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Fred Turner tried to raise a venture round in the UK while he was in his first year of college and running the startup on the side. He couldn't even get meetings, and one fund took an associate meeting with him. Investors seemed to back people on credentials, and a first-year undergrad from a university could not be looked at seriously.
In Silicon Valley the question was different: what's the possibility here, and what could you envision in 10 years if everything succeeds, and how big a company could this be. Investors there were optimizing for the best outcome, where in the UK he felt investors were optimizing to avoid the worst downstream outcome. The experience came more than 10 years ago.
What does an associate do at a venture fund?
Associates at venture funds usually screen incoming startups, take first meetings, and bring promising ones to partners. Partners make the investment decisions and hold the board seats. A founder who meets only an associate has cleared the first filter but not the main one. Funds use this layered process because they see far more pitches than partners can attend.
Why do investors chase outsized outcomes?
Venture returns follow a power law, in which a few investments return most of a fund's money. Analyses of fund data by Horsley Bridge Partners, cited by Founders Fund, found that a small share of investments produced the majority of returns. Investors therefore weigh how large a company could become, not only how likely it is to succeed. A large upside on one company can cover many losses.
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