Shardul Shah: How Index Makes Decisions & Why Benchmarks & Averages in VC are BS | E1202

(instrumental music plays) The lessons to learn are don't be cute on price, don't underestimate fantastic founders, and don't overthink it. TAM is a trap. Like, go back and look at the S-1s of some of the biggest public companies today. Their market caps are bigger than what they thought the TAM would be. The best founders find and expand market opportunities. We are in the business of finding fund returners. The power law dominates our business. Not being in a 10, 20, 50, $100 billion company is actually painful.

Ready to go?

(instrumental music plays) Thanks for having me back. Tell me, in all of the time you've spent interviewing so many people, what's the number one lesson you've learned?

There's no right way to do a venture. (laughs) After 2,700 shows, I've learned that the, one of the biggest mistakes people make is they try and copy someone's style that's not a- that's not authentically theirs, and think that's the right one. And actually, it's about finding where you are uniquely great in the three pillars of venture, sourcing, selecting, and servicing, and really leaning into one over others, actually. Um, that's been my biggest lesson.

Yeah. It took me a long time to figure that out. Like, growing up, I grew up outside of Chicago, and so my childhood hero was, um, Michael Jordan. And all of the advertisements are, "Be like Mike." (laughs) And that, like, be yourself is actually the message, uh, in life and as a, as an investor.

Do you think that's possible, though, in venture firms? Like, if you are a young person trying to scale the greasy ladder of a venture firm, as much as one might hate to say it-

(laughs)

... with internal politics like many have, you have to adjust yourself to the firm to be promoted. It's a game of strategic promotion.

No way. I think, you know, I learned this from, um, Josh Mata, uh, who's the founder of Coalition, sent me, uh, the annual reports from StoneBridge, which is a, a, um, a hedge fund. And, uh, everywhere, kind of a Warren Buffett style kind of annual report comes out. And in, in one of the reports, founder alluded to a culture of belonging. The spirit of belonging is for people to be themselves and not to assimilate. Like, if your goal is to be the best version of yourself, and your firm's goal is to be the best firm on the planet, there's no room for assimilation and, and, uh, confirmation, right? Conforming to other norms. So I think it's absolutely wrong, I think, if you try to assimilate to, you know, be someone who you're not. You're, you're setting yourself up for failure.

So you do not think that actually individuals and people who wanna scale in a venture firm should kinda play the game on the field, know where they can get angles to get promoted, and focus on that? As I said, like, you have to, you have to fix problems in firms.