Elizabeth Yin

1 (cont) "You don't have enough cash to build out the bare bones product to compete head to head w other email service providers out there. And raising $ at this pt in time is going to be a difficult pt. No one wants to fund partially built products"

1 (cont) He was so right. How much cash you have as a startup to a good extent dictates what you can build right now. And some founders can get more cash than others.

2) if you are @elonmusk you can get access to cash (or use your own) to shoot for the moon (literally). But most first time founders can't raise money to build a new kind of car. It's not to say that shouldn't try but you have to have a cash strategy.

3) If you can't come up w a good cash strategy (such as in my case), you have to think through what is a stepping stone I can hit w cash I can access that allows me to build this end goal ultimately. It could be a smaller product. It could be to zag to a peripheral prod. Etc.

4) as a vast generalization, it means that usually prev successful entrepreneurs who may have access to more capital than most ppl can shoot for something higher risk and higher return. That's a moat in itself.

5) On the flipside, as a fund, cash is also an impt part of strategy. If you have a $10m fund, there are some cos that are better for *your fund* than others.

6) For ex: as a $10m fund it isn't strategic to invest in ad based startups. Even if those cos go on to do very well, they need a lot of capital to get to monetization that you don't have in your fund! Similarly for other high cap cost cos - HW, e-commerce (inventory costs)

7) one way this can work well for a small fund is to have really close rapport w big funds that you know will just love whatever you are backing. This protects downside risk.

8) 2 yrs ago, I talked to this Co that I really liked. Super seemingly scrappy founders. But a marketplace where I was really concerned w the unit econ. There just wasn't going to be a high enough take rate to build this biz w little cap.

9) So there was risk in this failing because they needed lots of capital to make this work - that I couldn't provide and also even if they could raise from others lots of money, I would take huge dilution. So I passed.

10) It was a great company but not a great match for our small fund. Just wouldn't have been good strategy. This co has since gone on to raise a large seed round from whose who investors & they will likely do well because these funds can pour in tons of $$. Did I make a mistake?

11) Maybe they will become a unicorn that I missed but even if they do, you can't use "resulting" (read @AnnieDuke) to retroactively take a result and say it was a bad decision. Strategically it was the sound decision given our fund size even if the outcome turns out differently.