Dimi Taslim (MBA ’19) shares some hard lessons learned as a venture investor.
Prior to matriculating at HBS, I worked as a VC and led deal sourcing and execution across multiple markets in Asia. I learned many things the hard way. Things they don’t teach in business school. Today I’d like to share some of the lessons I’ve learned.
- Give earnestly, but give in a sustainable way.
To compete with other VCs in a competitive region, we took a long-term view—the mantra of “give before you get.” What does giving look like? From providing scholarships to the best computer science graduates to helping entrepreneurs with problems as awkwardly personal as divorces, we ran the gamut in giving to people to whom we have yet provided investment.
But while giving gets us on the radars of good people, we also hope that our bias to give gets us access to top talent and to allocations in funding rounds. We want to help people, not give the whole enchilada for free.
In his book Give and Take, Adam Grant made a riveting point: if we look at givers and takers, it appears that givers are both the least and the most successful people we know—the difference being that unsuccessful givers burn out by giving totally selflessly while successful givers keep their own interests in the rearview mirror.
What I found pleasantly surprising from my personal observation is that our most outstanding founders, who can get away with asking us for tons of stuff, are the people who have been most grateful for our help and most active in helping us grow our fund.
- Obligation to dissent; avoid groupthink.
We cultivated a culture of thinking against the grain. We largely ignore the ballyhoo of releases on mainstream tech media. We are not interested in party rounds. We work hard but don’t lose sleep trying to chase everything.
VC is over-glorified by those moments of discovering the most sought-after deals and pushing through a tight turnaround to get into them. Typically, the founders have just convinced a high-profile investor to lead the round, and a long line forms. This “FOMO” prompts irrational decisions, which every investor should avoid. Do not become hostages to the dynamics of a funding round.
Internally, we encourage individualism in our investment calls. When it comes to decision-making in VC, strength comes not in numbers, but in diversity of thought. Everyone is obligated to dissent. I have, on several occasions, made comments that were obliterated by other members of our team. I shrug it off, learn, and move on.
The key is to foster an environment where no one is cowed into consensus and intellectual ego doesn’t get in the way of people dissenting. Pattern recognition is important, but we can’t be beholden to the patterns we’ve developed.
- If you’re below the partner level, focus on reducing Type I error.
One of the greatest values that anyone below the partner level can bring to his or her VC firm is proprietary deal flow. The key is deciding which deals to pitch to the partners. As a gatekeeper, you need to balance the OMG-I-think-I-found-something moments with a keen dose of cynicism (i.e., you don’t want to waste the partners’ time on uninteresting deals). Let me explain.
Assuming the table below shows a rough breakdown of my deal flow, I’m always trying to reduce Type I errors (“errors of omission”) and Type II errors (“errors of inclusion”). But what I’ve come to believe in is this: the big hits you don’t pitch to the partners can hurt the fund more than the bad deals you pitch to them. So avoiding Type I errors is more crucial than avoiding Type II errors.
A top Midas-listed Chinese VC once told me, “It’s easier to say no than it is to say yes.” I’ve found this to be true. At the associate/principal level, saying no to deals is far easier and less meaningful than being able to identify the deals that should be seen by the partners. When unsure, get a second opinion—because a fund is defined by its hits, not its misses.
- Drive ownership, but let the founder be the founder.
There are two schools of thought in the VC industry in emerging markets. On one hand, some VCs believe that the nascent ecosystem lends itself to “spraying” and spreading bets—they think this is the best way to capture emerging vertical leaders.
I’m on the flip side. The “spray and pray” approach is neither capital-efficient for investors nor favorable to startups. As a VC, I’m aiming to drive ownership. This means I won’t need a herculean outcome every single time to have made a worthwhile investment. For my portfolio companies, it means I’ve pledged to being in the trenches with them and am not curbing the definition of success.
I’ve learned that there are times when a VC should intervene, but mostly at inflection points focused on path correction rather than intellectualizing on trivial details. Let the founder be the founder, but be there when they need you.
- The deal isn’t done until it’s done.
Probably the toughest pill I’ve had to swallow as a VC. Even after supporting a founder and negotiating terms for weeks, you can never be sure of sealing the deal before the ink has dried. It’s harder to convince someone to take your money than it is to identify a good investment.
The truth is, I have lost several deals, particularly when I don’t see the need to be ruled by the competitive dynamics of a funding round. There is, however, one occasion on which I feel I could have done better—I lost this deal to a company board vote, which went 3-2 in favor of the competing VC, who was offering a higher valuation.
This is what I learned: venture investing is essentially complex sales. I should’ve done more. I should’ve known this was a competitive round. I should’ve reached out to key board members to clearly articulate the value we could bring to the company. I should’ve sold better. It’s OK, though. You lose some.
I keep an anti-portfolio of sorts—the “could haves,” the “should haves,” and, thankfully, the bullets I dodged. I analyze. I learn. I move on.
- Pursue intellectual solitude around a focus industry.
Intellectual solitude is what promotes non-consensus viewpoints and investment theses. My job is to have conviction in things that others have yet to visualize. To find conviction, one needs to pursue things that are personally interesting, not things that everyone thinks are interesting. Form not an opinion, but your own opinion.
For me, the sector of interest is alternative credit scoring vis-à-vis unsecured online lending. I’m looking for the right approach to bank the 700 million unbanked people across India and Southeast Asia. My conviction is that P2P lenders will not succeed because the supply-demand imbalance would force the company to access capital markets to meet excess demand for loans, which would eat into the P2P cost advantage. So I’m looking for a “full-stack” lender: one that credit scores (with proprietary and exclusive data), lends through a hybrid balance sheet model, and scales through existing distribution channels such as telcos and mom-and-pop shops.
