Varadh

Tag: Startups

  • Potential Startup Ideas for 2020

    Some thoughts on Christmas from a coffee shop. A lot of these are problems I’ve been thinking about or directly encountered.

    International Visa Management 

    • If you’re North American/European, this might not be as big a problem for you but if you’re not the process of getting visas is terrible.
    • If anyone is building a plaid for legal identity/visas, please save me from this hell of entering the same basic information, the set of documents, credit card information, references, etc. 
    • Tourism across the world continues to grow and making this easier to unlock a whole lot more travel. 
    • A key challenge here will be intercepting the monopoly of VFS over this process but do think it’s possible with a few countries to test a pilot with. 

    Notes/Documents + Task Management + Links

    • The context for tasks resides in documents. Documents are filled with links. Links are websites or resources/assets in other apps. Making it all work together I think remains a very real opportunity.
    • So far, dropbox paper & notion come closest to the best. There’s one or two smaller co’s (Roam & Pine) which could potentially become the defaults here.
    • P.S I want to write a longer note doing some research on the future of productivity

    Privacy & Security Management 

    • I’m relatively paranoid and more people should be, especially in the wake of multiple scandals. However, it is cumbersome and very hard to get new people started on the path of trying to secure themselves and do any kind of ongoing monitoring. 
    • Here’s a list of some things I’ve done and I’d love to see tools to simplify this: 
      • Phone Numbers: I maintain a public and private number to reduce attack vectors
      • Credit Cards: Use privacy.com to generate credit card numbers for payments on shady websites.
      • Settings on phone / laptop: around notifications, location, sharing, background refresh, camera/microphone, ad limiting etc. 
      • Regular audits of platform apps: removing unwanted apps, disabling web & location tracking on google, etc. 
      • Password management: Continues to be a challenge to get users to adopt. (Either this needs to be done by OS providers or we need to get rid of passwords completely and move to magic links + otp verification)
      • VPN: Quite valuable for somebody who uses public wifi’s frequently. 
      • HaveIBeenPwned.com: Set up account alert monitoring for various email addresses 
    • One co. that’s interesting for some parts of this is Jumbo which launched earlier this year. 

    Venture Debt Financing in India

    • Spending time here in the last few weeks here, there’s a clear opportunity to build a fund focused on venture debt in India. There’s only a companies focused on this (innoven, alteria) and none of traditional banks have any plans to doing anything in this space. 
    • Especially in a world where’s there’s more D2C & SaaS companies being built in the country, the demand for this product is only likely to continue to grow.

    OS for SMBs

    • Growth for small businesses, especially in traditional sectors, remains hard as it’s hard to operationalise and become process driven. In a world where they are not used to paying for SaaS subscriptions you’d likely need to make money in adjacent ways (first: financing) but better tooling 
    • I think of Square doing this well for retail companies (stores & restaurants) but think there’s an opportunity to build in 100’s of other kinds of small businesses including real estate, real-world 1-3 person shops around specific skills (plumbing, furniture makers, etc.), freelance tech talent, etc. 
    • Enabling the sustainable GPD growth via better ERP tooling and process management (eg. Bringing in better metrics visibility, okr accountability, task delegation etc.) 
    • & Freelances?: do think there’s a some overlap with this and helping freelancers manage themselves and their businesses. 

    Home Financing Products

    • Homes are getting harder to buy for a variety of reasons in the cities that people want to live with. 
    • Additionally the primary way of purchasing a home remains the 30 year mortgage. I say this caution but do sincerely believe there’s likely many places to innovate here. We’re starting to see the rise of equity sharing/downpayment assistance, fractional ownership, rent-to-town, rent/mortgage splits, etc. and am excited to see the adoption of some of the above services but also many new ones. 

    Family Account Management

    • Over the last couple of years, I’ve moved to all things Apple: from music, to storage, to devices, for the entire family as it’s really helped do account management much better.
    • However, it’s still complicated to get family members onboard on new services, organise the billing, and manage the subscriptions. 
    • I think there’s an opportunity to build an Okta for Families. One that I would pay for but also could be a great way for subscription apps to increase conversion & retention. This one’s a personal problem more so than anything else though. 

