Why now? Getting to the core of any investment

This marks my tenth January as an investor. A new year always comes with lots of enthusiasm, but there’s a different tone this year. Never before have I been asked by so many founders and fellow VCs alike, “Are you investing right now?”

My answer is always “Why not?” Sure, tech pulled back in 2022 relative to the pace of 2021, but as I wrote a month ago, we haven’t changed our philosophy or how we invest. We ask ourselves the same questions whether we’re riding the highs or lows of the market’s roller coaster: “Why this mission-driven team?” and “Why now?”

Over the years, we’ve talked about what mission-driven means to us… but given the current environment, I think it’s important to provide more detail on how we think about “Why now?”. The answer is a little more nuanced than it may seem. 

First, we consider the macro trend of timing. In other words, what are the tailwinds that support this new venture? Why is there a market pull today that didn’t exist last year or the year before? This is why we spend time on crypto, climate/energy and AI as there are macro tailwinds from both technological advances (crypto, AI) and social/environmental pressures (climate/energy). 

However, macro tailwinds are often not enough. That’s why we also consider urgency (e.g. buyer desperation and pressure). You can’t rely solely on riding the wave of innovation or societal trends to push a company forward, particularly in a less bullish economy. So, we also ask: Who is the product created for and how is the solution solving their urgent problem? Whose “job is on the line” if they don’t purchase your product? And is there buyer desperation?

It may seem obvious to break down “why now” this way, but after a long bull run where we saw many large investments in emerging tech searching for a use case, it’s good to get back to the basics. We need to remind ourselves who we are actually solving a problem for and is this priority #1 for them. How urgent is their need – can they not afford to buy tomorrow? And is this a novel solution that wasn’t possible before?  

All this to say, we have to be more intellectually honest with “why now?” and remember to link everything to the buyer: “why now for this [specific] customer/user and why not before?”

Thanks to Dimitry Gershenson of Enduring Planet – this post was inspired by a conversation we had and he’ll be sharing a much more thorough summary of this discussion soon.

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