Having Conviction

I am going to be wrong over the course of my career--many times.  I understand and accept that because I know that if I do not take risk, I will not make a return.

On top of that, I am building a portfolio--and I plan to be a long term investor in the asset class.  If you are trying to prove to yourself that any one particular deal will be successful, either a) you'll never get there or b) you're convincing yourself that you know more than you really do.

That being said, I still feel strongly about the investments I make.  Right or wrong, I've got an instinct that comes from being in and around startups and venture investing for over twelve years.  What I don't do is waver on the fence for weeks and weeks on end.

Unfortunately, that's not what I'm seeing from other people in the space.  I've seen a lot of fundraising drag on because investors aren't getting back to startups in reasonable amounts of time or they get excited upfront, only to just kind of fizzle out over time.  They're turning down deals for reasons they should have known upfront.  I agree with what Paul Graham just wrote:

"I think one of the biggest unexploited opportunities in startup investing right now is angel-sized investments made quickly. Few investors understand the cost that raising money from them imposes on startups. When the company consists only of the founders, everything grinds to a halt during fundraising, which can easily take 6 weeks. The current high cost of fundraising means there is room for low-cost investors to undercut the rest. And in this context, low-cost means deciding quickly. If there were a reputable investor who invested $100k on good terms and promised to decide yes or no within 24 hours, they'd get access to almost all the best deals, because every good startup would approach them first."

Realistically, it's going to take more than a few days to get a meeting scheduled, but after a meeting, I don't like to stay on the hook.  In fact, most times I turn an investment down right there in the meeting.  I'll tell them, "I'm not going to get there on this, so how can I be helpful if not with a check?"  

I do that because a) I value a founder's time and b) I value my own time.  I can't have you circling my inbox forever trying to figure out if I'm in or not.  

Because VCs don't do this nearly enough--they're starting to get beat to deals by angels who make decisions quickly.  More and more funds are being approached with rounds already half filled with angels, and they're just looking for a lead.  These angels don't have multi-step processes or multi-partner voting.  They just answer yes or no often within a meeting or two.  

This scenario isn't really good for anyone.  You're having terms set by unsophisticated investors and you're often not getting good fundraising feedback from investors.  Maybe you're not raising enough or you're not answering some of the tougher questions well.  By going for "easier" angels upfront, you might not get the most valuable feedback from the most experienced investors.

That's our fault--collectively as VCs.  If we're not being decisive early--and not worrying too much about who else is in, it's our fault if you're forced to go to random, unsophisticated money to forge ahead when time is precious.  You deserve to have someone who can help you build your company on board, and who will ask the tough questions you need to hear, without taking six weeks to decide.  

I'm going to rededicate myself to being even more responsive to founders--coming to decisions right there in the first pitch when I know it's a no.  This current indecisiveness in our investor community is leading to party rounds, lower quality syndicates, and lots of founder time wasted.