    Unroll.me / Substack, Medium, Mailchimp Aggregator

    • In the last 3 months I’ve now subscribed to more than 10 Substack newsletters which has me thinking about so many different issues & opportunities. Brings back 2016 memories of medium publications and mail chimp newsletters. 
    • How do you better read the subscriptions without cluttering your inbox. What about unsubscribing and discovery? Does it make sense to integrate with emails clients, potentially? All TBD, but. if personal audiences are having a moment right now then it seems like an opprotune time to solve customer problems here. 

    If you’re building any of these, let’s chat me@varadhja.in. I’d love to help, if relevant, and invest 🙏🏽 More about me here

    Misc collection:

    • B2B Marketplaces around commodities
    • Contract management tooling 
    • Real estate transaction management 
    • Better financial management at startups: budget, planning, forecasting, ap/ar 
    • Professional feedback & references library for personal growth (analogous to medical records which can be seen by any doctor)
    • Artist discovery -> TikTok now for music. What other creative industries mighty we be able to improve new talent discovery in a non-direct way. 

  • Thinking Critically: My Time at Opendoor

    Over the last couple of months I’ve moved away from leading a cross-functional team to doing IC work remotely (will be a separate post later). As I’m a little more distant from the business (geography & nature of what I’ve been spending time on for the last month or so) I was trying to articulate for myself why I believe Opendoor’s succeeded so far and why to be bullish / bearish about the co. especially as I exercise more options (commit $$ to the co). Harder to share what’s still to be done & what I think the challenges that remain are, I found this a very useful exercise. Particularly so as I’m spending more time with new companies and what’s the must solve hypothesis for them at their earliest stages.

    Please note: This is my opinion based on observations. Sharing this but redacting parts that might be considered sensitive.

    Company execution: 

    • Customer experience / Customer focus. NPS – word of mouth 
    • Capital markets 
    • Pricing algorithms 
    • Internal tools 
    • Product marketing – “sell your house hassle free”
    • Complex ops management 
    • Analytics – ops, pick markets, etc 
    • Home entry: Text to enter 
    • Ability to launch markets 
    • Recruit A+ talent. Constantly. 

    Timing & necessary conditions: 

    • Low interest rates 
    • Macro up cycle 
    • MLS data open with history of transactions 
    • Repeatable housing 

    Where the business is yet to succeed:

    • Adjacent Services (sort of already done but more broadly)
    • Survive a downcycle
    • Competition (welcome, public company)
    • Margins

    Why I’d still bet on opendoor: 

    • Huge, huge, huge market. 
    • Truly a better experience for customer 
    • Margins at scale

    Enduring moats: 

    • Flywheel
    • Brand equity & trust in the marketplace
    • Internal operations tooling ?

    It was also an opportunity for me to take stock of where I think I excelled and had the greatest impact.

    My impact at Opendoor: 

    • Solving complex problems at the intersection of technology and operations and regulated businesses. Always driving to simplify and using software and ops processes to drive better outcomes
    • I’ve been a general purpose human more than anything else
    • Had the chance to original support team in Phoenix: 0 -> 1 -> 5. Original playbook, scripting, tooling. Today team is 50+ people. 
    • Data analytics + bots to drive operational leverage
    • Brokerage: spec’d & lead building of transaction management platform & ops playbook for compliance in 1st state (AZ). Gold star from regulator.  Playbook scaled
    • Canonical work: winding down Opendoor Mortgage 1.0 (beta), strategy for 2.0 and scrapping, core team to launch 3.0. (Mortgages @ Opendoor needs to be a book, lol)
    • lFor 3.0: Leading cross functional growth team. 3 eng, pm, 1 pmm, 1 CX ops, and 1 analyst

  • Looking Back: How Did I End Up at Opendoor?

    Looking Back: How Did I End Up at Opendoor?

