An investor’s job is not to invest in every deal but rather give themself the opportunity to invest in every deal.

A founder’s job to give each investor that opportunity.

In so doing, both give each other the best chance at being mutually successful.

Let me explain.

On a Summer weekend in Wisconsin, my family and I visited some friends at their cottage in Northern Wisconsin.

My boys caught a few fish in the lake nestled near the cottage. Then, my son asked me, “Daddy, how many fish are in this lake?”

It was a great question with an unsearchable answer.

We will never truly know how many fish were in the lake. Did my boys catch 2% of them, 47% of them, 80% of them, or 98% of them?

For investors, startup deal flow is the same way - unsearchable. There is no way to truly know how effectively they are indexing the startup opportunities in the market.

For myself, this market inefficiency is one part excruciatingly frustrating but on the other hand, represents a tremendous opportunity for arbitrage.

Here’s my view:

✅ An investor’s job is not to invest in every deal but rather give themself the opportunity to invest in every deal.

but also… founders often do not let every single investor in their network know that they are fundraising… and thus do not give investors an opportunity to make a move at all. ✅

I think about startup deal flow in four categories. Startups that the investor…

…chooses to invest in.

…chooses to pass on.

...is aware of but doesn’t know about the fundraise, so they miss the opportunity to invest.

...is NOT aware of and discovers it after the round has closed, thus missing the opportunity to invest. ✅

✅ Category 3 is the arbitrage opportunity for both investors and startups. ✅

In the first two categories, the investor becomes aware of the startup and thus has the control to react to it. The investor has the control to say “yes” or “no.” The investor wants to their deal flow set to be in Category 1 and Category 2 as much as possible. And even though it may be a pass, the founder knows where that investor stands, and remains a live opportunity for any other investors in their network.

Category 3 is when the investor is aware of the startup, but doesn’t know about the fundraise, so they miss the opportunity to invest.

✅ Category 3 is the arbitrage opportunity for both investors and startups. ✅

When the investor is aware of the startup but doesn’t know about the fundraise that is happening, doesn’t follow up, etc. they miss the opportunity to invest. 100% of the time.

But also, when founders do not give each investor that opportunity, by raising massive awareness about their fundraise to each investor they have spoken with in the past.

The consequence is that both sides miss out on the opportunity.

One reason that founders sometimes don’t reach out to investors announcing their fundraise is because they misinterpret the investor.

Let me share one recent example of when a

I sent a touch base email to a particular founder to check in. The founder replied to me with the below message:

I found the founders’ response interesting. Did I actually communicate our pass decision in such a closed and shut conviction to this founder? So I checked my notes on that company.

I had actually noted that I had communicated that Tundra Angels passed because the startup was pre-revenue at that time and for that space, we preferred to see revenue before digging in much deeper. I clarified that in my response to this message above.

But my point is, for the founder, they clearly thought that Tundra Angels had written off their entire company and opportunity. Thus, they probably weren’t going to come back to us once they did start a fundraise.

Uh oh. This one snapshot made me think of how often founders might misinterpret investors pass decisions. “I’m not interested now,” almost never means “I’m not interested ever…” and that misinterpretation affects how they execute their fundraise.

Here is another story.

Several years ago, I met a startup founder at a conference. The company was in the early stages, choosing to bootstrap and to not raise venture capital at that time. At that conference, there were other startups that were actively raising that I had to make near-term decisions on.

Fast forward to 12 months later. At the same conference, I met the founder again. This time, the founder had a co-founder that they brought to the meeting. The company had progressed significantly since my original meeting several years ago. They were not fundraising at the time, but I remember thinking after the conversation, “Their traction is really solid. I’ll have to follow up with them.”

Guess what happened?

I totally lost track of following up with the company.

Some time later, a news headline hit my LinkedIn feed - this startup had raised a venture round with participation from several VCs in the Midwest!

My reaction? “How did I miss this?”

