Pre-seed decoded

#66 Angelinvesting.it - From idea to Series A - Weekly Newsletter

Dear reader

This week I met a founder who made me think quite a bit. They easily raised funds from leading international VCs, supported by an extremely well-presented deck and a resume that screamed overachiever.

Nevertheless, speaking with the CEO, I realized that the road to product-market fit for this startup might be steeper than that of many startups in my portfolio that raised a fraction of this round and don't have as many prestigious logos on their team or on their cap table.

When we look at a pre-seed round, we angel investors need to consider two elements: (1) the quality of the idea, understood as the likelihood that the team has discovered a secret worth pursuing, and (2) the team's ability to execute what's needed to extract value from the secret in point 1.

In the venture world, there's a thorny battle over what's more important, the idea or the execution. The famous saying that a vision without execution is merely a hallucination is as correct as it is misleading.

You can invest in the strongest team in the world, capable of executing like the best of armies, but if there's no discovered secret, no idea truly worth pursuing, all that execution capability will go up in smoke (along with our money).

2 Tools to advance to pro

Founders-Problem-Fit Vs Early Traction

Very often, to discover a secret, you must have had long exposure to the sector and the problem. In venture capital, we pompously call this phenomenon "founders-problem-fit." For us simpletons, the idea is simply that greater exposure to a problem or a sector might increase the probability of the famous light bulb turning on.

At the same time, it can happen that certain solutions arrive in a very unexpected manner. The story of how the founders of Airbnb ended up creating Airbnb is famous. At the end of the day, product-market fit is another pompous term to describe the phenomenon of customers reaching for their wallets to buy what the founders have envisioned.

When I meet founders in pre-seed, I try to place them within this matrix composed of experience in relation to the secret and the traction they have managed to build. Matrices give a false sense of order and security, take them with a pinch or two of salt.

The one and only

Peter Thiel in "Zero to One" introduces the idea of secrets I referred to in the presentation. Read it or read it again, a classic that explains everything you need to know.

1 Reason to smile

Have a great weekend,

Simone

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