On this special segment of The Full Ratchet, the following Investors are featured:
- Paul Madera of Meritech Capital
- Medha Agarwal of Defy
- Jeff Bussgang of Flybridge Capital
We asked guests to tell the most important lesson they’ve learned in their career.
The host of The Full Ratchet is Nick Moran of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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Transcribed with AI:
0:19
Welcome back to etfr On today’s special segment, we ask guests to tell the most important lesson that they’ve learned in their career. Here’s a segment called Lessons Learned.
0:35
On today’s special segment, we have Paul Madera, co founder and general partner at maritech. What is the biggest mistake or the hardest lesson that you’ve learned as an investor, and what’s the story behind that lesson?
0:47
I can’t tell you any specific stories without outing the guilty so but, but as you can imagine, when we got started with the help of our sponsoring funds, Excel, red point, oak and worldview, they had portfolios full of companies they’d invested in in the 90s. And as they got as we went through the tech bubble, money dried up, opportunities dried up a lot of their portfolio companies needed financing that was not available from anyone else. So some of the partners would come to maritech and say, Hey, here’s the company you got to fund it, please write a check, and we would look and figured out that if we invested in all those companies, that it would not let us raise our next fund. And so we had to very carefully and thoughtfully, sort of create a set of criteria that made sense to invest on, and we follow that criteria to this day. And then we actually followed and stuck to it and then, and it worked in terms of helping us stay focused in the right and the right area and the right stage of company, and looking for the right metrics.
1:55
Can you tease any of the criteria without giving away the secrets?
1:59
Yeah, we wanted to see 10 million run rate. We wanted to see very strong growth. We wanted to see a business model that wasn’t sort of 0% gross margins, but going to improve in the future. We wanted to see a sales force that was reasonably efficient. By the way, when we were investing in SaaS companies, there were no metrics. I mean, today we all have this wonderful set of metrics to look for, in terms of payback, in terms of efficiency and lifetime value. None of that was existing, so we were trying to make it up as we went along. And we used those. We used those. We developed our own to make decisions. By the way, the dealer socket guys, just to tell a story, the dealer socket guys were so incredibly efficient with their sales force that when HubSpot showed up at my office and effectively begged me, they were begging me to invest because I’d been in Salesforce, I looked at their, their their efficiency metrics, and I said, gosh, guys, you know, sounds really cool, but This is terrible. I just, I can’t get behind it, so pass it up. And of course, that’s another one that I missed
3:07
sometimes, you know, when a company does something so well, it’s a standard that, you know, others can’t be held to.
3:13
That’s exactly right, and I didn’t know it. I missed it.
3:23
On today’s special segment, we have Metha Agarwal of defy What’s the biggest mistake or the hardest lesson you’ve learned as an investor?
3:32
It’s a great question. I think the biggest thing I’ve learned is to listen to a founder’s vision for what their company what they want their company to be and where they want it to go. I’m on the relative spectrum of investors. I would say I’m much more thematic. And so I often come in to conversations. If I say we were talking about supply chain and logistics, I’ve probably met, you know, three or four dozen companies over the years that are doing something in supply chain and logistics, and so I have a point of view on where the opportunities are, where I think there are opportunities to improve workflows build large businesses, and I think it’s really important to get excited about the founders vision and what they want to build, versus coming in with excitement about my own vision of what’s possible and What this company could become, because it’s so early, and I can see how, how this company could go solve some of those problems. And oftentimes those things could be the same, but sometimes they’re different. And it’s really important for me to recognize that
4:35
I once made an investment where, in retrospect, in hindsight, I was chief strategy officer that one didn’t work out.
4:43
Yeah, I have one or two of those as well. And it was the learning that I was imposing my I didn’t realize that I was imposing my own vision of what I thought this company to be, and that was a little bit different from what the founder wanted to build. And maybe they didn’t realize it either. So yeah. Cool.
5:06
On today’s special segment, we have Jeff busgang of flybridge. What’s the biggest mistake or the hardest lesson you’ve learned as an investor?
5:13
I think the hardest lesson is follow on capital, good money after bad. There are times when you’re such a cheerleader for your founders, and you have such strong belief in your own investment thesis that you’re loath to give up the ghost. You’re loath to admit the mistake. And it’s very hard to admit the mistake and say to a founder, especially the founders that are doing well, the founders that are doing poorly, the companies are doing poorly, that’s obvious, but the ones that are doing like good, solid re you know, they’re not bad, but they’re not exceptional. They’re not on a path to be 100x return. You got to, you got to be tough minded about that. And I think that’s that’s very hard for me. I’m a I’m a fan of all entrepreneurs. I want people to succeed. I self identify as someone who’s very supportive of their founders, and tries to be very nice and very human and very respectful, but ultimately, you also have to be tough minded on behalf of your investors.
6:13
That will conclude this installment of investor stories, if you’re enjoying the program and would like to see it continue, take a moment and leave a five star review in iTunes. Okay, that will wrap things up for today until next time over. Prepare, choose carefully and invest confidently. Thanks for joining me.
