I can’t tell you the number of investors that I admire who have a story about how they were offered an introduction to Company X, but turned it down before taking the meeting, only to watch the company go on to be massively successful. This is the second most frustrating feeling in venture, from my experience. (The most frustrating is when you never got an intro to meet the company, because there you didn’t even have the chance.) But it’s harder to navigate than it sounds.
also, the commonly-cited 4000 tech startups per year that would like to raise money per year is clearly a major underestimate
— Sam Altman (@sama) October 28, 2014
If Sam’s comments are true (which I strongly believe), I could conceivably take 10 meetings a day, every day of the year, and still have to say no to an inbound pitch every now and then. Of course, that is extreme, but it illustrates the point. There are so many companies. And among those, it is frankly impossible to know which among them is the next culture-changer, the next inspiring brand, the next unicorn. The top of the funnel is, thus, impossibly wide. After all, new pitches is only part of my job – supporting the portfolio companies, communicating with LPs, and growing the firm are all considerably important, too.
Different VC’s address this fundamental challenge in different ways: some limit themselves to certain sectors. Others ‘pattern match’, so they look for certain ‘types’ of founders. Others still only take introductions from referrals. I can’t help but think all of these are, in their own way, problematic. This is a big part of why diverse founders continue to lag, despite the growing chorus of concern about the issue. Plus, if I look to past success as a primary indicator of future success, I am summarily excluding newcomers (demographically or otherwise), many of whom can be the most dynamic and brilliant founders. And finally, we are in the outliers business. Most frameworks are necessarily designed to exclude outliers. How can a VC optimize the top of the funnel, and the ‘first meeting’ to ensure that they can be pleasantly surprised and maximize serendipity?
And perhaps this is naïve, and maybe the best companies and founders do fit within the pattern, but surely that can’t be true. Thoughts?