Facing Fear as an Emerging Investor
In my quietest moments, I am often abruptly shaken by a screaming inner voice: WHAT ARE YOU THINKING?! I find myself beginning to fall into the rabbit hole that I know all too well, the one with questions like Are you doing enough? and Who are you to X? written all over the wall. Call it anxiety or imposter syndrome, but I want it gone pronto. Accordingly, I begin desperately digging for a win because of the perceived satisfaction of an immediate achievement. But am I solving for a short-term solution or a long-term legacy?
Success as We Know It
Rising through the ranks during the longest bull market in history, we GenZennials have been taught that we must succeed. Why? Because to fail is to fall behind. We’ve forever lived with an up-and-to-the-right mindset. Each day we face the world, aspiring to be harder, better, faster and stronger. As a result, we’ve stopped taking stomach-churning risks and slowly conformed to the societal standards rising around us. Trying to be a TikTok star? No problem, Charli D’Amelio has proven this is possible. Dreaming of raising an early-stage venture round for your new future-of-work concept? Sounds within the realm of possibility to me. Yet, folks looking to distance themselves from the monoculture are met with skepticism. You want to build WHAT?! Well, it’s probably going to be easier to get funded if you…
Emerging Investors in today’s venture capital ecosystem are facing similar pressure. From selling our souls for Substack subscribers and podcast appearances to running after the latest Banking-as-a-Service provider like it’s the last ice cream truck on Earth, we’re being encouraged by our environments to follow the crowd. Both investors and founders are complicit in fostering this environment that equates hype to success. On the surface, it seems far easier to chase the Series B of a “hot” company in a sexy category, assuming a nice 3x paper markup when they go back out to raise in 9 months, than to think for ourselves and risk being wrong. Characterized by the media as a generation of snowflakes, we are forever tempted by the affirmation of these easy wins. Why try to foresee the future when you can find it on Twitter?
A New Perspective
Such approaches trouble me. They feel antithetical to the reason our industry exists and the ways it has transformed the world around us. As tomorrow’s industry leaders, we need to define and take ownership of the roles we each play in encouraging this momentum-chasing environment and ask ourselves whether it’s truly in the best interest of our funds, the founders we back and the limited partners whose capital we deploy.
1. A risky or daring journey or undertaking
2. A business enterprise involving considerable risk
1. Dare to do something or go somewhere that may be dangerous or unpleasant
2. Dare to do or say something that may be considered audacious
3. Expose (something) to the risk of loss
Scrolling through Forbes’s annual Midas List of the World’s Best Venture Capital Investors and the Notable Companies listed alongside them, you find not “Uber for X” or “Peloton for Y” but instead Uber and Peloton. The most iconic companies of our time — and, correspondingly, those that make venture capitalists’ careers — are often bold, borderline bizarre and not widely accepted as obvious in their early years. They frequently address misunderstood markets and, at times, are led by perceived misfits in their respective industries. It is this delta that creates the opportunity for alpha. Yet, in chasing momentum, Emerging Investors are missing these sparks. As we eager beavers charge forward faster and faster, we give up the time and space to observe, question and intellectually explore. But, hey, at least we consistently make it to YC Demo Day.
So, what’s so wrong with following the crowd? By definition, taking an index approach to investing is likely to generate index-like returns. For venture capital, this equates to roughly a 1x return on invested capital. Yikes. You’d be better off buying a basket of Chanel bags (seriously, though). As investors, we seek to back founders with earned insights and differentiated perspectives. Should we not hold ourselves to the same standards? To outperform, Emerging Investors must become comfortable with being out of consensus. Yes, this means most people around you will think you are either confused or crazy. Yes, this means you risk being very wrong. Yet, it’s this type of courage that makes careers. As I continue down the winding road of a path to Partner (yes, I know that in reality Sand Hill Road is quite straight), I’m striving for such strength and I hope you will too.
The Way Forward
I share these musings not to entrust you with perfectly packaged answers but to leave you with threads I hope you’ll pull. However, in the spirit of asking for the order, I will leave you with three requests.
Industry Veterans: Please encourage curiosity. Through your mentorship efforts, sponsorship of emerging talent and thought leadership work, hold us to a higher bar and push us into our potential.
Capital Allocators: Please award creativity. Remember that the greatest companies of our time are likely to be the ones solving society’s greatest challenges. Only through new solutions will we unlock new possibilities. And such advancements take time.
Emerging Investors: Please lean into fear. The most transformational ideas are often the most uncomfortable. Yet we depend on them to move forward as an ecosystem and, more importantly, as a society. Let’s not allow our insecurities and desires to be right, hyped and Twitter-liked to impede our ability to seek truth and transformation.
If you’re looking for an intellectual sparring partner, I’d love to hear from you on Twitter at @itsmeeraclark or at firstname.lastname@example.org.