My biggest frustration as a VC has been that it’s a very negative job.  You say “No” all day long, and it wears you out.  I’ve warned people getting into the industry about this, because in most operating roles, you end up saying yes much more often, and you feel like you are doing something positive every day.

But… I’m looking at this from a new POV these days.  It turns out that outperforming as a VC is about saying “Yes”, not saying “No”.

VC’s win by saying “yes” at the right time when others say “no”. The more competitive the market gets (and it’s pretty competitive at this point) the more this is true.

When markets are hot, the business gets harder. You either say “yes” at a price that others won’t touch, or you say “yes” to risk that others won’t touch.

When markets are weak, this gets easier. So you get lower prices or lower risk or both.

The other approach is to be more attractive yourself. That way, you get founders to say “yes” to you, at the same economics or sometimes even worse economics than the less attractive investor. Very few investors can pull this off, and if they do, the economic delta is usually pretty small. But as the market gets more competitive, more funds need to find a way to do this, and it’s not easy.

It’s funny that in a business where you say “no” all the time, the way to win is all about people saying “yes”.