This post isn’t for you. You are probably trying to get your round done and this post won’t help you with that. This post is mostly for me. Sorry.
Two years in, people often ask me what it’s like to be an investor, what I like and what I don’t like. There are a lot of things that I think are wrong with the VC industry (and I could talk about that for 20 posts). Focusing on the activity of investing itself, these are my best and worst days.
The worst days
The worst day as an investor are the days when you need to reject entrepreneurs. Last week, I had to send out rejection letters to everyone who didn’t make it to 500′s seed program, which just started. We have a limited number of spots, so by definition, not everyone is going to make it. Every batch, I procrastinate on doing this activity.
There are a lot of great businesses that we just can’t invest in (for now).
That’s just the unfortunate truth. Even though we do a lot of investing, we just can’t invest in every good business. There are also business models that we just can’t invest in — for example, we don’t invest in brick and mortar businesses. That’s just not what we do. Similarly, we don’t invest in gaming or pharmaceuticals. We just don’t have an understanding of these areas.
In addition, because there is always limited capital to deploy, we have to pick companies who can best utilize our investment now. In many cases, this means that we need to turn down companies that are not at the right stage, even if the founders are really smart, tenacious, and awesome. We just can’t get involved in many businesses at this particular time. That bums me out, but it’s business.
When we send rejection emails, the above thoughts don’t often get conveyed. Having been rejected by lots of investors before, I have previously thought, “Oh, they didn’t like me,” or, “They think my business sucks,” or whatever. It isn’t necessarily that at all. It could just be that this isn’t the right fit or the right fit right now. Whether you are getting a rejection from 500 Startups or someone else, it is still worthwhile (if you want) to reapproach an investor. If anything, investors who have spent more time with you rather than less are more likely to be your advocates, because they have gotten to know you.
The best days
The best days, though, are the days when I get to talk with entrepreneurs, and they leave feeling inspired.
This doesn’t happen all the time (or perhaps even most of the time), but it’s a great feeling when it does happen. This happens with portfolio companies and even in meetings with entrepreneurs who are pitching their business to me. The best example that I have comes from my own experience when I was an entrepreneur. I remember talking with Jason Lemkin about our customer acquisition process at LaunchBit. I was telling him about the outbound sales methods we were using. It was working; my cold emails were effective. But, it wasn’t scaling well. He had a particular insight about structuring the roles on our team, and that was an “aha” moment for me. I walked away from that meeting feeling super pumped.
As an entrepreneur, you often feel down in the dumps. Lots of things are not quite working or not quite working well. You may be so close to making something about your company really soar, and yet you often feel so far away and may even be tempted to throw away whatever is sorta working. Inspiration comes from the meetings where you get some interesting insight that you can put to work right away that will have a huge impact on your company. As an investor, I love being able to provide that or even just some encouragement. If an entrepreneur walks away feeling either super pumped or a little better about themselves / their business, those are the best days.