If I had an early stage fund, I’d host lots of social mixer events and then invest in the companies that never show up to any of them.— Darius ‘Bubs’ Monsef (@bubs) January 25, 2020
I retweeted the above earlier this week. Mostly because it’s funny, but there is some truth in it as well.
When trying to decide on whether or not to back a founder, I and others doing the same have to make a decision with very limited data. We meet a few times, can do reference checks (which is not always a good thing either), and can look into what they’ve done before. Even if you do this very thoroughly, you’re left with very little data to base a decision upon. Which leads me the title of this post: everything is a test.
- If you show up at a lot of irrelevant events, investors might think you lack focus
- If your deck is poorly designed, investors might think your product gets the same TLC
- If you spend most of a meeting talking about a minor detail and that means you don’t have time to get through your presentation, investors might think you’re easily distracted
- If you show “vanity metrics” instead of real stuff in your presentation, investors might think your real numbers suck
None of these “assumptions” might be true. You could be at the event to meet a friend, your deck could look like shit because you have your designer focused on your actual product, that minor detail might be very relevant for understanding your opportunity, and you could’ve gotten a flawed advice to always show your best numbers not your must telling numbers. Meaning; failing one such “test” should not be enough to lose investor interest, but if you repeatedly show “negative signals” through a process it might be enough to make a borderline decision tilt the wrong direction. Everything is a test.