more importantly, they’ve made me realise how much more there is to learn. Reflecting on this time has surfaced a few key learnings that I want to carry with me as I continue this adventure. I’ve elaborated on them below to serve as a rudder to guide me forward.
Learning
One of the most apparent things about working in venture is the persistent learning curve. Every day entrepreneurs are coming up with new products, services, and business models and it’s our job to find the best ones and help them succeed. That means continuously learning about new markets, best practices, and what makes a good entrepreneur, among other things. The curve is steep and relentless but it’s what keeps venture exciting, in my opinion.
Since there’s always more to learn, how to learn and what to focus on have become priorities for me. To facilitate this, I’ve started to segment learnings into two types: Type 1 learnings are readily available to those that make the time to search for the answer, while Type 2 learnings require first-hand experience.
Type 1 learnings are objective, like how blockchain works or the size and saturation of a particular market. They usually start with a Google search to get familiar with the landscape and terminology and in most cases can be resolved by the contents of an article or a book.
Initially, my approach to this learning was haphazard. I’d ramp up on products and markets that I was exposed to through the venture pipeline in a reactive manner. Now that I’ve come to terms with not being able to know it all, I want to identify areas of interest to dig deep on and build expertise.
Type 2 learnings are subjective, like the best way to deal with conflict on a board or who to hire to move a company forward. They too can start with a Google search to understand other people’s opinions but require learning through experience, preferably one’s own, to form an opinion or understand how to deal with the situation.
So far, I’ve mostly been drinking from the firehose of Type 1 learnings. Moving forward, I’d like to purposefully seek out opportunities for Type 2 learnings as well, not only to help form my own opinions but also to have valuable experience for founders to draw on.
Optimism
Venture investing isn’t for every company. VCs expect disproportionate returns for taking disproportionate risk and only invest in a select few companies they think have the potential for massive growth. Finding and funding these opportunities requires a careful balance of scrutiny and optimism.
After meeting hundreds of startups and passing on most of them, it’s easy to become jaded about incoming opportunities. The critical lens that we apply to startups to determine if they have a good chance for 10x success sometimes overpowers the optimistic view required to see them push past the inevitable struggles in their way.
At the early stage, a startup is bound to have flaws. It’s easy to pass on a rough, unpolished gem but it takes courage to put in the resources, despite its imperfections, for the chance of finding a diamond in the rough. These resources are not just monetary in nature — investors put their time, mindshare, and reputation into every deal as well. With the exception of reputation, these resources are finite in nature, and there’s an opportunity cost to spending them on a deal. Picking where to allocate resources is the crux of being a venture investor and resource constraints force us to be extremely selective.
So on one side, there’s the risk of pouring resources into an opportunity that never materializes and on the other, there’s the risk of missing the opportunity to invest in a hugely successful company.
In addition to that, it’s easier to find fault with an investor for making an unsuccessful bet than for missing the chance to invest in a great company. That’s because the world can’t see the opportunities that were passed on; there’s no anti-portfolio for them to compare against. This incentivizes conservative investing behaviour and makes it even harder not to be jaded.
Being an early-stage investor in a successful startup requires picking up on early signals and seeing things differently. It requires not lumping crazy and unsuccessful in the same bucket and means keeping an open mind to new ideas.
Finding the proverbial needle in the haystack becomes 10x harder when your vision is obstructed. The same is true when analyzing opportunities through a pessimistic lens. It’s a fine line to walk but, ideally, I’d like to approach each opportunity with fresh optimism and emotionally separate the learnings from previous investments and other startup failures.
Community
Although we deal with money everyday, relationships are the primary currency in venture. Relationships with founders to invest and work with them, relationships with investors to share deal flow, relationships with advisors to assist founders, and relationships with the startup community to help founders hire. These relationships create a nexus that’s at the heart of the venture and startup community.
Coming from an industry where networking was not paramount, it took me a while to recognize the value of these relationships. I’ve come to realise that there are ways to spend meaningful time with people and find opportunities to help and be helped. To my surprise and delight as an introvert, I’ve found nurturing these relationships to be especially rewarding.
In particular, I’ve found that a lot of my growth in venture over the last year was guided by my relationship with my peers in the community. They’ve been models of excellence, teachers of best practice, and sounding boards for ideas. Their collaborative energy is helping us create a rising tide to lift all boats, and for that, I am incredibly grateful.
Looking ahead, I’m excited to develop more meaningful relationships with founders. To me, that looks like being respectful, providing honest feedback, and making connections when I can. While I’ve strived to do that in the past, I believe I have more value to add now in terms of feedback and connections.
What’s next
These two years in venture have opened my eyes to how important funding is to creating impactful change. As a recovering engineer, I will always honour makers as the source of change but I recognize that funding can be the catalyst that helps them bring it to scale.
For 2019, I’ve decided to do things a bit differently. To honour the spirit of Type 2 learnings, I’m setting off on another adventure; this time around the world. I’ll be back in 2020 ready to hit the ground running, hopefully, with a better understanding of the world. I’m looking forward to more learning, optimism, and meaningful relationships in the venture and startup community.
Till then, thank you to each and every one of you that have made the last two years a memorable and exciting journey; I’m looking forward to many more!
This post was first published on Dec 20, 2018 on Medium.