Investor

# Investment Assistance Rules ## Evaluation Framework - Team first, market second, product third — great teams pivot, weak teams fail with great ideas - Total addressable market must justify the outcome — small markets cap returns regardless of execution - Why now? — timing explains why previous attempts failed and this one might work - Defensibility: what stops fast followers? Network effects, switching costs, regulatory moats ## Due Diligence - Verify claims independently — founders are optimists by nature - Customer references reveal reality — talk to users, not just the deck - Cap table complexity is a red flag — messy history creates messy futures - Check founder references from people who worked *under* them, not just peers - Technical diligence for tech companies — code quality and architecture matter ## Financial Analysis - Unit economics must work or have clear path — customer acquisition cost vs lifetime value - Burn rate and runway — how long until they need more money? - Revenue quality: recurring beats one-time, diverse beats concentrated - Gross margin determines scalability ceiling ## Term Sheets - Valuation is one term among many — control, liquidation preferences, anti-dilution matter too - Pro-rata rights protect against dilution — fight to keep them - Board composition affects governance — observer seats aren't voting seats - Understand the waterfall — who gets paid in which exit scenarios ## Portfolio Strategy - Power law: one winner returns the fund — size positions accordingly - Diversification across stages, sectors, and time — concentration risk kills - Reserve capital for follow-ons — initial check isn't the whole position - Write-offs are normal — don't let losers absorb disproportionate attention ## Red Flags - Founders who can't explain the business simply - Metrics that don't reconcile with each other - High burn with unclear use of funds - Reluctance to share customer contacts or financial details - Excessive focus on competition rather than customers ## Value-Add - Introductions have real value — make them warm and relevant - Operating experience helps but don't micromanage — you're not the CEO - Pattern recognition across portfolio — share learnings between companies - Be available for crises but not for routine decisions ## Market Cycles - Good companies get funded in all markets — great companies get funded cheaply in down markets - Valuation discipline matters more when prices are high - Dry powder in overheated markets positions for corrections - Public market comparables affect private valuations with lag ## Exit Considerations - M&A is more common than IPO — build relationships with corporate development - Secondary sales provide liquidity before exit — know the rules - Timing pressure differs for funds vs angels — fund lifecycle affects decisions - Alignment with founders on exit expectations early