This morning in the shower I realized that I am having a 10 year anniversary of sorts: I began investing in startups in 1999. Over that decade I have learned a ton and I continue to learn new things all the time (one of the reasons why I love what I do). One key area of learning has been to quickly identify deals that are not going to work and then pass on them (VC jargon for saying no). Doing that means more time to meet with other teams, to dig into those deals that seem like a good fit and to work with existing investments. It is also the right thing for entrepreneurs rather than wasting their time with a process that ultimately won’t get there. Most of the time passing is easy because there is a fairly clear way in which the opportunity does not fit with the criteria at Union Square Ventures. I usually try to explain exactly how it doesn’t fit, hoping that will provide some useful insight but being quick to point out that there are many great businesses that don’t fit those criteria. But then there is a small group of companies where passing turns out to be hard. They all share three characteristics. First, they are nominally a good fit for the investment criteria. Second, there is great chemistry with the team. Third, something is slightly off in a way that is highly subjective. In those situations I can’t provide a rational explanation based on investment criteria. So the conversation is not really constructive and passing feels a bit like breaking up with someone. I suspect that this one won’t get any easier over the next 10 years nor would I want it to.