    It’s been almost 2 years since I joined Opendoor and what an incredible ride it’s been. Looking at my notes from Nov-Dec’16, here’s the story.

    Starting things is my default, whether it was thinking about how to capitalize on the fish wire craze in middle school or starting companies with friends after college. So when I left Polymail after we raised our round post-YC, with no plan, the first thing to do was figure out what should I build next. I spent most of October 2016 thinking about would follow. My notes/sketches show me all the things I thought were interesting: another productivity app 💌, a food-related consumer brand, something blockchain-related, a smart factory, and new retail experiences.

    While I was dreaming about the next big thing to build, I also had a constraint—my visa status— that I hadn’t fully grasped the impact until an international student counsellor at UCLA reminded me, in November, that I had under 90 days left on my existing F-1 visa.  I had only until Jan’17 left in the US unless I found a job that could sponsor my F-1 visa’s STEM extension. Because this threw a wrench in my plans to start something new again, I needed to find a job (and quick).

    In general, job searches aren’t a particularly fun experience but I got started on mine. Back when I initially left Polymail I emailed a few folks asking, “If you see something interesting, let me know” but it was time to ping people again. I didn’t know what role I wanted…I didn’t have any specific career goals other than being entrepreneurial and having an impact. As I thought about roles, I had experience and was excited to work on products, analytics, and growth. However, a role itself didn’t seem like the most important pillar when looking for the next opportunity. Instead, I established criteria of what I thought was important to me knowing it would help me make a decision. I had narrowed it down to:

    • Joining a full-stack startup: Having grown up around operations heavy businesses in India, I wanted to spend time working on a project that would have the whole stack—build the software and use it too.
    • Talent & Culture: I wanted to work at a place where people I knew and respected worked. I wanted to learn from them.
    • Scale: I hadn’t worked at a place yet that found product-market fit, scaled, and needed real management. This was something I needed to experience first-hand. Reading books or medium articles were not a substitute here.

    There were a bunch of companies with interesting roles, but nothing really matched all three. Serendipitously, Vedika, my sister, who was then working at Stripe told me she swung by the offices of a hot new startup where her friend Logan worked at a place called Opendoor. I looked up the company and at first glance, it appeared to meet my three criteria. On LinkedIn, I noticed that I knew a few folks who worked there, including Simon who I had last met in NYC when he was fundraising for his company at that time.

    Some backstory: Simon and I originally met in 2014 when he was working at Robinhood doing PR and I was running LA Hacks where the founders ended up showcasing their app for the very first time publicly. You could say the demo was interesting—ask him about it.

    The original email

    I swung by the office at 116 Montgomery on a weekend to meet with him. Once there, he introduced me to another PM who was also working the weekend and left us for an impromptu interview…surprise, surprise. To say that the interview didn’t go well would be an understatement. I was later told that the PM thought I was smart, but also thought I spoke too quick. I told him that if the PM I had met wasn’t interested in the next step, I’d still be interested in other roles. He referred me for a different, and more analytics-focused, role. I needed my visa and time was running out. I thought to myself, “Let’s get the job, get the visa renewed, and then see what to do next. I likely won’t last long at a company so big for more than 3-6 months anyway, but at least I’ll have my visa.”

    The referral worked on getting an email back from Jac, a recruiter. We spoke on the phone and she sent me a take-home assignment which seemed straightforward enough to do.

    22nd November
    Email for the Take Home. My answers here.

    One week later, 22nd of Nov, I had somehow forgotten about it in the midst of preparing for a slew of other interviews. I remembered only after I finished the on-site I had that day down in Palo Alto and decided to head to the Stanford coffee shop get this thing done before the end of the day. I finished by around 5 PM, phew. However, given the rush to finish, I didn’t expect a callback. Surprisingly, I heard back and soon found myself scheduling an on-site.

    Even with a few offers on the table and the deadline for my visa continuing to approach, I wanted to hold out for Opendoor. Less than 48 hours later, I received a call back telling me more about the offer and the role. However, it came with a hurried deadline and a compensation package that differed drastically from the others. Pay didn’t make it onto the list because it was more of hygiene criteria as opposed to one you could pull the trigger based off of. This would be a bit of a bullet to bite but I was genuinely excited about the company which had satisfied the criteria I set out with and had the opportunity to have a big impact though.

