Yesterday, I got profiled in Crain's about my investment philosophies. They do this cool lunch series where they try a new place and profile both a person and a place. We went to Brick, which is a sorely needed lunch spot by City Hall.
I made the following comment:
"I've looked at 2,000 companies, and I'm funding eight. It's not about picking the eight. It's about eliminating the other 1,992, and the eight are leftovers."
Don't get me wrong, I'm psyched about the investments I make--calling them "leftovers" doesn't really do them justice. But, it does emphasize one important fact: You absolutely do not know the future or know for certain that a company is going to be successful. No one does, despite the best Monday morning quarterbacking. VCs will tell you what they saw in a team or in a product early on, and most of those stories are revisionist history.
Not only that, saying stuff like "This is a great team" isn't really a good investment criteria, because lots of great teams totally fail. In fact, most of the investment criteria I hear, if applied as a filter, wouldn't work to build a good portfolio--early traction, great team... again, lots of people have still failed under those circumstances.
What I'm much more mentally comfortable with is this process of elimination. I'm much more certain about what won't work--teams that don't have talent to match the core challenge of what they're doing, or not playing in big enough spaces. What I'm left with is a bet where I'm saying "This could work." It's not a weak bet--it's a reasonable bet. I'm not going to convince myself that I'm way smarter than I am--that's a good way to fail.
I believe in my teams and their products, but I'm not drinking so much Kool Aid that I don't realize that I'm actually taking risks and don't know the future.
For the record, I actually really like leftovers. When I left for college, my mom told me that she finally figured out how much I was actually eating, because leftovers were piling up in the fridge and going bad.