How I'm thinking about VC now

I think a lot about where a VC firm like CT Innovations plays in the larger venture ecosystem, as well as what types of deals are in our "sweet spot." The way I think about it now (which is sure to evolve over time) is that we are an agglomeration of many VC strategies all lumped under one umbrella. I'd like to think that most venture firms have one or two "founder archetypes" in its sweet spot -- but given our mandate of investing in nearly anything that comes out of the state, we have no singular archetype. The way I've come to think about it is a sort of mental accounting: many deals fit our portfolio, but some because with an economic/catalytic tilt and others because they are ones larger players (a16z, etc.) would be interested in. 

From what I've seen thus far, some of the archetypes I've seen and diligenced:

• Industry specialist, great founder, great business, "small" TAM -- Right now, I think this is our sweet spot -- a great founder (often repeat founder) building great businesses in a $1-5B market, too small for other venture investors to get excited (i.e. no "homerun," unicorn upside) but a potential for a great return. 
• High-growth potential unicorns -- Connecticut simply gets fewer of these high-growth, "hype" companies where valuations step up 2-5x between rounds. These are the a16z/Sequoia/Thrive archetypes -- super high growth potential, high valuations compared to revenue, "true" venture deals that can go 30x or 0x. 
• Catalytic capital -- These deals have an "impact" angle to them. By no means are these deals meant to be concessionary, though. CT has a host of amazing talent -- Yale/UConn professors across science and tech, as well as pharma and insurance expertise -- that have the potential to become great companies. We can be one of the first checks in on these deals. 
• Economic development -- Less often, we make deals in part for local economic development. 

At a higher level, the way I'm thinking about it now on the tech side is we invest in (a) good, solid venture-able businesses, (b) a few moonshots, and (c) a few true pre-seed companies. A really fun mix of companies -- albeit a bit disjointed for a "typical" VC firm -- whose strategy is driven by the natural restrictions of CT Innovation's mandate.

The curse (and benefit) of the Epic culture

 Working at a place for 8 years -- through your 20s -- really shapes how you view the world, how you interact with people. I think about this more and more the further I get away from my time at Epic (I left in Jan 2023). There's some quirks I've noticed about myself as I venture into the outside world, double-edged swords. A few of the things I've been thinking about are below.

Speaking with certainty / humbleness

We're trained to speak with our hospital customers with certainty and knowledge; better for someone to trust that everything you're saying is accurate, even if it means half your answers are "I'll get back to you." In healthcare, this works amazingly well -- it's a cornerstone of building long-lasting trust. Works less well in the real world / the investing world, where you can't possibly know everything and are rewarded for having an opinion.

It leads to a natural culture of humbleness (especially on the TS team) -- you're generally aware of your limits, and you constantly have to reach out to other people for help and expertise. 

Low/no sales

Our long-term technical support (TS) team has almost no sales that we need to do -- no upsells, no selling new products. If we ever do get to that conversation (say, of adding on a new module), we kick the demo and contracting to our implementation team. I believe it's an excellent model of support: we could just focus on fixing problems as best we could, and never had to worry about billing or budgets or upsells. 

I realize now it's a weakness I have now -- that sales muscle isn't there (for better and for worse!). For example: in the investment memos I've presented, I've focused on the facts of the investment, treating it like a puzzle to solve for us to decide on. Others do much better at "selling" their companies -- again for better and for worse. 

Replaceability

Part of the Epic culture -- for better or for worse -- is that everyone is replaceable. My cynical take: the genesis culture of this is that turnover is/was high, so you need to ensure that if someone leaves, you can replace them. This works well when you have to travel to a customer site or go on vacation -- you can have real back-ups to replace you. A lot of energy thus goes into ensuring that other people can easily know what you're working on, into educating others on niche areas of the software, on building redundancy. In some investment firms (and in some governance structures), this replaceability -- a focus on process, on sharing -- is not a focus. 

