We recently sat down in our Berlin office to discuss and draw conclusions from our anti-portfolio (deals we missed out on or cases in which we didn’t recognize the potential) and difficult decisions we had to take in the past (and whether they were right or wrong).
As one usually don’t find much time to stop and think about past mistakes in the day-to-day hustle, I found this exercise quite valuable. After all, how will we get to the next level if we keep repeating the same mistakes.
I won’t go into too much detail and took out all sensitive information, but these are the top 10 things I took away from the discussion. Maybe they are valuable for you as well.
1. Listen to, but don’t base your decision on others advice.
Our network is one of the most valuable sources of information we have. As we can’t be experts in all fields and luckily we work with many people that we trust and respect, who bring domain expertise on the table in areas that we know little about. However when it comes to making the final investment decision, it’s on us to put all pieces together and make the call. We are the only ones responsible for the outcome and thus have to be 100% comfortable with the rationale behind it.
2. Don’t only consider the primary market size.
When evaluating potential don’t only look at the primary, but also adjacent markets that can be captured at scale. Most, if not all, big success stories where aiming at a fraction of the markets they dominate now. Just think about AirBnB, eBay or Facebook — underestimating market sizes can be a fatal mistake.
3. A good exit isn’t necessarily proof for a good investment decision (and vice versa).
Just as in poker, you can be lucky and win the pot with a shitty hand. But in the long run, playing the wrong cards is a sure way to go broke. If you made the ‘right’ decision with all available information and a company manages to exit against all odds, don’t beat yourself up about it too much.
4. It is very hard to predict the need for a new product.
At Point Nine we did pre-launch investments that turned out very well (like WestWing or DeliveryHero), but with these companies we already knew the founders very well and the business plan was strong. In most other cases, it is almost impossible to know whether a product will take off, without seeing initial traction in the market.
5. Initial traction can be deceiving.
That being said, just because a company shows good growth in the first few months, it’s no guarantee that it will keep on growing. There are often low hanging fruits a startup can (and should) reap, but that doesn’t mean it has already found a way to scale the business.
6. Goliath is scared of David (and he should be).
Don’t be afraid of backing a new player that brings innovation to a big market with large incumbents. They too can be disrupted. For all I know, this is why Facebook is putting $19B (or more than Iceland's GDP) on the table for WhatsApp.
7. We like ‘rich niches’.
Even if you are not aiming for a multi-billion-$ market, you can still build a very good business if there is the chance that you can become the market leader.
8. Timing matters.
Not just in terms of market entry of the company, but also in deal making. If there is something you are really excited about, lock it in. Because otherwise somebody else will do it.
9. Solve problems in the real world.
The best startups we have come across are solving problems of or are providing tools for the real world, not for early adopters or other tech companies. Also, the biggest successes we have seen were built on original innovation, not incremental improvements.
10. Venture Capital is an awesome game.
After more than two years of working with Team Europe and Point Nine Capital, I have yet to experience a day that is not fun or interesting. The possibility to work with and support young founders that are going out to change the way we live or work in such a dynamic world is nothing less than thrilling. I’m sure there are many more learnings to come!