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Would you pick up Saturday night?
The life's work test
The first question is whether you could talk someone you care about into joining this company and, intellectually honestly, explain why it could be their life's work. If not, the project is not the right one, however big the opportunity looks.
The Saturday phone call
The second is the phone call. If this person calls at 9 PM on a Saturday night, will you pick up? If the answer is not an instant yes, that is a chemistry thing, and the feeling has to run both ways.
Would it matter
The third is whether being right would matter. Plenty of things can be right as a business and still not matter, to the point where an amazing company could be built that simply shouldn't raise venture capital. If we're right, will anybody care? If nobody would, there is not enough equity value to build.
Why does chemistry matter in venture partnerships?
Venture funds are typically structured as ten-year partnerships. An investor who backs a company in the first years often stays involved through board seats until the fund winds down. The relationship covers hiring crises, down rounds, and sale decisions. Investors and founders therefore tend to work together for many years.
Why can a good business be a poor venture bet?
A venture fund returns money to its backers only when a few investments grow enormously. A company that grows steadily and profitably but tops out at a modest size cannot do that. Such a business can pay its owners well and employ many people. Its returns simply fall short of what venture funding structures require.
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