“I reject 250 out of 251 startups.” A venture capitalist’s revelations on how to get investments

The path into venture capital and entrepreneurship is always a transformation. For me personally, it started in a completely different area that was not directly related to venture. My expertise has always been in building process management, which is applicable in startups, but usually not at the very early stage. However, it was this experience that helped me see unique interconnections and develop my own approach to the complex but fascinating field of venture investments.

What is entrepreneurial “keen eye” (nasmotrennost)

I always wondered about the phenomenon of entrepreneurial thinking: can it be cultivated, and who can be an entrepreneur? Today I have some answers, and one of them came from where I least expected it—from neural networks. I tried to understand, what distinguishes me from my top managers? Why do I instantly see what is good and what is bad? This is the keen eye.

In essence, it is instantaneous recognition, like ChatGPT, which delivers a result based on a massive amount of data. The only difference between me and my top managers is that my “neural network” is already trained, and theirs is not yet.

Cultivating entrepreneurial IQ and the role of Jobs to Be Done

Naturally, the question arose of how to train our top managers in this skill. We began implementing the Jobs to Be Done framework and actively conducting customer interviews. This model allows for a deep understanding of why our product or service is needed, what changes it brings. And I watched the entrepreneurial IQ of the participants grow right before my eyes. This is a direct path to forming that keen eye.

That is why I fully agree with the thesis about investing in repeat founders. They break through because their “neural network” is already trained. They are not afraid, because experience has taught them that nothing terrible happens from mistakes. In venture, we look for those who can make many effective mistakes, because the model works on the fact that only 3-5% of companies yield a huge return. If you invest in a company that unexpectedly captures even 3% of the market, your investment can grow manifold.

We once invested in a small company, but due to market growth, their product became incredibly popular. When they started, 8 million people were trading on the stock exchange, and now it is 80 million. They grew not only because they made a great product, but also because the market grew.

In my business, I have two types of clients: investors and startups. One does not work without the other, because without good deals, there will be no good investors, and vice versa.

The perception gap and our approach to selecting investors and startups

For entrepreneurs from traditional business, to whom I include myself, the venture world often comes as a shock. We are used to thinking about profitability, about how to make money, how to use funding for a breakthrough. But in venture, there are people who simply sit and think about where to put huge amounts of money. Look at Bezos’s wife or Bill Gates—distributing billions to charity becomes a large-scale task in itself, requiring a focused approach.

We only work with investors who are responsible with money. And we constantly receive proposals like: “We have an idea, we need investment.” But I know how much time it takes to find one worthwhile one out of dozens of such inquiries.

Our selection process is simple: we reject all incoming startups. In my career, out of 250 tested startups, only one came to us through a cold email. Because a startup that is forced to approach us on its own often has problems with sales and hiring.

The startups that reach us pass serious social filters—they are recommendations or they coincide with my own needs. We do not want to invest in scammers, so we avoid companies that use cheap mass mailings.

The complexity and art of the venture fund

When one entrepreneur recommends another entrepreneur, a unique opportunity for early investment opens up. But I always feel uncomfortable when someone tells me: “I am also a venture investor, I invested in one startup.” This is extremely risky, and with single investments, the probability of success is comparable to a casino, although startups have higher chances.

A venture fund is an intellectually rich activity, complex in all aspects: social, organizational, and communicative. A classic fund of $150 million, investing $5 million in 20-30 companies, often bets on the personality of the founder even before the product is formed. It is a whole art.

I, however, prefer an approach where the fund is reduced in size but aims to bring 10 times more value. We maximize all parameters to achieve great results with fewer resources. This requires much more labor and complex approaches. My motivation is not only about money but about creating something unique, something no one has done before.

Scaling and managing influence

For me, a venture fund must be scalable. While funds increase in size to billions, which is difficult to double, we aim for greater growth with a fund of $100 and even $30 million, returning up to 20x investments.

I am building the fund with an excellent product manager. She knows how to build scalable processes and organize projects, while I act as the visionary. Our approach to systematization includes creating a “hypothesis factory”—a process for generating and testing ideas, which allows us to identify promising features and directions. It looks like a conveyor belt: hypotheses are generated, tested, and adapted.

My vision for the future is tens of thousands of employees and thousands of LP-investors (Limited Partner—a partner with limited liability who contributes capital to an investment fund or project but does not participate in its operational management) working in accordance with our structure. We purposefully create a community around the fund that will become its key element, opening opportunities for friends and colleagues.

Many successful entrepreneurs want to invest in startups, but few of them understand the mathematics and risks of venture investments. Investment management requires the same expert approach as managing a furniture or construction company. Diversification is necessary for successful investments, and therefore it is important to work through a venture fund, rather than making single investments.

In addition, we see prospects in working with clients from Business Booster who systematize their business, begin buying competitors, and integrating them. This is a model similar to venture capital, but with less risk and a more predictable return. It requires a deep understanding of management and the ability to work with a fragmented market to create new opportunities for entrepreneurs.

Such is our path to creating a unique, scalable venture fund, where the art of entrepreneurship meets precise systematization.