Deference

At Epic, we supported the hospital IT's team who supported end users (doctors, pharmacists, etc.) Thus, as Epic staff, my goal was always to make the end users trust the hospital IT team -- and ideally, never know that I existed (unless I came onsite). I would go out of my way to ensure that the hospital IT team looked like the heroes instead of me -- good for them, good for me. Same with newer team members: the quicker customers trusted the newbie, the quicker I could roll off; feeding the newbie answers was a win-win strategy. However good this may be for the org, the "leading from behind" strategy is not visible enough, especially when switching careers. It's a hard skill to unlearn.

"Build it yourself" mentality

Epic famously does not acquire; any tool you wanted, you had to build yourself. I feel the same way now -- I'd rather build a tool that works just how I want it than try to find a pre-existing software that does 80% and locks me in. A blessing and a curse.

High product-building capability

I've spent over 200 days onsite, which taught me how to think about designing a product to address real customer needs -- noticing small pain points, asking questions to understand larger workflows, figuring out which issues were root causes and which were a symptom of another larger problem. This is unanimously a good thing -- I like to think of it as the original Forward Deployment Engineer popularized by Palantir -- but it is devilishly difficult to put on a resume. Talking with another ex-Palantir engineer, it's a rare, subtle skill, but one that is very hard to boast about or verify (save being an ex-Palantir FDE).

VC Notes (Part 3)

"In investing, you're rewarded for having a point of view." 

Heard this recently, and it's a mindset that's been hard for me (and other STEM majors?) to adopt. In my prior roles, I was rewarded for being knowledgeable, not saying wrong things, and couching my uncertainty. In investing, the best speak with knowledge and conviction, but it seems the next best thing is to speak with conviction but not necessarily knowledge. To sound impressive -- or to have a view, even if ill-informed -- can take you further. Investors don't like to hear "I haven't done my research on that topic"; it seems they'd sometimes rather force you to glom onto a position. Obviously, there's a lot more nuance than that, but I'm slowly learning how to thread the needle of speaking like an investor. 

Gut investing

I wrote about this a little previously, but it also feels like there's some flavor of machismo in some corners of venture where people "trust their gut" and increasingly "learn to trust it more." I've heard it at least a few times, and I think it's something that uniquely exists in venture as something that people are proud of? You never hear a fundamental equities investor talk about their gut as the sole driver of decisions. Anyways, I hear it a lot, I agree with "gut" as a data point, but I think it behooves everyone to tease apart what "gut" means (founder charisma? founder anti-charisma? etc.)

What it takes to build a novel software (e.g. computer science research) is drastically different than what it takes to distribute a novel software

Perhaps it's embarrassing it's taken this long to fully comprehend, but the cool stuff that computer scientists are doing seldom translates to a successful software company, especially in age of AI. Cool algorithms or cool technology usually don't sell; "dumb" software with great distribution are what matter. Most of the MAG7 today are fundamentally "dumb" software with great distribution (save Google perhaps). I've become increasingly cynical about the software technology itself being any sort of differentiator; it's the people and sales channels that make a tech product pop.

Same goes deep tech, say in climate. Great lab work (i.e. science research) needs to be coupled with even better engineering to have any chance of survival. Sometimes it's not the best core science, but the one that can scale up better that wins. 

Syndicate vs. the more modern sole lead

Historically, VC investors looked for syndicates of other investors to share risk. The largest VC firms now don't need -- or want! -- syndicates; there's too much money that needs to be deployed. Instead, it feels like it's sometimes better to elbow others out of rounds. Almost has a PE flavor to it. 

Authentic differentiation

This is probably more through the lens of an allocator, looking at VC funds. (We recently had a day where we saw a few of our portfolio VC managers.) The VC funds that resonate the most are the ones where the point of differentiation feels authentic -- ties back to the person's past career, past predilections, or a difference in the way the GP thinks that manifests itself as strategy. Hard to describe without naming names, but something I think about more and more as I build my "brand."