    I called back and said, “I’m ready to do this”. My boss-to-be at that time, Ryan Johnson, recommended coming in the next day.

    The email exchange. Full thread here.  
    Sunday, Dec 4th: RJ inviting me to Slack
    I joined on my personal email account  

    So on Dec 4th, I showed back up at 116 New Montgomery to start my first day at Opendoor. The first project was some product discovery work: call customers and see if they were interested in getting financing. Oh, boy! This was a sign of things to come.

    Reflecting two years later, I’m grateful I made the decision I did. I’m lucky that the criteria lead me here to find each of three things I was looking for but also gave, and continues to give, me so much more. Also, the roles basically didn’t matter.

    • Full-Stack Startup: Opendoor really is a technology and operations business that builds software end-to-end and uses it too. Its fascinating problem set to have an opportunity to take on.
    • Talent: I’ve gotten to work with people I know, and made lots of friends with people I work with and respect. I’ve gotten also to recruit some amazing folk to come to join us too.
    • Scale: Opendoor has continued to grow and be successful and it’s amazing to work at a place where we’re impacting the lives of thousands of people every month during the most stressful transaction of their lives.

    Thank you, Laura and Saige reviewing early drafts. 

  • Transparency at Startups: My Experience at Opendoor

    When on vacation a few weeks ago I was reflecting on what are some things I love about Opendoor and Transparency as a value rose to the top. Transparency has always seemed like one of those things that’s a no-brainer to follow and I’m grateful to see the steps we’ve taken at Opendoor to put it into practice. More so as a recap for future me, I wanted to outline some aspects of it.

    Transparency can be encapsulated into one of our “5 Core Principles”: Build Openness

    Productive communication depends on a foundation of trust and goodwill. Approach difficult conversations with curiosity. Avoid hearsay, passive aggression, and snark. Give feedback early and often.

    Some activities that enable transparency:

    • All-Hands Q&A: Ability to ask the leadership team questions that will be publicly answered even though the questions itself can be anonymously asked.
    • Windows: I didn’t realize the impact of windows until we moved from moved offices. Initially, all the meetings rooms came with frosted windows which added a strange layer of secrecy that felt unnecessary. Within a few weeks of moving in our workplace team unfrosted most of the meeting rooms barring a few which are in the corner of recruiting and legal, and a few private rooms which are understandable.
    • Public Calendars: Everyone can see anybody’s calendar by default. The onus is placed on the person to make an event private when needed. It also allows for easier scheduling of time with co-workers.
    • Slack/Company Updates: There’s a healthy default towards posting messages in public channels as more than half the messages are read in public channels. Weekly Update and retros for most teams publicly shared(email and to #meeting-notes)
    Pasted Graphic.png


    • Documents: Not everything is searchable but if you come upon any link it’s likely that you’d be able to open it without needing to request permissions.
    • Metrics: Most metrics are now hosted on an analytics portal that everyone can access. Additionally, every morning a performance report of the business goes out.
    • Feedback: Various channels of customer feedback including reviews, NPS, twitter mentions, and more are automatically posted to slack channels which showcases the impact and experience of the service we offer. Additionally, there’s quarterly feedback from managers to direct. reports.
    • Financials: All numbers are presented to the entire company which exposes everyone to the ups and downs the business constantly faces. What’s been impressive is that even as we approach a 1000 people this information is held in the confidentiality that it’s shared with and my sincere hope is that this never changes(until the company goes public of course).
    • An Open-Mind: honestly, this is the real secret. We’ve got an amazing team.
    • Total Rewards/Compensation: Total rewards are still very hard to understand and I think we’ve gotten pretty good at this now. What makes it more complex is things like what’s the liquidation preference from the latest round, how much is my equity worth if to company exits at these 5 different valuations. I love how we’ve taken steps to create a rewards packet which better outlines this.

