Andy Tang argues investors should treat each round as a single-loss bet and only fund again if the company performs. Founders must keep big promises and avoid shrinking scope after raising capital. The relationship requires transparency and compatibility, like a marriage that could last a decade.
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Anyways, okay, so I wanna keep moving. The other thing that's important is, as an investor, you only lose one time of your money. Think about that. Right, so focus on the positives. Don't get fixated on losing money. In other words, what does this mean for entrepreneurs? You're not gonna lose money. You shouldn't be so hard on yourself if things don't work out. But you gotta give it a shot, right? If you promise someone, I'm gonna think big, aim high, follow through with that. And if it doesn't work, you did what you were supposed to do, that is okay, right? What is not okay though is this, promise to go big, and then once you get the money in, you go low, right? Because that's not what we signed up for. You're not really protecting us. Does that make sense? Yeah, it's actually really important. Okay, be rational about following on. This is important. I'm still, after 15 years in venture, I'm still working on this. When we make an investment, there's an emotional attachment to the company, but there is a time And places say and sort of call it quits.
Right.
So as founder, you should have that sort of discipline too. If things don't work, pivot. If it doesn't work, you pivot again. Don't raise 3, 4 rounds of inside money. If the market is telling you it's not working, figure out another way to do it. And we need to be more disciplined and just say, all right, it doesn't work.
I've been experiencing something that, for example, if the investor doesn't want to follow on, the other investors think that the deal is not good. Do you think it's contradictory to what you said about not investing in different rounds?
Depends on who. Remember I had that chart, the various types of investors? If friends, family, fools don't follow on, doesn't mean anything, right? I mean, they're not set up as an institution. We are an institution. When we make an investment, we put reserves behind it. We know that there's going to be a sort of alphabet soup, A, B, C, D, E, F, G, many rounds. So we do this for a living. If we don't follow on, it could be many reasons, right? One reason could be the company's not performing.
Mm-hmm.
Right? Or the company pivoted. You said you were going to cure cancer, but you went into the vitamin business. Oh, good for you, but that's not what we signed up for. And there may be other investors who want to support you, and that's great. Right? And so no hard feelings. It's just, it's actually very important to be, it's like a marriage, you have to be very transparent. Right? This takes a lot— so marriage takes a lot of time. So this is actually really interesting to read. You should take some time to read through this. This may help you with your relationship. What's interesting is this. As you have more kids, you have less time for each other. But it doesn't mean don't have kids. It just means that you have to know. The takeaway here for entrepreneur and VC is that as you go into a relationship with an investor or an entrepreneur, it takes a lot of time. Right, it's like getting married to someone. And then, you know, Investors will have other investments, with more kids, there's less time. So less time, miscommunication, then issues happen. So the key is you actually do have to view this as part of your job, or my job, to talk to your investors, board members, kind of understand where they are. It's important to figure out who you're getting married to. If the person has a bad reputation, right, obviously if the person has a bad reputation you won't get married to that person. But oftentimes we get married first and then we figure out if that person is not compatible. I mean, that is sort of what happens in the fundraising world, right? I mean, we do some basic due diligence. go through their website, but how many people interview your investors' CEOs of the portfolio? Zero. I actually recommend you do that. Whenever I fund someone, I would say, hey, feel free to call any one of my CEOs and these are the phone numbers. That also helps me, right? 'Cause they will call them, may not be compatible. And if it's not compatible, it's not a good idea because At seed stage, we're signed on for like 10 years, right? So the other thing is if we have a CEO who does due diligence on their investors, that protects me in the future because this hopefully then weeds out the investors or the board members who force the company to do unnatural things. Thank you.
