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."