Thread by @fdestin

1/ By definition, VC partnership are only as good a their decision making.

Let’s explore 👇

2/ In venture as in startups, there are only decisions, never any certainties. It is the nature of our game that good decisions combined with good execution can lead to poor outcomes. In other words, a poor outcome does not mean you took the wrong decision. What to do?

3/ The first step is to collectively get as close to the truth as you can.

This means gathering opinions and facts until you have built a mental model of the decision you are taking and assessing the nature of the risks you are taking.

4/ If there is convergence around the evidence you are gathering, great. Also: rare.

Often there won’t be convergence and you are left in partial darkness, but you have improved the quality of your thinking framework.

5/ So the process by which you gather and analyse evidence and opinions is important. This is where you need to identify and stifle your decision making biases: pattern matching, over-reliance on experience or expertise, confirmation bias, etc. Competence can be dangerous.

6/ The magic is created outside your zone of comfort.

Remember: objections, even poorly expressed, are a gift.

An opportunity to explore and challenge your own thinking.

7/ The objective of this process is to (a) make a decision (b) assess and understand the risks you are taking.

You can then decide whether you are OK taking these risks, and if that balance of risks is acceptable. Too many uncorrelated risks means a high chance of failure

8/ The next question is: are you getting paid to take these risks?

Yo can’t create value if you don’t build unlikely outcomes, but you can’t create value if your entry point is too high to account for the probability of failure.

9/ Finally comes decision making as a group.

Groupthink is a well documented issue, but it goes well beyond that.

Does your partnership represent an environment of trust where robust challenge is allowed but where you are also encouraged to be bold.

10/ Seniority can be a real poison - where the voice of experienced and successful investors goes unchallenged but diverse or young voices dare not express their unique viewpoint on the world, or champion unlikely projects.

11/ Group discussions also have their own dynamic and rhythm, and sometimes a good investment decision can be pushed aside simply as a result of the unique flow of a discussion gone sideways. Sometimes you need a reset.

12/ Finally comes intuition and art. All this process serves to form a view that is properly informed and where every angle has been explored; but at the end of the day, the best investors are the ones who are able to see through a sea of evidence and identify the outliers.

13/ If you find an outlier no one likes but that you are passionate about, and you’ve been intellectually honest throughout, pound the table.

That’s what you are paid to do.

/eot