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It's interesting to see this mapped out so clearly, but each step along the way is still entirely subjective. Most investors, IMO, are not great evaluators of

It's interesting to see this mapped out so clearly, but each step along the way is still entirely subjective. Most investors, IMO, are not great evaluators of founders (e.g., are easily fooled by elite credentials), markets (they tend to chase shiny things), or founder / market fit (this takes a lot of operational expertise to realistically evaluate).

zmitri 13y ago
Agree with you. I'm actually unclear what exactly this is a decision tree for because its steps are so subjective. Definitely isn't the decision tree from first contact to investment - that would be much deeper. It would also have to factor in how much heat there is behind the deal already - which for most seed firms is probably the most important signal! Seems accurate as a decision tree to take a meeting with someone though. As an exercise, try running some of their portfolio companies through that decision tree and see what kind of results you get.
- Dartanion7 13y ago
  I'm also curious what inputs they use to evaluate the founder. Surely there's some objectivity to that element of the decision tree beyond "great guy, articulate, firm handshake" --- I'm thinking probably quality of undergraduate / graduate schools, past exits, years in industry, etc.
  - ig1 13y ago
    From my experience it's much more individual than that "what makes this person exceptional ?" - which tends to be a combination of track record (what have they achieved previously) and individual traits (are they super-smart, charismatic, etc).
  - seiji 13y ago
    "great guy, articulate, firm handshake" You can tell a lot by the first five seconds with a person. That's why so many founders today are the cool kid/hot guy variety and not the Bill Gates/slovenly nerd variety. VCs won't take seriously a guy who shuffles-when-walks with zero eye contact and stares-at-floor-constantly habits unless they come with someone vouching for them. VCs will take seriously someone who can project all the right social signals, act strong, and not let anyone see into their weakness.
    - mattgreenrocks 13y ago
      This is precisely why VCs will miss truly disruptive founders. Tech entrepreneurship is still fairly young, but in that short time, we've already invented our own unique brand of cool: young, credentialed, hot, saying the right things. Oh wait: those are the values of society at large. We've already abandoned all pretense of disruption. This is just the next iteration of the elite, where your value as a person hinges on how well you project your own narcissism.
      - michaelochurch 13y ago
        Tech entrepreneurship is still fairly young, but in that short time, we've already invented our own unique brand of cool: young, credentialed, hot, saying the right things. Oh wait: those are the values of society at large. We've already abandoned all pretense of disruption. This is just the next iteration of the elite, where your value as a person hinges on how well you project your own narcissism. I had a chronic illness in my teenage years and 20s, hit a nadir around 24, and recovered by 27-28. I'm healthy now, but didn't have the start that's "expected" of people with +4 sigma talent. It's obvious, since I'm 30 and not earth-shatteringly successful, that I have some kind of health story... but I prefer not to get into the details with people I barely know. I don't want it to be the first conversation, but in the contemporary Valley, it would be. ("If you're so smart, why aren't you rich?") Silicon Valley used to be for weird people. It was about second chances (and third, and fourth) and outer-range creativity and acceptance of weirdness. People were too busy building for the cool-kids shit and high-school drama that dominates now. That Silicon Valley was worth defending, and protecting. This iteration, this Disney-fied new one, is worth attacking, humiliating, and bringing to its undignified end.
        seiji 13y ago
        ("If you're so smart, why aren't you rich?") I wonder that of myself all the time. I don't have any medical problems other than the tragedy of living inside my own fucked up head. I find the cheap ways of getting rich untenable (abusing users, SEO affiliate ad crap, stealing personal information, facebook viral shitfests), and the hard ways are too much for my unconnected self to tackle alone (remaking credit card processing, remaking flight finding, anything requiring network effects to get off the ground). But, for now, I'm not homeless and I have a view of Manhattan from my window. It could be worse.
- mathattack 13y ago
  Having the decision tree helps fight bias. It also can help frame decisions. "Are we saying no because we don't believe in the founder, or don't believe in the market?"
seiji 13y ago
entirely subjective. That's the point. Most VCs pick who to fund like 14 year old high school cheerleaders pick friends. He mentions "Top 0.01% founder" which is probably about one of ten people in the world.
- michaelochurch 13y ago
  He mentions "Top 0.01% founder" which is probably about one of ten people in the world. VC culture selects for arrogance and narcissism. The few who are "top 0.01% founders" would never describe themselves as such.
michaelochurch 13y ago
Most investors, IMO, are not great evaluators of founders (e.g., are easily fooled by elite credentials) The theory is that if someone doesn't have elite credentials, he doesn't have the hustle to stitch a business together amid adversity. I'd generally agree that it's much harder to launch a successful business than it is to get into Stanford. The latter is not at all hard if you (or, more accurately, your parents) know how to go about it. Two fallacies are that (1) people who didn't go to Stanford couldn't get in, as if everyone wanted to go there at 17, and (2) that "hustle" at 17 correlates significantly to hustle at 25 or 38. VCs come from a socioeconomic milieu in which it's normal for kids of average intelligence to attend Stanford or Harvard, because of all the connections they can pull, so their assumptions are valid where they live. The mistake they make is that they assume that (no Stanford => not founder material) to be true for the other 99.9% of the population.
- oceanplexian 13y ago
  >I'd generally agree that it's much harder to launch a successful business than it is to get into Stanford. I'm a bit skeptical of that point, being that there are a lot more successful small business owners than Stanford grads. Now, if your idea of a successful business is a multi-million dollar exit on VC money, then sure, but plenty of people are happy to get by on a bootstrapped business that pays the bills.

zmitri 13y ago

Agree with you. I'm actually unclear what exactly this is a decision tree for because its steps are so subjective. Definitely isn't the decision tree from first contact to investment - that would be much deeper. It would also have to factor in how much heat there is behind the deal already - which for most seed firms is probably the most important signal! Seems accurate as a decision tree to take a meeting with someone though. As an exercise, try running some of their portfolio companies through that decision tree and see what kind of results you get.

