Jamie Rhode, CFA

Using data that is representative of the population is important. Also making sure it’s presented in a manner that is understandable and too point is important, sometimes using data can be confusing if the person you’re presenting to doesn’t understand the nuanced language. And no data mining!

Roughly 2% of startups become successful outliers, given this… that’s means 98% of startups don’t produce VC like outcomes. But some of the best outcomes are from companies that were solving complex, unmet needs in areas with unproven technologies. It’s important to invest in these areas, the tails or edges, but to do that in a risk adjusted manner. Diversifying the portfolio across sectors and enough companies can allow you to capture the upside of a winner but protect the downside of the portfolio.

Using data is extremely important to removing behavior biases when making investment decisions, but a lot of times these decisions are made via a group setting or through a team. Being able to communicate your thought process and tell a story using the data can allow your team to understand your thought process. Being a very good story teller using data, especially complicated data, to prove your points is also a very powerful skill that can lead to success.

Establishing a shared framework and language is extremely important, specifically what the definition of certain things mean and can the group agree on that definition. Saying something is almost done can mean different things to different people, is it 75% or 95% done? Without having an agreed upon framework and common language, completing a project efficiently will be very hard.

It is important to understand your audience and what their intelligence level is regarding your product, sector, pitch. It is okay to ask them a few questions to gauge their knowledge level on the topic, but when discussing any topic if you can’t explain it to someone like they’re a fourth grader, then you need to work on improving how to communication. Saying a lot with very little is important when people’s time is limited.

It’s important to not only learn the lingo and key terms used within venture capital… but also important to understand the distribution of venture capital: the steady state return, the upside, the downside, the mean, median, etc.. Also recognizing behavioral biases of investors can help shape how you communicate and display your data analysis.