    Upsides:

    • There’s transparency for transparency itself but it also allows for tangible value. A few upsides:
    • It helps builds trust much faster across the organization.
    • It helps collaboration happen faster as folks are exposed to more information earlier. It also allows ideas to flow across the organization even when people are not in the same business or functional unit.
    • It allows folks to have less postured conversations and as our core value describes, approach challenges conversations with curiosity as the information about what happened has already been shared.
    • It allows for a stronger muscle to handle organizational thrash.
    • It also allows for a stronger muscle to handle a few bad months or years as we’ve seen ourselves bounce back. In my opinion, this helps with talent retention.

    Downsides:

    • Information Overload: As we get bigger availability of constant streams of data vs. synthesized information that’s most important to you might become a challenge. I’m curious on whether there’s a software solution here: AI for notifications.
    • Criticism: More people can be critical of other people’s work as you can see the short/medium term volatility.
    • Transparency vs. Oversharing: can introduce people to the sausage making which can be a bit hard on new employees & those with only a few years of experience.
    • There are some things you likely cannot be transparent about such as legal, recruiting, firings, etc.

    What I think we can still improve on:

    • Context: allowing for a stripe-like email system so that most messages are available publicly. Most messages are still sent via email/DMs, especially as you go further up the organizational structure.

    • Salary Information: While there have been big strides mad here: I still have a desire to have all comp be on a public spreadsheet though I can understand why no company might ever do this.
    • Reducing Rumours: though I’ve never been at a company of this size and everyone tells me this is the least they’ve seen of anywhere else. I am definitely guilty if this too. The onus here primarily falls on the individual.

    Overall, I think it’s very valuable and gets me excited about Opendoor. Future Varadh looks forward to sharing specific stories. In the meantime, I’d love to hear your thoughts about transparency.

     

  • DBX’s S-1: Bottom’s Up SaaS

    DBX’s S-1: Bottom’s Up SaaS

    The first companies that come to mind as one thinks about users as the gateway into an organization are Dropbox and Slack. While their individual mechanics are different, they’re very good at getting users to join orgs that then pay. In addition to building a 10x better product, they have the strong brand & community that it takes to be installed on day one of a new org; something which is incredibly difficult to nail down and continues to be a holy grail of the fabled land & expand distribution strategy.

    • Dropbox: Win the user in single-player mode and then become the first option as a user thinks about a service for their org (multiplayer mode).
    • Slack: Win the org on day one because there’s zero friction to start on multiplayer mode. Get users as the company’s get bigger and people move companies.

    (More on Single-Player vs. Multiplayer here on CDixon’s blog)

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  • Not In Control

    In the world of startups and entrepreneurship, we, almost religiously, believe that if we work hard, work with talented people, and get traction, then we’ll come out “victorious”.  Given the general optimistic nature of being a founder, when looking forward, we tend to brush the uncertainty under the rug and assume that outcomes are fully in our control.  So, when things don’t play out how we imagined it would, we are often left in despair and confusion. It  makes it harder to wake up the next day and need to ask ourselves, “How could this happen to me (yes, it’s personal) when things were looking all up and to the right?” I’ve particularly gone through this exact cycle more than once and each time I learn from it. A place where I like to draw inspiration about how others deal with this is by watching elite sportsmen and sportswoman compete. They train their entire lives for something that might last from 10 seconds to a couple of hours. Even though you can be the best and do everything right, you sometimes still don’t win. Yet, you have to pick yourself up, deal with it and go at it again.

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  • Early Stage Startup Recruiting

    Last September, I had the opportunity of spending a few hours with a family friend who had been in the banking industry for over twenty years. I think I met him a once growing up but this particular trip to New York allowed me to spend quality one-on-one time with him. He shared lots of good advice and it was a pleasure to sit across from such a knowledgeable, yet humble, individual. I tried to absorb everything. However, there was one thing he said that resonated with me more than anything else, “People almost always leave companies because of their managers. Remember that in your entrepreneurial endeavours.”

