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Venture Capital:
#1 questions I use to determine the time and energy I’m willing to invest.
Applies specifically to early stage:
-Series Seed or Series A
-You are the first or second potential source of outside capital
Thread contd...
#1 questions I use to determine the time and energy I’m willing to invest.
Applies specifically to early stage:
-Series Seed or Series A
-You are the first or second potential source of outside capital
Thread contd...
Conviction of management is one of the most important pillars for an early stage investment, right?
The formula to determine if this company is worth my time can stem down to 2 questions and a couple of “follow-on” questions:
The formula to determine if this company is worth my time can stem down to 2 questions and a couple of “follow-on” questions:
Questions:
1) How much have you put into the business to date?
2) What is your total net worth today?
(you can tell him/her that you are not trying to pry, but this is a super important question you ask founders)
1) How much have you put into the business to date?
2) What is your total net worth today?
(you can tell him/her that you are not trying to pry, but this is a super important question you ask founders)
Follow ups and thought process:
2a) If he/she has a low net worth, inquire why? (Did they put into ventures, expensive lifestyle)
*Never like to see a low number - if you cannot handle your own personal finances, why should I trust you to handle the finances of a business
2a) If he/she has a low net worth, inquire why? (Did they put into ventures, expensive lifestyle)
*Never like to see a low number - if you cannot handle your own personal finances, why should I trust you to handle the finances of a business
*If the amount invested in the business relative to current net worth is LOW, that is a big red flag 
*Why should “I” (as the investor) stand to lose more personally then you financially?
*Why should “I” (as the investor) stand to lose more personally then you financially?
1a) Are you willing and prepared to put your net worth into this company?
*This next answer can be a huge determinant for whether I escalate the conversation further, and ultimately, invest into the business.
*This next answer can be a huge determinant for whether I escalate the conversation further, and ultimately, invest into the business.
If the answer is shaky or a no,
the phone call may as well be over.
the phone call may as well be over.
If the founder will not put money into their own business, how are they going to convince a stranger to put money into the business?
If the founder is not willing to go broke for their investors, than why bother with your finite capital?
#goforbroke
If the founder is not willing to go broke for their investors, than why bother with your finite capital?
#goforbroke
Bottom Line:
If you include as a question for your pre-Series A company prospects, I guarantee it will increase the outcome of your overall portfolio performance.
If you include as a question for your pre-Series A company prospects, I guarantee it will increase the outcome of your overall portfolio performance.
*Disclaimer – this doesn’t work so well for post Series A businesses with a significant run-rate.
Post Series A Stage:
You need the founder to have creativity, which is important when you’re trying to scale an enterprise that already has “product market fit”
Creativity is tough to tap into when your sleeping in your car and eating ramen noodles as your nutrition protocol.
You need the founder to have creativity, which is important when you’re trying to scale an enterprise that already has “product market fit”
Creativity is tough to tap into when your sleeping in your car and eating ramen noodles as your nutrition protocol.
Reflection:
It seems unfair that “us” #VC’s (investors) pride ourselves in having a well-rounded, diversified portfolio, meanwhile we often expect the exact opposite framework from the founders we choose to invest in.
It seems unfair that “us” #VC’s (investors) pride ourselves in having a well-rounded, diversified portfolio, meanwhile we often expect the exact opposite framework from the founders we choose to invest in.
Elon made a life-changing $180 million when he sold his share in PayPal to Ebay.
But rather than living a life of luxury, he poured his $180 million payout into his three new companies: Tesla, Space X, and Solar City.
But rather than living a life of luxury, he poured his $180 million payout into his three new companies: Tesla, Space X, and Solar City.
Despite the $180 million payday, Musk completely ran out of money to live.
In 2008, he found himself in divorce proceedings and living off loans from friends.
Despite being a newly minted millionaire, all his money was tied up in Tesla and SpaceX.
In 2008, he found himself in divorce proceedings and living off loans from friends.
Despite being a newly minted millionaire, all his money was tied up in Tesla and SpaceX.
He was borrowing money to pay his rent!
His brother confirmed his dire financial situation “Oh yeah. He’s in debt. More than broke.”
https://twitter.com/elonmusk/status/1118292557895618560?s=2
End of thread
His brother confirmed his dire financial situation “Oh yeah. He’s in debt. More than broke.”
https://twitter.com/elonmusk/status/1118292557895618560?s=2
End of thread
In collaboration with @adam_grossman1
