Early-Stage Investing And Upstream Communications

I’m coming up on two years of investing. I plan to share more of what I’m learning in 2015, and will do so in more frequent, smaller blog post chunks.

Lately, the topic on my mind is my role sitting in between early-stage founders and the larger investors in the ecosystem. Here’s a basic scenario that has come up often of late: A company where I’m a small investor is starting to get interest from larger seed funds or even bigger VC firms. Those investors will email, text, and often just call me to chat about the company. Now, the short-term thinking and easy trap is to “sell” how awesome the company is and be a promoter, but in reality, different forces are at play. Often, as a small investor very early, I don’t know everything that’s going on at the company. While I email the Haystack portfolio on the first of every month to just check in, I don’t hear from everyone. Some founders don’t like emailing updates, which I understand, too.

In those conversations, where I’m asked for my opinion, I end up just sharing what I know. The person contacting me is usually someone I know personally, someone I’ve hung out with, and they’re calling me for my honest opinion. And in some cases where I don’t know the situation — again, as a small investor there are no things like information rights, etc. — I end up just saying that, “I don’t know.”

It’s never wise to lie or fib, of course, but especially here, these are investors I will have relationships with until I’m six feet under. I have to make sure my word is just that — my word. I have to ensure that when I say something, people believe it to be true. That takes consistency, and often involves me sharing my opinion about someone or something. I wanted to write this for founders to better understand the dynamics their early-stage investors face. A little communication goes a long way — not for me, or for them — but for the business, at large.