I haven’t written a post in a while.
There are several reasons for that, some legitimate and others less so. But the fact of the matter is that I just couldn’t think of a topic that felt truly worth writing about.
What I kept coming back to though, was a half-baked idea around the investment process that we have as VCs. Of course, every firm, and indeed every individual investor, has a different process, and this can often be pretty opaque for founders.
So while trying to formulate a fully fleshed out explanation, or description, of my process, I realized that it was much harder to articulate than expected. Which is odd, because this is literally what I do on a day-to-day basis.
But after putting some thought into it, I think I was able to come up with a good way to describe what goes on in my brain when I meet companies.
Honestly, it’s a love story.
What is Love
There’s a classic comparison between a founder-investor relationship and that of a marriage. And while I understand where that idea comes from, I simply don’t subscribe to it.
Much like a company isn’t a family, an SPA isn’t a marriage certificate. Founders and investors are first and foremost business partners. That doesn’t mean however, that love isn’t somehow involved.
So Haddaway aside, what is love in the context of an investor-founder relationship?
Love is so many things. It’s Passion. Intrigue. Loyalty. Dedication. Curiosity. Perseverance. Time.
Sometimes it’s all of those things at the same time and sometimes it’s only one of those things.
But love needs to be present when it comes to the relationship between founders and investors in order to establish the initial bond. Because these relationships can last upwards of a decade, and financial incentive simply isn’t enough to keep up a strong connection.
Where is the Love
The journey of finding love as an investor starts with a first meeting.
Each meeting with a founder presents a new opportunity for love. And that’s exciting. But the number one question in my mind that drives my entire interaction with a company is: where is the love?
Is this founder inspiring? Does their mission resonate? Is this someone I can see myself working with for the long run?
There’s really only one way to answer these questions: by spending time together. And this process of spending time together is what all of us early stage investors refer to as due diligence.
We research the market, competitive landscape, technology, speak to potential customers and more. But when it comes down to it, I tend to look at the traditional data gathering due diligence process as an excuse to spend time together, as opposed to actually driving a decision.
**Now feels like a good time to remind you, my dear readers, that my entire perspective is that of an early stage investor, specifically an idea stage/seed investor. I won’t pretend to understand the process of my growth stage friends, but I would guess that actually taking a look at the numbers is important in their decision making process. That, of course, assumes that by the time companies raise “growth rounds” there are actually numbers to look at - something that is no longer a given.**
You Give Love a Bad Name
Since “time spent together” is the most impactful contributing factor to falling in love with a company, it stands to reason that requisite time should be spent together. Seems logical.
Which is why the trends of founders expecting to receive an offer after one or two meetings, and of investors boasting extremely quick decision making processes (i.e. solo-capitalists) are quite baffling.
At TLVP our time to term sheet (the amount of time between meeting a company for the first time and issuing a TS) has indeed consistently decreased over the past four years as can be seen in the image below.
But this steady decrease is just as much a reaction to the market as it is an increase of efficiency in our internal processes. (Of course, these are averages and like any good data set there are outliers as we’ve invested in about 35 companies over this time span).
This isn’t to say that speed isn’t important. Of course it is. Just as we don’t want to waste founders’ time, we also don’t want to waste our own time.
That being said, it’s simply impossible to experience true love without putting in the time. Investors who claim to be able to do so, give love a bad name.
Can’t Help Falling in Love
As I mentioned earlier, each investor has a different process. Personally, I can’t help falling in love with companies.
I’m an optimist by nature and when I meet founders I have a tendency to develop love at first sight. While it’s true that we reject the vast majority of companies that we meet, sometimes I think people forget that investors begin each meeting with the desire to be swept off of our feet.
The role of the process then is to determine if this love persists or if it’s fleeting. (Quick shoutout to Maroon5 for producing my go to karaoke song).
All You Need is Love
I realize now that I may not have shed much light on the actual investment process. Sorry about that.
But the truth is, at the seed stage, the particulars of the process are of secondary concern. The important thing to remember is that as investors we are running a process in order to get to know each other and initiate a long term relationship.
Of course, if at any moment the love fades, the process ends. And that’s how it should be, both from the side of founders as well as investors.
Company building is a roller coaster. Especially in the early days, founders can experience the highest of highs and the lowest of lows multiple times in the same day. Getting through that doesn’t just require hard work, grit and intellect.
It also requires love. Love of your mission. Love of your team. Love from your team. And yes, love for and from investors.
At the end of the day, all you need is love.
What's the unit in your graph of average time from first meeting to t/s - hours, minutes or seconds?