VCs Hate Wild Speculation

I’ve Met a Lot of Founders

I meet with a lot of founders. And when I say a lot, I don’t mean a few dozen, I mean around 100 every month. I meet with them to help on all kinds of different things, from team building, to fundraising, to pitching, to product roadmapping, to founder therapy. By and large I do this for free. I find that meeting this many founders helps keep me alert as to what people are trying to build and what problems people think are worth solving. Everyone will argue that their idea is unique, but as someone who has met with roughly 3,000 founders in the last 5 years, I can tell you that your idea has likely been tried before, and that’s ok1. As time as gone on, and especially as I start wearing my VC hat more, I find myself caring less about novelty in product or idea and much more about novelty in execution and go-to market.

Yes, the old trope is true: “Good ideas without execution are worthless”

After meeting with all of these founders, virtually everyone wants VC investment. It’s fun, sexy, and would really allow them to make their vision happen. They claim that their idea is the next big thing and truly believe that they are ready for VC investment. And believe it or not, they’re often sure that the only thing that stands between them and a billion dollar company, is an intro to a VC.

Reality check, it’s not.

Almost all of these founders are nowhere near ready and that’s because they haven’t built anything investable. Instead they’ve created a vision in their head of what might happen and try to raise money based on that vision.

If you’re well-connected, that can work. If you have a PhD and millions invested into research and have patents, that can work. Or if you’re on the Forbes 30u30 to prison pipeline, you might be able to.

But for everyone, else, just know this: VCs are sick of wild speculation.

VCs Are Sick of Wild Speculation

VCs live in a world of what-ifs and hope. They take capital from LPs to make big bets on companies to grow rapidly. And they often make these bets early. The problem of founders is not that they in some ways are speculating, but instead their speculation is wild and rampant.

They contend so much about what they are going to do.

For example:

They are going to disrupt the real estate ecosystem by using blockchain to create fractionalized ownership for investment.

They are going to create a new dating app that really cares about pairing people up that actually match well.

They are going to use AI to change the way we analyze stock market research.

And believe it or not they usually just need investment to make that happen.

Isn’t that crazy?

All that stands between most founders and a $1b valuation is just a little capital. Maybe $300k in some cases2.

But wait, isn’t it strange that founders who get money usually need more and usually fail?

So are all of these people bad at forecasting or are investors bad at investing?

What’s happening here?

Brief Aside, I Do Get Pitching

Despite my rabid claims that people shouldn’t claim things that are outlandish, I do get the power of the pitch and the power of persuasion. The line between hyperbole, vision, hope, and a straight up lie is a tricky one to draw.

I also get that VCs will bet on ideas that could come true and that is the nature of their game.

Also, I’ve pitched a number of things, a number of times. I have also speculated in many scenarios.

I was once that bright eyed founder who promised the world and spoke of future features, and a new asset class, and how I was going to disrupt the creator economy.

Guess what?

I didn’t.

The More You Build, the Less You Speculate

My real critique is not that people claim big things about their startup’s future, but instead that they claim so much with so little to back it up.

These founders focus so much on raising and the potential of their idea and not nearly enough on building.

Every customer you get, is another 3 customers that I believe you will get.

Every additional dollar of revenue you have, is an uptick in how much I’ll believe your financial projections.

Every shred of proof you have that shows your vision is possible, the more excitement I get about what you have built, what you are building, and most importantly, what you WILL build.

In other words, you tell me 10 things that are demonstrably true about what you are building, I will likely believe any 1 thing of your choosing.

You win VC money by eliminating speculation. You eliminate speculation by actually building.

Footnotes:

1 My estimation is that around 5% of startup ideas are actually unique

2 Obviously they may have to raise other rounds, but after the first, they think the rest will come easy