What is the currency of Venture Capital?
If you were to say USD you would be partially correct. The deeper view is that Venture Capital is an exchange between relatively stable fiat currencies into monetary instruments that can return significant multiples on invested capital, most often equity in startups.
What is the basis for that exchange? Simply put it’s a transfer of durable conviction from the entrepreneur to the investor.
What are things the investor needs to be convinced of?
- This team and leader can lead this organization through significant growth including fundraising subsequent rounds, sales and channel growth, operational scaling, recruiting and investor exit. All of those processes involve the entrepreneur being a person of high conviction themselves.
- The leader will maintain loyalty and integrity in how they deal with any ambiguities that may arise in the future.
- The product has or will have significant traction in a significant and fast-growing market. That this traction is based on a competitively differentiated product with significant entry barriers.
- Early stage deals may not have traction or product/market fit. In such cases we need conviction in the team’s ability to deliver product market fit. This may require significant domain expertise, a 10x better product and/or sufficient runway. Many companies are lost in the chasm between early stage financing and product/market fit. Thanks to Paul Walsh who pointed this out.
- There is a network or data effect at scale
- The team will be able to deliver product on schedule.
I refer to what I am looking for as durable conviction because I find as a technology and human optimist, I get excited when I meet entrepreneurs who describe constructive solutions for real problems in society and industry. But what I mean by “durable conviction” is that it’s not enough to get me excited. Excitement gets weaker when confronted with the day to day challenges of execution.
I don’t only want the entrepreneur to have durable conviction for their own project–I want to see the ability of that entrepreneur to transfer that conviction durably to me and my fund management team. Paul Walsh also pointed out that the ability to “tell the story” is the ability to transfer conviction. I tend to agree.
In fact, the ability to be accountable to numbers and to explain numbers and tell stories about those numbers is the heart of building trust, so as such it is the key to being a good CEO.
The sure hallmark of durable conviction is not how excited I am during the meeting, it’s how convinced I am the next day after sleeping on it.
If you want financing from gumi Cryptos, you should consider both how durable your own conviction is, and how best to communicate and transfer that conviction to others.
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