Diving deep into a sector and forming your own thesis will help you establish your brand, interact with key operators in the sector, and guide you towards the path of investing into the leading startup in that space.
- Back thesis-driven founders in the right markets.
When I first started, I fell in love with the wrong products too quickly. I was overly tied to assessing product visions, and I analyzed startups based on road maps sketched out by founders. I learned the following (in order of importance):
- Markets have an enduring impact on the opportunity set for startups.
- Founders’ abilities to execute were what determined success.
- Product road maps will change as founders build experience.
Instead of obsessing on product, I learned to spend more time unfolding founders and digging deep into their thesis on how our world is evolving. I learned to love people and markets more than products. And I learned to be intimately aware of my own biases.
- Admit lack of knowledge, then lean into your blind spots.
I saw about 15–20 deals a week across six to eight different markets. Figuring out different technologies, understanding multiple business models, chatting with experts, and supporting portfolio companies keep me in a constant state of flux. I’m always discovering new blind spots and figuring out how to plug my knowledge gaps. I’m obsessed with learning. I want to be continuously educated by the best founders.
When I first started, I used to worry that the rate at which I discover what I don’t know far surpasses the rate at which I learn. But I came to grips with the delta between those two boundaries. And I learnt to lean into the experts for advice—this really helped to thin down the delta from ∆b to ∆a. I can’t learn by sitting in the office, only meeting people I know and only reading what I read. I find opposing standpoints, find the antagonists, find new networks, find offbeat ideas.I learned to not discard what I don’t understand. The biggest ideas usually tap into emergent behaviors that people initially find confounding. Lean into them. Have the relentless curiosity to pursue what you don’t intuitively understand.
- VC is long-term, unglamorous sales work.
A VC is constantly selling. This is something I wish I understood earlier. I’ve come to realize that there is a lot more to being a stellar VC than just investing. And there are more contexts and subtexts that the public does not see.
We’re always selling ourselves to founders. We’re selling our portfolio companies to partners, customers, potential hires, and to later-stage VCs. We’re also selling our fund as an investment opportunity to Limited Partners, such as pension funds, sovereign wealth funds, family offices, foundations, university endowment funds, high net worth individuals … the list goes on. Selling is not always fun.
Fundraising, for example, has so many disheartening moments when people don’t respond to emails, don’t turn up to meetings, and don’t want to invest but tell you they want to (so they get access to your data room). Sometimes it’ll feel like you’re the only person who takes things seriously. Most important, sitting on the sell-side of the table should humble you and make you mindful of how you interact with founders who reach out to you in their own pursuit of funds.
Being a VC, especially in emerging markets, is not about first-class flights or models & bottles. It sure is a hell lot about working in Grab taxis (while stuck in 3-hour traffic jams in Jakarta), replying to entrepreneurs, reading a ton of business plans, conducting due diligence and reference checks, sorting out admin and scheduling meetings, and getting to know a lot of people. I have spent many hours writing investment memos and meeting hundreds of companies that I didn’t eventually invest into.
It requires consistency of effort (and a long time) to solidify relationships, to raise a fund, to build a strong deal flow, to help portfolio companies scale, to execute exit opportunities, and to make the hard work pay off.
- Founders are more important than VCs. Treat them with respect.
I’ve been appalled by some of the investor egos I’ve experienced firsthand or heard about from chatting with entrepreneurs. Stories range from inundating startups with irrelevant data requests, to imposing 2–3x liquidation preferences and full ratchet anti-dilution, to being very unresponsive over emails and messaging apps, to attending BOD meetings without staying up-to-date on company developments. VC is a product for entrepreneurs, so VCs need to be transparent and to continuously improve their offering to better serve entrepreneurs.
Here are some good habits I picked up:
- Say “no” quickly and constructively. I really do my best to respond to founders within a week. It’s simply unfair to string them along as it could waste months of precious time. Writing honest and straightforward “pass notes” to founders was one of the first things I learned. I thank them, give two or three constructive reasons, and invite them to keep us updated with their progress.
- Be prepared and on time. Before the pitch, I read their deck, visit their website, and browse through their credentials on LinkedIn. I frequently meet founders who are 5–10 years more experienced than I am. Preparing enables me to ask relevant questions, which is the base level of respect I can accord to founders.
- Partner, not preach. It’s critical to know when one can give advice and when one can’t. I temper my enthusiasm to help with practicality and relevance—it’s pointless to make ineffectual introductions and offer advice not grounded in experience or expertise. It’s OK to concede a lack of ability to help with a market, technology, or product that you haven’t properly understood.
The last word.
I’m very grateful to have had the opportunity to work with a handful of smart, driven, and ambitious entrepreneurs. It’s a privilege to have a fun job that’s also intellectually challenging. I’ll be the first to acknowledge the many things I haven’t spent enough time learning: dealing with difficult LPs, being a truly great board member, and managing struggling portfolio companies.
There’s always more we can learn and understand. VC, entrepreneurship, and technology are moving targets. Buckle up and enjoy the ride. Stay humble and hungrier than the entrepreneurs themselves.
Dimi Taslim (MBA ’19) leads the India and Indonesia initiative at GGV Capital, a global multi-stage VC firm that invested in Airbnb, Alibaba, Bytedance, Slack, Square, and Xiaomi. He graduated from the London School of Economics and is currently an EC at Harvard Business School, where he is co-president of the Asia Business Club. Dimi is a scuba diving addict and is often seen gorging vast amounts of food at hot pot buffets.