One of the big misses of my angel investing career (there have been many) is passing on Carta in the seed round (now a $1.8 billion valuation). I joke that Henry Ward the founder ‘could not close me’, but the joke is on me.
I was sitting for breakfast with Fred Wilson last week in New York and Carta came up (his firm is an investor) and I lamented again. Fred reminded me of how many great companies he has passed on and that the important thing was that I saw the deal and had the chance to swing early. Breakfast still tasted like shit.
Picking public stocks is hard and picking private stocks/companies is hard. I could not be luckier to make a living doing both.
Henry Ward has a great post up on the Carta blog titled ‘Private Stock Picking‘ that every college student should be thinking about. (Quick note – if you are a college student you should have your own brokerage account to follow the top 10-20 public companies you would want to work for as well which should be stocks you are excited to own for 10 plus years). Henry begins:
The best startups are worth 1000x the median startup. Most employees forget that startups follow a power law. This is why when Sheryl Sandberg was considering joining Google, Eric Schmidt told her: “If you are offered a seat on a rocket ship, get on—don’t ask what seat.” Picking the right company is far more important than picking the right role.
The hard part is figuring out which startup is the rocket ship. If an employee can get that right, they might win the Silicon Valley lottery. If they don’t, they won’t.
Venture capitalists do this for a living. For our Series E, investors wrote over 500 pages of investment memos to decide whether to invest. It took them weeks of diligence going through our financials and forecasts, interviewing customers and employees, and doing reference checks on our executives and me.
Employees joining a startup don’t get anywhere close to that level of information. Most employees are limited to a handful of interviews and Glassdoor.
Some employees look at investors as a signal for the company’s trajectory. But even with all that time, information, and experience, the best VCs still get it wrong 9 times out of 10. Investors can afford those odds because they have diverse portfolios. Employees, on the other hand, can only pick one company to work for.
That last point by Henry is the money line if you are scouting for your career. It is more expensive for you to be wrong when picking the company you are going to work for.
Take the time to hunt for the companies you want to work for because the tools are available today to become a great hunter.
PS – Keep this link to Power Law handy and make sure you have read it.