For those who don't know me, I switched to venture from product management earlier this year. "8 after 8" sounds catchy, so it seems like a good time to jot down some observations.
- Tough to break in if later in your career.
Many former colleagues and acquaintances have asked me for advice recently. After all, I worked in product management for ~15 years before joining Costanoa to invest across early-stage crypto and fintech. The reality is that there are very few openings compared to the amount of interest. It's hard to break in if you're later in your career, especially if you haven't run fundraising processes, had an entrepreneurial win, or led big groups at successful companies. But it's not impossible. I did it (s/o Amy & crew). Luck helps. But yeah... it's tough to break in.
- Operating experience helps with some things, but not all.
I'm convinced that some operational experience enables you to be helpful to founders. It also helps you relate more. So it's valuable. But I'm unsure how much experience is enough or if it makes you a better picker. No doubt, spending a lot of time in venture makes you a better investor, having seen multiple cycles and building valuable relationships.
- Solving a problem ≠ great investment opportunity.
Coming from a product background, I'm the type who can't unsee problems or injustices and turn off thinking about potential solutions. I'll stand in a coffee shop, lost in my thoughts, designing it to be more efficient. I can't help it. I get excited when someone tells me they're building something that will result in an experience resembling the inevitable or when they clearly articulate a big problem and a possible way to solve it. Unfortunately, I've been learning how those don't necessarily make for good investment opportunities where the return profile matches what we look for. Market size, timing, flywheels, defensibility, commercialization, and monetization all matter. The reality is that my job isn't just to help fund people to solve problems. They also need to be problems and potential solutions with extreme value creation and capture capabilities. I'm still training my brain to think this way. It's tough telling a founder that you're passing despite believing it's a good idea that they should work on. They often think you're blowing smoke, but I'm usually being genuine.
- Strategy & conviction drive all investment activities.
I underappreciated investment strategy prior to joining full-time. Ours is high conviction, high ownership. We're most active at the seed stage, often leading $2-$4m rounds. We go all-in on our companies, meaning we don't make competitive investments and put in a lot of money, time, and support with design partner and customer intros, fundraising, gtm, and hiring. We're disciplined, even during times of froth (meaning sitting out of $50m...$100m valuation crypto seeds). All of this results in fewer deals. We aren't in the camp of "spraying and praying." Many stars need to align to get a deal done, and there are only so many extraordinary founders out there. "Conviction" is at the heart of every investment decision. Founders should keep this in mind when pitching investors. Your goal is to make the investor feel confident that the problem is worth solving, the investment is a great opportunity, the team is capable of executing, and the timing is right. I'm still learning what it truly means to have conviction – both what it feels like and what it requires. Because even when it's strong, I know an investment can go to zero for a million different reasons. I'm working on gaining comfort with uncertainty and figuring out how to balance theses vs. risks.
- Founder attraction...
I think I've seen enough pitches at this point to say I naturally gravitate to relatively grounded, pragmatic, commercial-minded, technically capable founders. I especially appreciate experience in both large companies and early-stage startups. I don't discriminate. I actually think the more experiences the better. Mike at Luabase fits this profile like a glove. Sid and Julia do as well. But once in a while, I'll meet someone who doesn't look like that, but really energizes me. The spiky, young visionary who will undoubtedly accomplish extraordinary things over their long career – people like Jamil, Jon and Tate. All of these people have a few things in common. They're capable of building products, enjoyable to speak and spend time with, good people, missionaries instead of mercenaries, and dedicated. Said another way, they're trustworthy.
- Knowing why I'm here.
For me, getting a deal done feels nice, but it's little more than a quick dopamine hit. Many investors are likely addicted to the feeling, mistaking getting deals done for being great. But there's a difference between gathering logos with low ownership and leading investments. Leading a seed stage investment is just the beginning of a lot of work. Product progress and commercial signals are what feels great. I'm not in it for social validation or high fives. I'm here to play a part in creating significant value while spending time with extraordinary people creating the future. Quite frankly, I want to make fund returning investments, generating extraordinary returns for myself, my partners, our LPs, our founders and their teams. That means fewer deals, high conviction, high ownership, and more hard work in the years that follow the initial investment.
- Still figuring out my game.
I'm still trying to figure this whole thing out. I want to stay true to myself while advancing as fast as possible. Admittedly, I'm battling imposter syndrome, although I've done that throughout my life. It took ~6 months before I was comfortable identifying as a VC instead of as a product manager. I often feel like a potential employee or colleague when chatting with founders rather than a potential investor. I've grinded and have helped build something from nothing several times. So I still identify with builders more than investors. John gave me a great pep talk a few months ago. He loosely said, "you need to figure out what your game will be. There are different types of VCs. Don't be afraid to lean in on your natural curiosity and product background. You actually use more products in crypto than most investors, and your product experience is rare. Don't shy away from these things." So while I'm still getting comfortable and figuring out my game, I know I'll continue thinking from first principles and as an actual user.
- Rare to be great, hard to know if you're good, common to be mediocre.
Greatness is insanely rare and takes decades to achieve. It's impossible to even know if you're any good early on. You generally know if you're doing the right things like thinking, writing, networking, doing thorough DD, and being helpful to your founders. But it takes 5-7 years to get signals with regards to being good at the actual investing part (picking, deal structuring, doubling down, etc). Reality is, there's a lot of mediocrity – those with unoriginal thoughts, little desire to be helpful, logo gatherers, etc. Luckily I get to see what good & great look like every week thanks to the crew.