Fred Wilson is bummed about the Knicks and turned it into a blog post about early stage investing and disappointment.
I think a lot about disappointment because I am an optimist. Until I began investing in other people’s startups I had only myself to blame and if I was hard on myself I was mostly just hurting myself.
Now that I am a career optimist I have to learn how to live with a lot of disappointment that is out of my control.
I have found what works best is educating our LP’s on exactly how our business works. The math is the math and no matter how good you are at spotting and investing in founders – most startups just fail. Per Fred:
Fortunately, I have learned a lot about disappointment in three decades of backing early-stage startups. Our business is one where a third of things we do don’t work out at all and another third deliver a lot less than we had hoped when we pulled the trigger. Only a third of our investments deliver on what we expected when we made them.
Fortunately about ten percent of the investments we make so vastly outperform our expectations, that they make up for everything else we do.
So we live with a lot of disappointment. And one of the questions I struggle with is how much of that disappointment do we share with the founders and teams we work with.
Certainly feedback helps founders. But if the feedback is too negative and too downbeat, it is not helpful and can also lead to tune-out.
So I have found that many times I need to bite my tongue and take the disappointment in stride and chalk it up to the cost of doing business in early-stage investing. You have to be an optimist to make early-stage investments and you can’t let the disappointments take that optimism out of you.
Howard here again…good advice Fred.