I’ve been investing for a year and a half, and I’ve learned more than I would’ve imagined by just jumping into the game. Now, I’m playing with very small amounts of capital, and whatever lessons I’ve gathered for myself aren’t necessarily “right” and aren’t generally applicable to everyone. With that disclaimer, I wanted to briefly share what the key learnings (so far) have been for me in this final column for my guest run with StrictlyVC:
Polite But Clear, Direct Language: When I’ve been talking to a founder and decide I’d like to invest, I will usually write in email: “I would love to invest in the company if you’d have me.” In a way, it is asking for permission. The investor is not in control; the founders grant access. For every investment, there are many “no’s” to deliver. I try to do these quickly over email or even in a meeting. I’ve received so many “no’s” before that it helps me deliver them, too — I hope. I also briefly describe how I expect to help once the check is deposited. As a small investor at the table, I generally ask founders to contact me anytime they need to, and I will proactively focus on helping set up the company up for future financings.
Following Founders Versus Predicting the Future: When I started, I thought: “Hey, I’ll pick some spaces I like.” Wrong. Founders define the future and dollars simply follow. Originally, I thought I’d take a portfolio approach and focus in some areas, but as things have evolved, I just focus on the people I get to meet and make sure I pay attention to every word, every pixel, and every slide. I cannot predict the future, so I try to find people who can invent it.
Pro Rata is a Privilege, Not a Right: Pro-rata rights are very important for small, early-stage investors. I don’t ask for them, because I don’t think I’d get them, and mostly because I don’t feel like I deserve them. Without pro rata, early-stage investments suffer quite a bit of dilution, so there’s extra pressure to be a “high-contact” hitter who hits for batting average. Over time, I hope I earn the right to ask for pro rata.
Dialogue Over Time Pressure: I will trade many emails with a founder to ask key questions and learn more. I like email as a medium. Most people would rather talk in person or at least on the phone, but my personal preference is to get up to speed via email and then engage in live conversation. This doesn’t work for everyone, and I’ll miss things because of that, but that’s one of the things I’ve just come to accept.
Tough Love Over Coddling: I don’t talk or write about it much, but I was a founder of a life sciences technology company before coming to the Bay Area. It was both a great and painful experience, and in part why I’ve held off starting something again. I kind of just fell into it, and I wasn’t ready. Back then, in the Boston area, there wasn’t anyone around to support or coddle us. Then, I came here and got my a__ kicked for 11 months straight. It was bad. All of these experiences make me think about existential risk. I see an early-stage company and think: “Hey, you’re awesome, but hey, you could run out of funds pretty quickly and then evaporate.” So, in the course of early-stage investing, yeah — at times, you sense existential risk for others, and then if you’re outspoken and direct like me, you have the delicate job of pointing out that existential risk. In those moments, I tend to be driven by tough love over coddling. It’s not right or wrong, and there’s always room to improve, but that’s how I’m wired, for better or worse.
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