Dartanion7 13y ago
I'm also curious what inputs they use to evaluate the founder. Surely there's some objectivity to that element of the decision tree beyond "great guy, articulate, firm handshake" --- I'm thinking probably quality of undergraduate / graduate schools, past exits, years in industry, etc.
- ig1 13y ago
  From my experience it's much more individual than that "what makes this person exceptional ?" - which tends to be a combination of track record (what have they achieved previously) and individual traits (are they super-smart, charismatic, etc).
- seiji 13y ago
  "great guy, articulate, firm handshake" You can tell a lot by the first five seconds with a person. That's why so many founders today are the cool kid/hot guy variety and not the Bill Gates/slovenly nerd variety. VCs won't take seriously a guy who shuffles-when-walks with zero eye contact and stares-at-floor-constantly habits unless they come with someone vouching for them. VCs will take seriously someone who can project all the right social signals, act strong, and not let anyone see into their weakness.
  - mattgreenrocks 13y ago
    This is precisely why VCs will miss truly disruptive founders. Tech entrepreneurship is still fairly young, but in that short time, we've already invented our own unique brand of cool: young, credentialed, hot, saying the right things. Oh wait: those are the values of society at large. We've already abandoned all pretense of disruption. This is just the next iteration of the elite, where your value as a person hinges on how well you project your own narcissism.
    - michaelochurch 13y ago
      Tech entrepreneurship is still fairly young, but in that short time, we've already invented our own unique brand of cool: young, credentialed, hot, saying the right things. Oh wait: those are the values of society at large. We've already abandoned all pretense of disruption. This is just the next iteration of the elite, where your value as a person hinges on how well you project your own narcissism. I had a chronic illness in my teenage years and 20s, hit a nadir around 24, and recovered by 27-28. I'm healthy now, but didn't have the start that's "expected" of people with +4 sigma talent. It's obvious, since I'm 30 and not earth-shatteringly successful, that I have some kind of health story... but I prefer not to get into the details with people I barely know. I don't want it to be the first conversation, but in the contemporary Valley, it would be. ("If you're so smart, why aren't you rich?") Silicon Valley used to be for weird people. It was about second chances (and third, and fourth) and outer-range creativity and acceptance of weirdness. People were too busy building for the cool-kids shit and high-school drama that dominates now. That Silicon Valley was worth defending, and protecting. This iteration, this Disney-fied new one, is worth attacking, humiliating, and bringing to its undignified end.
      - seiji 13y ago
        ("If you're so smart, why aren't you rich?") I wonder that of myself all the time. I don't have any medical problems other than the tragedy of living inside my own fucked up head. I find the cheap ways of getting rich untenable (abusing users, SEO affiliate ad crap, stealing personal information, facebook viral shitfests), and the hard ways are too much for my unconnected self to tackle alone (remaking credit card processing, remaking flight finding, anything requiring network effects to get off the ground). But, for now, I'm not homeless and I have a view of Manhattan from my window. It could be worse.
mathattack 13y ago
Having the decision tree helps fight bias. It also can help frame decisions. "Are we saying no because we don't believe in the founder, or don't believe in the market?"

seiji 13y ago

entirely subjective. That's the point. Most VCs pick who to fund like 14 year old high school cheerleaders pick friends. He mentions "Top 0.01% founder" which is probably about one of ten people in the world.

michaelochurch 13y ago
He mentions "Top 0.01% founder" which is probably about one of ten people in the world. VC culture selects for arrogance and narcissism. The few who are "top 0.01% founders" would never describe themselves as such.

michaelochurch 13y ago

Most investors, IMO, are not great evaluators of founders (e.g., are easily fooled by elite credentials) The theory is that if someone doesn't have elite credentials, he doesn't have the hustle to stitch a business together amid adversity. I'd generally agree that it's much harder to launch a successful business than it is to get into Stanford. The latter is not at all hard if you (or, more accurately, your parents) know how to go about it. Two fallacies are that (1) people who didn't go to Stanford couldn't get in, as if everyone wanted to go there at 17, and (2) that "hustle" at 17 correlates significantly to hustle at 25 or 38. VCs come from a socioeconomic milieu in which it's normal for kids of average intelligence to attend Stanford or Harvard, because of all the connections they can pull, so their assumptions are valid where they live. The mistake they make is that they assume that (no Stanford => not founder material) to be true for the other 99.9% of the population.

oceanplexian 13y ago
>I'd generally agree that it's much harder to launch a successful business than it is to get into Stanford. I'm a bit skeptical of that point, being that there are a lot more successful small business owners than Stanford grads. Now, if your idea of a successful business is a multi-million dollar exit on VC money, then sure, but plenty of people are happy to get by on a bootstrapped business that pays the bills.