Investor Stories 498: When Investors Get It Wrong: Lessons in Humility, Focus, and TAM (Fubini and Patel, Rosenbloom, Sagalov)

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0:23Manish Patel: Welcome to the podcast about venture capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran, and this is The Full Ratchet.

0:39Welcome back to TFR. On today's special segment, we ask guests to tell the most important lesson that they've learned in their career. Here's a segment called Lessons Learned.

0:55on today's special segment we have ross fabini and manish patel of xyz venture capital uh ross manish what is the biggest mistake or hardest lesson you've learned as an investor and what's the story behind it i think the so the biggest lesson that i've learned as an investor actually was when i was a founder so i founded a company i still remember this is so naive i was a young kid. I wasn't even that young. And I went to our first board meeting. And long story short, we were trying to figure out if we could do this bottoms up enterprise sell motion, what you would now call a land and expand or product led growth.

1:33It was not common back in 2009. Or if we should do a top down selling. And I went to the board meeting with all my facts. And I literally thought I was going to tell my board members, a guy named Gus Tai. Gus is wonderful. What was going on? And he was just going to give me the answer. He was just going to tell me what to do. And the investor learning is that nobody knows. And his answer at the time was like, oh, that sounds like a problem. And the reality that you learn as an investor is that nobody knows the answer. So all you can do is get the best facts, make the best decision, execute, and then keep going if it's working or change course if it's not.

2:14And I think about this all the time with founders. I even have, I have a company that I thought was just going to get lost in the dirt. They weren't executing sales well. The guy kept hiring his friends as the exec team. And like, this is going to stumble into like average. Lo and behold, run the clock forward six months. Not only did they catch a macro wave, but those folks that he hired, they're his friends. They were a band of brothers and they just did incredible execution. And I always wonder if I'd been a stronger in my venture view, if I would have like changed out all those people, maybe I would have broken it.

2:50Maybe it would have been better, but like I have a lot of like, uh, appreciation for like, well, let's, let's see how this, this pathing plays out. And that's a real, uh, humility on the investor mindset, but that I think humility helps me help founders a lot.

3:14On today's special segment, we have Micah Rosenblum, MP at Founder Collective. Micah, what is the biggest mistake or hardest lesson you've learned as an investor?

3:24Micah Rosenbloom: I think this is where the two things I'd say. One is analysis paralysis. I think particularly as you get older in this business, it's so easy to have seen all these things fail or to like want to focus so much on the what the company and analyze it. And now we have Claude and all this stuff. And this business is about the who and why. not so much about the what because the what will change and the markets you know will do what they're doing so i think i've i've over analyzed way too much and spent too little time on the who and the why are they doing that and just in general i think that results in like taking more risk and taking the right risks um as an investor like we are in the risk seeking business to an extent and and i you know i i uh i do go back to that a lot um focus on the who

4:15Are you still managing expenses with outdated apps and spreadsheets? If so, it's time for Ramp, the leading U.S. spend management platform covering corporate cards, travel, AP, and more. All built to save time and extend runway. We use Ramp at TFR and it's been a game changer. As our preferred partner, they're offering listeners$150 just to take a demo. No need to sign up. Head to ramp.com slash partners slash TFR to claim your$150 before the offer expires. Now back to the interview. On today's special segment, we have Yuri Sagalov, MD at General Catalyst. Yuri, what is the biggest mistake or hardest lesson you've learned as an investor?

4:59And what's the story behind it? I think that this is a lesson that unfortunately I keep learning. And it's the idea that like passing on a startup because of a perceived TAM is usually a mistake. Like some of my biggest misses over the years have been companies where I felt that like the market size was small or unclear. career. And it's something that I really try to not overthink, see, really just focus on the team, focus on their progress, their execution. The idea is that if the team is actually as exceptional as you think they are, they should be able to either expand the TAM, expand the market, or navigate themselves to a better market.

5:44But sometimes it's just like, you look at this thing and you're like, oh, this is such a tar pit. I think every investor has stories here. People that saw Webven probably didn't want to look at DoorDash because they're like, I've seen this story before. And how big is the delivery market? And can it structurally work? And so I think that this is an area that is just very difficult to break that happen. And I very actively try to mitigate it for myself.

6:17that will conclude this installment of investor stories if you're enjoying the program and would like to see it continue take a moment and leave a five-star review in itunes okay that will wrap things up for today until next time over prepare choose carefully and invest confidently thanks for joining me

6:42Thank you.