> Founder-investor fit, which happens when the desires of founders match the products of investors, is one important factor.
This is a bit delusional to be frank, because of the power imbalance. Reality of raising VC money is more like Tinder: most founders frantically swipe right on every investor in the hopes of getting a match, while an investor swipes right on anyone they want and get a decent hit rate. From time to time investors gotta chase after the hottest thing (aka Clubhouse); and then all Phd-level hypotheses, investment focus, and fancy blog/tweet theories get thrown out the window.
If you have 5 investors throwing term sheets at you, then yeah, you might want to look into them a bit more deeply to figure out what they can offer beyond the check. But if not, just keep swiping.
With low interest rates, and an ever increasing complexity of the state of the art, won't this balance tip to the other side soon?
There is more money than can be invested, and since economies don't grow fast enough, even more will be printed. On the other hand, founders don't grow on trees. So if you have a good idea and a good team, why should it be difficult to rise money?
except that we're already in a position of pretty low expectations. your 'good' might make sense relative to all the other poorly conceived and executed startups, but still might be a worse investment than treasury bills
interesting to see the author admits VCs are generally superficial and only invest if they like you as a person. in reality to be succesful in business you need to be able to work with people you don’t like, if they are really good and the right choice for your business. maybe that is the reason a lot of VC investments go nowhere.
It's the ”nobody ever got fired for buying Microsoft” optics driven decision making. Essentially, VCs decisions on average don't work out, so they check the optics to protect their downside. So long as the decision looks superficially correct, they protect their reputation with both investors and founders even when things go south (which probabilistically they do).
Does it cause them to pass on some great companies and miss the outliers? Yes.
The question if it's really down to probability that only 1 out of 10 investments works out. I'd say there is a big factor in there that they simply make poor business decisions, like doing whatever your friends are doing, and betting money on people you would like to go play golf with instead of people that maybe make you uncomfortable but are much smarter than you are as a VC, and know a lot more about the problem domain than you do.
This is a bit delusional to be frank, because of the power imbalance. Reality of raising VC money is more like Tinder: most founders frantically swipe right on every investor in the hopes of getting a match, while an investor swipes right on anyone they want and get a decent hit rate. From time to time investors gotta chase after the hottest thing (aka Clubhouse); and then all Phd-level hypotheses, investment focus, and fancy blog/tweet theories get thrown out the window.
If you have 5 investors throwing term sheets at you, then yeah, you might want to look into them a bit more deeply to figure out what they can offer beyond the check. But if not, just keep swiping.