Should you worry if investors say this? (VC Sunday School) + Seth Bannon of 50 Years | E1395
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Episode Highlights
Lead Role
Understanding the role of lead investors is crucial for navigating the startup investment landscape. explains that lead investors often conduct thorough due diligence, which can benefit other investors by reducing redundant efforts 1. This dynamic allows smaller investors to rely on the lead's groundwork, saving time and resources. However, notes that some investors hesitate to lead due to check size or confidence levels, preferring to wait for a lead to emerge 2.
What you're trying to do is preserve optionality. So, hey, circle back around when you have a lead and let's talk.
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This approach can be frustrating for founders, as it often signals a lack of conviction or a mismatch with the investor's typical funding stage.
Investment Strategies
Startup investment strategies vary widely, with lead investors setting terms and conducting due diligence. highlights that lead investors often take on the responsibility of reviewing legal documents and ensuring the company's governance 3. This role is essential for maintaining order and accountability within the investment. Meanwhile, describes how firms like Launch have multiple ways to engage with startups, allowing them to say "yes" more often and build positions over time 4.
We want to have ways to say yes and get to know companies. And I think that's good for companies, too.
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This flexibility can be advantageous for both investors and startups, fostering stronger relationships and better opportunities for growth.
VC Realities
The venture capital landscape has shifted, with some VCs prioritizing short-term gains over long-term innovation. criticizes this trend, noting that many VCs now act more like hedge funds, focusing on speculative ventures rather than groundbreaking technologies 5. He argues for a return to investing in solutions for significant global challenges, which he believes will yield both social and financial returns.
These are big, complicated, hard problems and a lot of solutions that they require are really hard.
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Bannon's firm, Fifty Years, exemplifies this approach by backing deep tech and mission-driven startups, demonstrating that aligning values with investment can be both impactful and profitable 6.