It is hard to not get jaded after being in the trenches of super early stage investing as long as I have been. I have been doing my own investing for over a decade but I have also been watching, learning and listening to my husband invest for 30 plus years. The stories I can tell.
I have witnessed the good times and the bad times because we have gone through a few cycles, the big ups, and the big downs. Obviously, the ups feel much better but the downs are the biggest lessons learned.
What has never changed is dumb money. Dumb money is a broad category. There are the people who think that investing in companies is easy and you can just put capital into a young company with a supposed good concept and by doing nothing it just magically grows because isn’t that what is supposed to happen in the land of start-ups? There are the companies that get backed by huge amounts of capital at absurd valuations and end up gasping for breath because their vertical valuation isn’t equal to what their revenue intake is.
There are the investors who grow outside of their sweet spot because they can and start to invest at later stages and appear to have lost their touch. There are investors with huge pockets of capital that feel comfortable giving a large amount of capital to a founder because, in the end, they really don’t care if it doesn’t work out although it would be nice if it did because they have other darts out there. There are the investors’ with a thesis completely out of line with the founders. The investor knows that one big hit will make up for all the bad investments but for the founder, not succeeding is devastating.
I have given up trying to understand why some companies get funded and others don’t, why investors invest in what they do, why valuations to some don’t seem to be as important as it is to others, why some investors just give out capital and don’t do the hard work of helping companies grow, why some investors just follow other investors like sheep, why some investors don’t have a thesis. Perhaps if it all works out in the long run, and investors figure they will be able to pay their LP’s back a decent return, then they don’t care. I don’t know the answer.
What I do know is that change is coming. More founders are figuring out how to get profitable sooner and more savvy founders are interested in smart money, people who can be of help and get their business. There is a ton of cash out there right now and lots of it just feels dumb.