    I think this is especially true when working in a startup environment and can be extended to; “People almost always join and leave companies because of their managers”. In the case of early-stage companies, managers are more often than not the founders themselves. In the early days, there’s not too much certainty. However, there is one constant day in and day out: the people you’re working with and for. I think this early founder-employee fit evolves into the culture. Culture is upheld the strongest by the founders/leadership and is maintained as a common thread through the company. This not only attracts but also helps retain talent. This invariably helps a company become better.

    It’s why VC’s spend time digging into a founder’s ability recruit. It’ll give them a taste of what’s to come. Accordingly, being on a founding team of a company, it’ll be up to us to attract (and keep) the best people. You cannot rely solely on press, metrics, etc when it comes to recruiting in the earliest days. It is quite literally up to you.

    I think founders can approach it from a personal brand standpoint; twitter/personal blogs, and or from a technical depth standpoint; technical talks/papers published/previous technical execution, Either way there’s a need to do what’s most authentic to who you are since its most likely to be convincing to somebody looking to join you. Some of this does seem obvious, but I think it is something that needs to actively be done. However, sometimes it can be overdone and doesn’t seem authentic. Plus, people tend to get weary of people who are too charming/smooth. Similarly, its why it makes sense to ask to spend some time with founders before joining a company, should it small enough (<50). You’ll most likely get a taste of what lies ahead.

    I’m going to spend some time looking for stories from the first few employees at some today’s larger startups/tech companies. It could give insight into what convinced them to join in the earliest days. I’m curious to see what sold them.

    This family friend recently passed away and I write this post in his memory. I hope to not only have the stamina and fitness to climb to Everest Base Camp in my late 40’s like he did but also carry valuable lessons like these that he shared with me.
    —
    Assumption: Basic product/market fit, in one’s own eyes, and a need to hire. If not, there should be a focus on getting a point where hiring is necessary.

    Update 1 (07/18/16) : The Macro, YC’s publication, is doing a whole series on early employees. So far they have: #1 Airbnb, #1 General Assembly, #1 Yahoo, #1 Reddit, #1 Amazon.

  • Bruin Entrepreneurs: Undergraduate Entrepreneurship Ecosystem

    PictureTwo night ago, I attended the 2nd UCLA Student + Alumni  Entrepreneurs Dinner. Last time I was here, a year ago, the event was my baby at Bruin Entrepreneurs for which we had raised some money from, the ever supporting, UCLA VC Fund, to host! The only difference was this year, I was back as an alumni*. A good reminder of how far we’ve come, I’ve come, and it encouraged me to write about what we built over the last couple years when I was on campus. Some of you may find nothing new or groundbreaking here, but if you’re interested in my perspective or have thoughts and comments about it, that’d be awesome!

    Also, groups on other campuses’ such as BASES @ Stanford, MPowered @ UMich, Harvard Ventures @ Harvard, CORE @ Columbia, Founders @ UIUC, Spark @ USC*  have all built amazing ecosystems. I learned a lot from their work and you might be able to as well. I’m going to write another post on how they + campus focused funds have made it possibly the best time to start something when in college.

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  • Learning From Passes

    PictureDiagram. 1

    In the last year, I have been quite lucky to have had the opportunity to spend time being on the VC side and the startup side. Particularly, learning about the other side when not being in that role! However, while it is definitely too early to say that I can view things from both sides of the table, this opportunity has lead me to having a greater amount of empathy for both roles. One particular part of the system that I found myself thinking most about was around “passing”. Specifically, investors passing on entrepreneurs/their companies. If you are an entrepreneur passing on investors, kudos to you for being in that position.

    Getting passed on is the default in the system; however, you may get passed on at different points of the funnel system [1] for seed funding. Every investor has their own process but based on what I’ve heard/ see/read, I’ve attached some numbers that I think are not too far off from reality with respect to drop-offs. Depending on when the drop off happens, your take away should be quite different IMO.

