Pattern recognition at pre-seed

Label the patterns

TLDR: Pattern recognition is improved by actively labeling the patterns.

We’re heading into our investment committee next week to fund our next wave of companies, and I was reflecting on some of the things I ask myself at this early stage of pre-product, pre-revenue, or pre-everything.

As a bit of context, we work with founders as early as co-founder matching—in some cases before there is even an idea or a line of code.

We spend months with them, working in person.

99% of VC’s invest on referrals and track records coupled with some research and data that is often manipulated to what I can only describe as confirmation bias relative to their beliefs on a particular market or founding team.

Don’t get me wrong, it may be a great strategy, but that’s also why—at least in part—how vicious cycles are perpetuated for women and underrepresented groups, and why fundraising as a first-time founder can be so hard.

And of course, when you invest this early, you’re taking an enormous amount of risk. The variables are endless. Almost everything about the business will change.

Everything except for the founder… in most cases.

So here are some anecdotes I posted recently about how I think about founding teams that are pre-product, pre-revenue, or pre-everything:

• Don't invest in any founder who you couldn't describe as an animal or a maniac (in a good way)

• Would I go work for this person?

• When everyone thinks I'm wrong, how do I know I'm right? (If the answer is anything other than ‘the team’ I am probably wrong)

• Would I be nervous to compete with this team?

• Whose expectations of this company are higher, mine or theirs?

• When emotional, is it an affiliation to the individual or conviction in their ability?

• Is being right a 1000:1 upside?

• Execution > ideas

• Talent > markets because true talent sees and makes markets others cannot

• Is there something tactile about this?

• Does this person have imposter syndrome, a deep belief they're meant for greatness, and have they demonstrated outlier levels of discipline and commitment?

Other ideas that weren’t included in the post…

• Is the founder emotionally detached from features & functions, but deeply passionate about the problem space?

• How do they oscillate between thinking and doing?

• Is there a material founder-market-fit here?

• Do we at least have “problem”-market-fit?

• Is the founder chaotic, focused, or magical?

• Is this person an autonomous autodidact? Will they succeed no matter what by being self-reliant and being able to teach themselves anything?

• Can this person or team build *and* sell? Companies need to be able to do both at a world-class level

Some ways we can hold the mirror up to our decisions…

• Talk to users/customers

• Use the product

• Share the memo with actual industry experts…other VC’s will almost always try to flex by telling you the reasons not to do something, or give an example of some “great” company they already invested in

• Prospect customers yourself to see the real objections and reactions

• Challenge the novelty, defensibility, and long-term vision… not because the founders will have perfect answers, but to see 1) are they intellectually honest?, 2) are they well-researched, and 3) can they deliver an inspired vision of the future?

With years of repetitions you don’t actually need to ask every question, but instead develop a filter and level of pattern recognition that leads you to a belief on a founder’s potential.

I’ve found that in anything you do, if you label and write down the patterns that you’re more likely to recognize and act on them later. This is the case for personal values, developing professional skills, or even manufacturing healthy habits.

See you Monday.