No investor wants to pass on the investment of the century. I’ve heard that every VC or early-stage angel has a story of passing on a company that turned out to be a unicorn or decacorn.
They can be missed opportunities that haunt some investors for the rest of their lives.
But VC doesn’t need to be a game of regrets if you understand a few aspects of the business of VC and your role as an investor.
Take Time To Understand the Business
I’ve heard VCs say that they passed on a decacorn investment’s pre-seed round because they did not fully understand the business model or underestimated the market size.
The longer a person does a job, the more they think they know, and that might be true in some jobs, but that’s not the case in VC.
Knowing that you don’t know something and having the humility and modesty to admit that and behave accordingly is a skill that needs to be nurtured.
It’s almost like a muscle. You better use it, or you’ll lose it.
It doesn’t matter if you’ve written 200 blog posts about that industry or made investments that didn’t pan out.
If you’re meeting with a founder who is innovating in a field you appear to know a lot about, act as if you know nothing.
The best way to think about yourself as an investor is to believe that you are the encourager or cheerleader of the startup you’re meeting with.
All of the “context” you have from the founder is not going to help you learn what they know about their business and industry that you might not know.
An investor’s job is not to tell a founder how to do their job, but to listen, ask questions that encourage a founder to think deeply, encourage the team, and continue to keep all the channels of communication open.
It’s not a smart idea to invest in a startup that you know more about than the founder.
If you know more about how to build the company, you shouldn’t be investing in it; you should probably be building it.
Let Go of Your Ego
The way to ensure that you don’t have any regrets about passing on a startup is to treat every interaction with a founder with deep care, humility, respect, and gratitude.
Assume you will only have one chance to meet with the founder or founding team, and treat it as such.Assume you will only have one chance to meet with the founder or founding team, and treat it as such. Click To Tweet
Go into the meeting fully prepared. Hit the reset or delete button on any negativity, ego, attitude, arrogance, or lack of humility.
Leave No Stone Unturned
Be extremely grateful that you get a chance to meet with the founder, and walk into the meeting ready to learn everything you can about the idea.
By doing so, you will ensure that you don’t leave any stone unturned. You will ensure that you don’t allow your shortcomings to get the better of you.
If you need more time to think through the conversation, explain to the founder that you need more time.
We like to move fast, but sometimes it’s okay to just sleep on it or take the weekend to think through it.
Don’t hesitate to meet with the founder again to learn extensively about the business, and make sure you assess the idea and learn what the founder knows like your life depends on it!
If you do that, you will eliminate any future regret. The only way to completely get rid of regret (even if you pass on a unicorn) is to practice extreme humility and not miss a step in every interaction with the founder.The only way to completely get rid of regret (even if you pass on a unicorn) is to practice extreme humility and not miss a step in every interaction with the founder. Click To Tweet
If you can be honest with yourself and you know exactly why you passed on a deal, you may initially regret it, but you can tell yourself that you truly worked diligently to understand the business and it just didn’t seem like the right fit at the time.
That’s better than saying you wrongly estimated the market size or didn’t quite understand what the business was all about.