    An immediate takeaway is that investors spend a large chunk of their time on reading decks and/or listening and meeting with entrepreneurs whom they are going to pass on. So when we went out to fundraise,  I knew there would be passes and lots of them, particularly since the funding environment was not so hot and space has a pretty big graveyard.  Having been on the VC side and getting to see this first hand, it allowed me to take passes in a non-personal way. Just for the record – every single pass still came with a little bit of pain.  Diagram 1 illustrates the different points you might get dropped off by an investor and how best to move in my humble opinion.

    1. You need to get the investor’s attention to get passed on. So go get ’em, cause you miss 100% of the shots you don’t take!

    2. About half the companies that VCs first encounter for an Introduction, they’re not going to spend any more time with. At this point, if you get passed on, it makes sense to just say thank you for their time and move on. It is unlikely that you will receive any feedback given the sheer volume of companies they see at this point – respect that! Also, as a friend who is an early stage VC points out, “The shitty thing about early-stage investing is that there isn’t always a reason. The reason can be super obscure. Like maybe a VC saw a company in this space 2 years ago, and it failed. So now they are hesitant to look at others”.  The good thing is that these people will likely pass early, like right now at stage 2.

    3. While there is a pretty high chance you will make it to the Diligence I part, there is a pretty high chance that you will not make it any further. If you do not make it any further, it could mean a few things:

    • The opportunity is not big enough
    • The VCs do not believe in the same future that you believe in/ timing
    • Timing is too early
    • There needed to be more traction
    • The VCs do not think you/your team is right for this business or this business is not right for you/your team (This one is personal and usually is not ever relayed back as feedback, but there is a high chance that this is the case.)

    It would definitely be worth asking for feedback at this point & keeping a log of that feedback. They passed based on a certain set of information you provided them with and conclusions they drew from there. If there is something they see as obvious, it would be worth it to get their feedback. While you might get generic stuff like “we don’t think you can sell this to enough people to make a big business”, it’s definitely worth not dismissing it at a first glance. There could potentially be a problem that you would need to focus on first to solve, and it is possible that other VCs have the same concern. It might make sense to delve deeper to see if you do indeed run into these challenges and how you can take them on!

    4. Now Diligence II is the most interesting part of the process IMO. At this point, your team may think they are close to getting a term sheet and your investor is excited about you as well. (You haven’t been dropped off like the other 90%. ) The investors are taking you/your thesis pretty seriously. If you get passed on at this point, IMO it comes down to one of two reasons:

    • A red flag showed up that they cannot look past
    • While everything is looking good, there is not one die-hard reason on why they should commit

    I think that receiving feedback at this point is the most valuable. The investors have spent a good amount of time thinking and researching about what you’re up to, so get them to share their thoughts if they have decided to pass. It will help you build a better business 🙂 Also, it makes them more likely to help you out in the future either with this company, your next company, or your friends’ company. The investors that did give us feedback at this point had critical points and were the most likely candidates for us to send future updates regarding, lean on for potential help, and send more deals 🙂 Also, my personal thesis is that these investors are most likely to be helpful on whichever cap tables they are on.

    5. Once you get the Term Sheet, the next move is in your hands! GG.

    A point to keep in mind is that usually after an investor passes, there’s almost nothing you can do to change that and hence use the feedback constructively. Eric Peckham, an early stage investor and friend, echoes this point from speaking with other VCs over time; “many investors don’t give feedback – even though they might want to because they know it’s helpful – is that founders frequently use the feedback as ammunition to push back against the pass. They send counter-arguments to the weaknesses you raise and think they can still make you change your mind.”

    Summary:

    • Entrepreneurs: No matter who you are, you are going to get passed on. So use that opportunity to ASK for feedback – period. It does not matter if you agree with it or not, there is a chance you will learn something from it which will only help you in the long run
    • Investors: If you took a potential investment all the way where you spent more than an hour with them, please allocate at least a couple minutes to give them useful feedback. We are all better for it!

    If you disagree with everything I have said here, I would love to hear your thoughts in the comments or at me@varadhja.in!

    [1] – Funnels at some existing venture firms: Homebrew, I will update you with more when I find the links!