the investment life.
I am always learning in this business. I have certainly learned that nothing is standard when it comes to investing. A few things happened recently that I truly learned on.
I have a thesis which is that I want to own 1% of the company from the very beginning which based on that amount I like to put in I pretty much have to put money into the very first round. Not an idea but a real live product that I get excited about and an entrepreneur I believe can grow the beginnings of something into something larger. That means hiring a team, raising money, thinking out of the weeds, making tough decisions and being completely out of their mind focused on success.
I always get a side letter that insures that I can continue to invest to keep my pro-rata share at every capital infusion until I choose to opt out. At one point I have too much exposure (probably around the Series B) and then I choose to pass. Then I look at the amount I have in the company not as a percentage but as a dollar amount that will hopefully have a multiple exit. It is purely a head switch.
So here is how I screwed up. I forgot to get a side letter with a company I invested in. At the beginning I wasn’t on top of this but I finally figured it out. I think that I was in between figuring out the side letter thing and this company might have been the last one without it. Alas because one of the things I have noticed is in SF they like to raise notes over notes over notes. What that means is when they finally do get their Series A and the note converts into stock what you believe you own is not what you own. Needless to say I was pissed, I had a pissy fit and then I blamed myself. Lesson learned.
Move forward on to other things that piss me off. There are a few investors out there, not angels but funds that I refer to as micro-funds that love to get some sweet deal that is better than everyone else in the round because they can write a larger check. It is that or they demand some kind of advisor shares on top of their investment. Everyones money is the same in each round as far as I am concerned. Some investors are more active others and some are completely passive but that money helps the entrepreneurs get to the next stage of their business. The good news is that in my side letter I negate getting screwed by the micro-VC who comes in with their better terms than everyone else in the seed round.
So returning to reality after being off the grid for a full on month has been quite a whirlwind. Perhaps while I was gone I found my voice but maybe it is just the last 9 years of investing and seeing some really not great stuff out there that I just do not like and I just help not holding back my anger.