This week a colleague and I hosted dinner for a group of VCs
in Washington DC. As is often the case, the conversation turned “inside
baseball” very quickly. We chatted about down rounds, entrepreneurs’
expectations, newfound pressure from LPs, and the now striking (and somewhat
scary) disconnect between the private markets and the public markets. It was
very doom and gloom. And very reminiscent of all the conversations I’d just
finished having in the bay area before heading east.
That was until one of the investors at the table who’d been relatively quiet to that point chimed in. Normally, folks would all continue talking passed or over each other. But since this particular investor happened to be one of the better enterprise investors on the East Coast, people quieted down.
“Look,” he said. “In this industry, you’ll always be able to come up with reasons to say no to an investment. The hard part is coming up with the right reasons to say yes.”
The conversation kept moving along, as conversations do, and we eventually got to more traditional dinnertime subjects. But since our conversation earlier this week, the comment has sunk in and resonated. Its truth couldn’t be more obvious to me. There are a near infinite number of reasons why startups can fail. That number compounds as investors ask themselves why, even if the startup succeeds, they might fail to make money on their deals.
Every time we look at businesses, it’s easy to spot these risks and argue that a deal doesn’t make sense. In fearful times like these, we’re biased to see these potential risks first. We’re like moths to flames. But the reality is, most of those issues are there in greedy times as well. The key is to avoid both irrational fear and irrational exuberance and come up with the right reasons to say yes.
This is something I’m going to be focused on for the next few months; forcing myself to always ask how a business might succeed instead of talking about why it might fail.
Image Courtesy of Alexandre Dulaunoy