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Startup Therapy

Stop Listening to Investors

Mon Jul 03 2023
InvestorsFoundersStartup Advice
  1. Investors and Founders
  2. Investor Tactics and Advice
  3. Learning from Founders
  4. Challenges and Success Stories
  5. Investor Qualifications and Feedback
  6. Investor Involvement and Vision

Investors often provide feedback to founders, but their opinions may not always be accurate or valuable. Founders should be cautious of taking investor advice as gospel and evaluate its relevance. Investors use tactics to appear knowledgeable and authoritative, but their opinions represent only their own views. Learning from other founders and industry experts can be more beneficial. Successful businesses like Uber and Airbnb faced initial doubts from investors but proved them wrong. Investors may lack qualifications and their feedback should be taken with caution. Founders should focus on their vision and consider feedback from multiple sources.

Investors and Founders

00:00 - 06:28

  • Investors are often wrong in the feedback they give founders.
  • Investors have a bad record at picking winners.
  • Founders are vulnerable when talking to investors and often take their feedback as gospel.
  • Most of what investors do is guessing.
  • Startup investors are useful experts on investing in startups, but not necessarily on how a specific business will work.
  • Investors are not fortune tellers and their opinions may not hold weight.
  • Some investors try to establish themselves as experts or authorities.
  • Investors forget that founders take their speculation seriously.
  • Young founders and those with little experience with investors may be more susceptible to taking investor opinions as truth.

Investor Tactics and Advice

06:05 - 12:17

  • Investors often come across as confident and knowledgeable, leading founders to assume they have all the answers.
  • However, investors use a formulaic approach in meetings, asking speculative questions that they can't answer.
  • This tactic makes them appear as experts and sets them up as the authority.
  • It's easy for investors to find flaws in startup ideas, but it doesn't necessarily mean they are adding value.
  • Even if an investor has experience in a specific industry, it doesn't make them an expert in every aspect of that industry.
  • Investors' opinions represent only their own views and not those of all investors.
  • Smart people can still make wrong decisions, even in areas where they have expertise.
  • Founders should be aware of where advice is coming from and evaluate its relevance to their specific situation.
  • Investors may exaggerate their feedback to maintain their authority position, so founders should question hyperbolic statements.
  • Founders should call out investors when they offer advice outside of their area of expertise or make unrealistic claims.

Learning from Founders

11:57 - 17:59

  • Investors should learn from founders, not fans
  • Founders, CMOs, and CTOs are the opinions that matter in marketing and business growth
  • Everything you're dealing with has been done before, so seek out the answers
  • Investors provide money, not operational help
  • Be cautious of well-intentioned advice from investors or customers
  • Feedback from investors is just one data point and may not be right
  • Examples of successful businesses that were initially doubted: Uber and Airbnb

Challenges and Success Stories

17:38 - 23:46

  • Uber and Airbnb came up around the same time and were improvements on existing business models.
  • Investors initially saw many problems with these ideas, such as renting out guest rooms to strangers or unseating the highly regulated taxi industry.
  • Brian Chesky and Travis Kalanick faced significant challenges and negative feedback when pitching their ideas.
  • If they had listened to all the perfect opinions and forecasts, neither Uber nor Airbnb would exist today.
  • Predicting the success of a startup is difficult, but potential for disaster and pushback should be considered.
  • Pitching an obvious business with an easy path is not attractive to investors.
  • Feedback should be taken into account, but it's important to consider the source and qualifications of those giving it.

Investor Qualifications and Feedback

23:25 - 29:21

  • To be an angel investor, you need zero qualifications and $10,000 or less saved.
  • Being an angel investor doesn't make you a stock market expert.
  • Checkbook writing capability doesn't make someone knowledgeable about startups.
  • Bessemer Venture Partners has an anti-portfolio on their site listing all the companies they passed on, including Apple, Airbnb, eBay, and Google.
  • Just because one investor passes on a company doesn't mean others will too.
  • Companies can pivot and evolve based on feedback and market conditions.
  • Investors may change their minds and want to invest in later rounds of funding.
  • Positive feedback from investors should be taken with caution as it may just be a polite way of declining involvement.
  • "We should get together" is often a polite way of saying "no".

Investor Involvement and Vision

28:59 - 31:08

  • When an investor says they'd love to get more involved or take a look at the business when you hit a certain milestone, it usually means they are not interested in investing.
  • Investors seek opportunities but don't control or direct the vision of the business.
  • Founders should focus on sticking to their vision and let others contribute ideas.
  • Access to education tracks on includes funding, customer acquisition, and financial management.