0/ Thread: 25 traits of the ideal early stage VC 🔥 My ideas of best practices based on what I’ve seen + read. Anything to add / argue? cc @andrewchen @ArlanWasHere @eriktorenberg @fdestin @cyantist @ryan_caldbeck @sknthla @garrytan @TZhongg @hunterwalk
2/ In the same way I think humble founders will rule the world, I believe VC land will be led by the humble: people who recognise luck, who are honest & explicit about what they don't know or can't help with, & who work hard despite success salon.thefamily.co/humble-founder…
3/ All great VCs are positive. The longer you're in the game, the more tempted you are to become cynical. The key is to balance experience with an open mind on what could go right. As @garrytan put it, you only make returns when you are optimistic & right
4/ The best early stage VC funds are managed by foxes: curious polymaths with broad peripheral vision. Their curiosity allows them to recognise technological breakthroughs before anyone else
5/ The best VCs learn in real-time & are adaptable. On top of the fact tech keeps changing, the more you progress (& potentially succeed), the easier it becomes to believe your own BS or to shy away from what your gut tells you
6/ A great early stage VC has a unique investment thesis. This isn’t “we invest in stellar founders tackling huge markets blabla”. Instead, it is so singular & clear that multiple people will send the same founders to you based on their fit with you
7/ The ideal early stage VC fund is diverse & inclusive (in terms of gender, ethnicity, educational backgrounds & career backgrounds) on 2 levels: the team managing the fund + the investment selection process cc @ArlanWasHere @deborahokenla @checkwarner
8/ During pitching time, the best VCs show they value founders' time as much as they value their own. This can be done in many ways, e.g. leading a speedy process (not taking one month to meet a founder); offering to meet founders at their office rather than yours, etc.
9/ Great VCs get back to founders fairly quickly after meeting them. Being clear on timelines (e.g. ‘sorry for being slow, I will get back to you by the end of next week’) is absolutely possible, and makes you look as good as if you made fast decisions. Ghosting is the worst
10/ The perfect VC is great when it comes to rejection: they declare conflicts upfront, are candid in discussions & try to say no to founders as early as possible. They say no directly in a meeting / call or write amazing, value-adding rejection emails
11/ Relatedly, the best VCs only use the “too early” card when they really mean it, and not as an excuse for (a) I don’t like the idea (b) I don’t think you’re the right person to do it (c) the market is too small cc @leehower @TheFullRatchet @checkwarner
12/ When it comes to Term Sheets, great VCs set clear, founder-friendly terms. Embracing the upside risk theory, they offer compelling terms & forgo some downside protection to get the top companies to want to work with them cc @sama @roybahat blog.samaltman.com/a-founder-frie…
13/ In particular, a good VC doesn’t put founders under pressure to sign their Term Sheet, or set traps like exploding term sheets. Demanding that founders decide too quickly is disrespectful, & term sheets with an expiry date are utter nonsense cc @chrija
14/ Once a term sheet is signed, a great VC does not pull out, whatever the reason (e.g. a bad month, a better looking competitor showing up etc.). If you don't firmly believe in the hypothesis and team, why sign in the first place? cc @robinklein
15/ Good VCs don’t lose deals on valuation when they spot great founders; the difference between a 3x and a 300x return is not caused by a small % ‘saving’ on price
16/ The best early stage VCs won't overreact when founders miss their numbers. Forecasts are poetic prose and all that matters is building a great, sustainable company. They will, however, ask the right questions about how to get back on track
17/ A great early stage VC is low volume. They always try to make themselves available to help but they acknowledge the importance of founders’ independence, so they don’t micromanage them or second-guess all the decisions they make cc @josephflaherty
18/ Whilst being low volume, the most brilliant VCs are able to support founders in meaningful ways beyond funding, e.g. opening doors to speed biz development, talking up your startup with later stage VCs, aiding in negotiations, etc. cc @josephflaherty medium.com/@foundercollec…
19/ Great VCs complement their efforts on maximising upside with a good management of downside risk by knowing how to run M&A processes & building relationships w/ alternative forms of capital / pot'l acquirers (family offices, strategics, tier 2 & 3 VCs)
20/ Having access to incredible people, the best VCs are good at identifying great talent & surrounding founders with the most talented people they know who want to join important causes but don’t have startup ideas themselves cc @mashadrokova @msuster bothsidesofthetable.com/venture-capita…
21/ When needed, a great VC acts as “chief psychologist”: they help founders through tough moments; they coach them & act as sparring partners; they help them resolve conflicts & deal with adversity as well as success cc @robinklein @msuster salon.thefamily.co/the-beauty-of-…
22/ Relatedly, great VCs candidly address concerns. It’s hard to perfectly express something you think is wrong & that should be taken into account by founders. However, firmly & empathetically acting towards the right change can be huge medium.com/human-machine/…
23/ When asked for advice, the best VCs act in the founders' best interests. For example, they won't encourage irrational behaviour in fundraising and spending & will think about founders' lives when it comes to (relatively small) exit opps cc @tomiogeron @BNarasin
24/ Great VCs see reserves management as critical: they focus their time on the winners. But whilst knowing how to prioritise, they still try to help less performing companies, which is crucial for reputation building cc @lrastegar @ophelia_brown
25/ Great VCs accept they’re never in control. Even if you sit on boards, it's the founders who plot the course, the teams that set the sails, the market that provides wind. All you can do is guide, advise, question. This isn't obvious for former operators
End/ I will also collate all these tips on a master Medium post soon: please help me make this better by giving me ideas and challenging my points of view! Hopefully this can contribute to continually making the ecosystem better :)
