Practice Makes Perfect
All Things Venture #083
Life comes at you fast. Let’s set the scene. It’s a Saturday night in America. One moment that means sitting in a living room with your closest college friends. There’s a 30 rack or two (or three, depending how the boys are feeling), nestled in the corner. Jokes are flying, FIFA is playing, and the vibe is buzzing. A few years later, you’re propped up on the couch in your Lower East Side apartment. The dishwasher is on. HBO is paused on the Apple TV, the vibe is decidely “late twenties dude with a long term girlfriend who is having a girl’s night.” That’s me tonight, and a younger me would almost be insulted by how I’m choosing to spend my time. A much younger version of me would genuinely not be able to comprehend why I wasn’t out, having fun, in New York City of all places. But life obviously changes.
I’ve said this to a bunch of people before, but I genuinely view investing as a sport. There’s a scoreboard (i.e the amount of capital you return), there’s teams (i.e other firms) and there’s a field (i.e anywhere a deal can get done). And what I know from playing sports my whole life, and from competing at one of the highest possible levels - is that success, especially in individual sports, is a function of two things:
Your natural level of talent
Your capacity to do the work and train/practice
And you know what the beautiful thing is about investing?
It’s that there’s no barrier between you and your field.
Your field can be a coffee shop in Mexico City. It can be on a chair lift in Colorado. It can be on your slightly worn down Lower East Side couch in New York City. Anywhere you have the space to think, you have the space to practice investing. And that’s where I caught myself tonight. I’ve been grappling with some internal thoughts on what matters most as a venture capital investor. And I’m not talking about the high level dynamics of team, market, and product. I’m talking about the second and third order questions you need to ask yourselves to identify an attractive team, an attractive market, and an attractive product.
I wanted to share these raw thoughts out loud because A) I believe that clear writing is a sign of clear thinking B) There’s an added pressure of sharing your thoughts publicly (and an opportunity to collect feedback) C) I thought it would be helpful for any potential founders, who are thinking through/assessing opportunities on their own. So to return to the question, what matters most to a venture capital investor when they’re assessing an opportunity? Well, here are some questions that came to mind for me:
Does the founder have core attributes that are competitive in their chosen market opportunity?
Is the end customer in a position to compound value?
Is there a clear path to developing a sustained competitive advantage, relative to the competition?
What are the series of miracles I need to believe, that would unlock the above competitive advantage? And what is the likelihood of those occuring?
Is the product simple enough, that the median American could use it?
Is there enough gross margin to pay for my customer acquisition costs?
Is virality or levered distribution part of my go to market strategy?
If the product is live today, is there evidence of repeatability, in the sales motion or in the level of customer engagement/usage?
What is the new technological, regulatory, or cultural change - that the business is taking advantage of?
What evidence is there that the founders are capable leaders?
Are these questions the end all, be all of what defines an attractive investment? Obviously not. But do these questions start to outline, a framework of how to think through what is and isn’t an attractive investment? Absolutely.
If you’re a founder, if you’re an investor, if you’re an operator - my belief is that we should all be doing our best to compete. We all owe it to ourselves to maximize the natural talents we have, in an effort to see what amazing things we can produce. I don’t know why, tonight out of all nights, I chose to hammer out a quick article and articulate some of the investing framework in my head. Maybe I’m a bit nostalgic for being a college student. Maybe I need more hobbies. Maybe I’m just a bored, nerd looking for something to do. I don’t know, and frankly I don’t really care, because what I do know is that practice makes perfect, and I’ll be damned if I’m not getting my shots up in the gym in an effort to see how far I can go.