The Investor Trough of Sorrow
The startup trough of sorrow has been well documented in recent years, so I won’t repeat the concept in great length. As a generalization, it’s the difficult period at every startup when the novelty of the initial idea and maybe a bit of traction have worn off, and the founders must find the will to build a company with long-term sustainable growth and value. Many companies do not make it through the trough of sorrow. Some special ones do.
I’ve experienced the trough of sorrow myself at two previous startups. One was my own and it didn’t work out. It’s still painful to this day, many years later. I was employee #1 at the second, and after several years it seems to be emerging on the other side.
I realized recently that I’ve experienced a similar sensation as a seed investor at betaworks. We seed invest in companies and people that we’re obsessed with, products that we think are solving important problems, and thus have good reason to exist. And yet, there’s been a distinct moment after every investment I’ve made, sometimes it’s weeks afterwards, sometimes it’s months, when I can’t help but think, “Holy Shit. What have I done? This company is never, ever going to make it.” I can’t speak for every investor, but I’m guessing there are others out there that have experienced this feeling too.
Of course, the investor trough of sorrow is very different than the startup trough of sorrow. Venture capitalists make many investments, most of them are highly risky and so there’s an expectation that many of the companies will fail. As an entrepreneur, you make one bet, it’s generally all or nothing, so the trough of sorrow is that much more terrifying. When my first company was cracking, I remember thinking, “Well what the hell am I going to do now? How am I going to make rent? What am I qualified to do and how am I possibly employable?” For a VC, even if many of your companies fail, you still keep your job. In fact, performance is judged over such a long period of time, that you’ve probably already raised another fund by the time the hammer comes falling down. This is why fees at large funds keep mediocre VCs in business for decades longer than they should be.
Though the investor troughs of sorrow are no doubt less acute than the entrepreneur’s, they occur more frequently, often one or more per startup, and each one hurts. Possibly it’s because I’m familiar with this sensation from past companies and it’s a stark reminder that it exists, but more than anything, I think it’s because our founders are my people, and I simply want to see them through this painful period.
Neither seed investing nor startups are for the faint of heart, no matter how you look at it. If there’s one thing I’ve learned in the five or so years building and investing in nascent companies, it’s that it’s really hard - almost impossibly hard - to make it work. But for those few times that you can find a way through the trough of sorrow, whether it’s as an investor or a builder, there’s no better high. I think that’s part of why we do this.