I was working late into the night, researching a very hot deal. It was 2021 and I was amped — until I found out I couldn’t get an allocation!
I was really disappointed. The founder was first rate and the co-investors were Silicon Valley legends.
Surely I was missing my billion dollar opportunity!
Fast forward two years…
The company I was so excited about got sold for a small sum. This “acquihire” provided a soft landing for the team and got the investors their money back.
But those billions remained elusive.
We investors think we need to win allocation in the hottest deals. But my best performers were pretty chilly when I found them.
My Top Performers
Let’s take my #1 performing company. Even though I invested in 2021 at the height of the boom, the round wasn’t the least bit competitive.
It grabbed some solid investors. But most anyone who wanted a piece could’ve walked into that deal.
They just couldn’t see it.
How about #2?
I almost passed on #2, but the founder scheduled a second call with me to show me just how special his product was. I’m very grateful to him — he was right.
This marketplace had great early traction, but again the deal wasn’t remotely competitive. Anyone who contacted the founder probably could’ve invested.
In all three deals, I got the full allocation I wanted.
My Hottest Deals
When we turn to the hottest deals I’ve been in, the picture is much less rosy…
Deal # 4 was a great company with strong early traction. The investors included a scout for one of the best venture firms on earth.
I could only get some of the allocation I asked for. I took it, grateful to get anything!
Deal # 5 was a very innovative SaaS company. The round was hot — again, I only got part of what I asked for.
Despite very hard work by the founders and teams, neither of these companies quite caught on. They were acquired for small sums and I got my money back, but nothing more.
Looking at every company I’ve invested in, not one of the hot deals has performed well.
Meanwhile, the big winners got a cool reception from VC’s. Perhaps what they proposed was too radical.
But it worked.
Better yet, because I got the full allocation in the successful companies and didn’t in the others, my returns are better!
I’ve invested in 20 companies so far. The sample size is hardly scientific.
But I’m done worrying about getting into the next hot round. Instead, I’m looking for great businesses that need someone to believe.
Do you like hot deals, or do you avoid them? Leave a comment and let us know!
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