I hurriedly messaged the founder, which resulted in the below LinkedIn message exchange.

I was frustrated, but only at myself. I lost track of it, and thus lost the opportunity to invest.

Was this on me? Or was it on the founders?

Let’s be straight up - the founders were not obligated to follow up with me once they kicked off their fundraise and see if I wanted to meet.

If I had followed up after the conference, I could have better tracked the fundraise and if interested, we could have put ourselves in a position to be one of those investors at the table when the company put out the call to close.

But also, when the founders started their fundraise, even though they didn’t have any obligligation to reach out to me or investors they spoke to at that conference, they still could have maximized their opportunity set by doing so.

My fundamental premise is - it wasn’t on me, or the founders. This was actually a missed opportunity for both.

Even though tension sometimes exists, we both need each other.

An investor’s job is not to invest in every deal but rather give themself the opportunity to invest in every deal.

A founders’ job is to maximize the investor opportunity set by clearly communicating their fundraise to every investor they have spoken to previously.

For both startups and investors - stay top of mind with each other.

Each side needs to work on creating opportunity for the other.

I’d recommend two tactics:

I recommend sending a monthly investor update. I wrote about why monthly investor updates are a secret weapon for startup founders in this article.

In addition to monthly investor updates, I would have a process to individually email each investor when you have an active round in process. I would email them over three points in time, A) Fundraise kick off, B) Half-way through, and C) Finalizing your round, regardless of whether or not they have passed on you or not.

An individual email is a lot more personal and comes across more high-touch. Sort of like, "Hey, this round is happening, and I thought of you." It shows the presence of mind of the founder and puts them in a positive light.

One important caveat - this “Hey, we’re fundraising now” email is a personal email from you. Not a newsletter email that goes out on a mass distribution list. I have received these ‘we’re fundraising” emails from founders but they are sent from a newsletter platform and they go to a different part of my inbox like “Updates’ or even spam. In those cases, I more often than not miss them entirely. This is a personal email from you because it hits the inbox differently. Maximize the eyeballs by sending a personal email to each one.

Now, founders might think to themselves, “These investors at firms A, B, and C were not interested when I spoke to them 6, 9, 18 months ago… so I won’t let them know.”

No. My take is this - if an investor has told you, “We will never, ever invest in your company and I don’t want you to ever email me again,” then don’t let them know.

But for the other 99.9% of investors that you’ve spoken to, I would send it to them.

Why?

Because it’s all about top of mind. Maybe a investor recipient has spoken to a perfect profile of investor just last week and then they forward it onto them.

Trust and bank on the fact that each investor wants to see each investor in their network do well, and let that guide your execution.

For investors, their opportunity is to optimize Category 3 to be as miniscule as possible.

Category 4 is inevitable. But Category 3 can be optimized down.

I would encourage investors to find a process to stay on top of the new deal flow and existing deal flow. Every VC firm has a different workflow, process, etc. But fundamentally, it starts with indexing every opportunity that comes across your path whether in-person or in any online context. At a minimum, I would gather:

With that, you have a starting place to stay top of mind with the founders in your network.

It is impossible to index the entire set of deal flow opportunities.

But in my opinion, founders and investors can take advantage of an arbitrage opportunity and it’s this - startup rounds that happen without awareness from all investors in their network.

An investor’s job is not to invest in every deal but rather give themself the opportunity to invest in every deal.

A founder’s job to give each investor that opportunity, by raising massive awareness about their fundraise to each investor they have spoken with in the past.

The collective point here is not that Tundra Angels will invest in or would have invested in these two startups that I brought up, or others. That’s not the point.

The collective point here is that startups and venture capital is a world where founders and investors must maximize the surface area of success as much as possible.

✅ Raising massive awareness to funding rounds is one tactical, and very easy way to help make the fundraising process, just a tiny bit easier. ✅

Click here to access the rest of the newsletter articles.

Here are some of the recent ones!