We were in an online webinar recently, with a young investor as the guest speaker on the virtual dais. He is a former founder with several failures and one success under his belt. Given the fact that he has sat on both sides of the table, we were particularly curious about his investment approach, especially since he is a partner in a quite large fund.

While he is new to the investment side of the table, he has already developed his philosophy: if he is predisposed to investing in a company, he advises the founder to get some traction – meaning paying customers – and check back with him in a few months, whether the founder had achieved this or not. After said time, provided the founder is in the same position monetarily, he advises a pivot.

He does position himself as a very early-stage investor. Maybe not back-of-the-napkin, but fairly close.

There are no hard and fast rules in tech, as we well know, and given this investor’s investment criteria/philosophy, let’s do the math: he would have passed on Amazon, Google, AirBnB, Facebook, eBay, and 99% of the now unicorns out there.

Truth be told, that number is probably closer to 99.9%.

Zoom had been around for years before the lockdowns put the company on the radar. Like Google, which took years to hit the zeitgeist, Zoom now a verb, although at launch, they were competing in a space pretty much owned by Webex. We can only wonder what pivot advice this investor might had offered, and what the results might have been had Zoom heeded that advice.

It’s important to realize that investors are not necessarily the great sages or all-knowing seers you might think they are, which is why more of their investments fail than succeed. Nor are they always the smartest guys in the room. One fund which knows this only too well is Bessemer, and for your amusement – and sanity check – do take a look at the Bessemer Venture Partners’ Anti-Portfolio, “Honoring the companies we missed,” as they themselves state, including Apple, Intel, Google, Facebook and more recently, Zoom and Instacart.

An investment in OpenAI may seem like a no-brainer, especially considering the fact that “ChatGPT reached 100 million users in February 2023, just a few months after its official launch in November,” as Techspot reported, but note to self, as Windows Central – et al – reported last week, “OpenAI could be on the brink of bankruptcy in under 12 months, with projections of $5 billion in losses. The startup spends $7 billion on training its AI models and $1.5 billion on staffing…The ChatGPT maker’s operation costs aren’t satisfied by the approximate $3.5 billion generated in revenue.” We mention this in case you’re wondering why investors put so much stock on the team, and Sam Altman has not exactly distinguished himself in some of his previous – or even in his current – endeavors, truth be told, but exceptions seem to be made for tech bros. OpenAI recently launched SearchGTP, a potential Google search killer according to the tech press, to a small group. Is this the pivot the company needs? Only time will tell. Not that we’re suggesting that they’ll disappear any time soon.

Investors aren’t always right, which is why it’s important that, when you’re in the room with them, you need to have some questions for them, too. What’s their track record? When was their last exit? Have they invested in anything similar to your company before or not, and if not, why did they pass? Investors do hold the money you need but for all we know, you might be holding what amounts to the keys to the kingdom to satisfy their LPs. Provided, of course, that you have a large target market, a true pain point that needs to be addressed. A defensible IP moat always helps, too.

We will also remind you that just as anyone with an idea can call him/herself a founder, anyone who can raise funding can call him/herself a VC. There’s no oversight committee that vets funds.

Each fund has its filters, and a checklist of what they look for. Not every fund will see or understand what you’re building, meaning, the big picture. Nor will every fund out there invest in your vertical. Do your homework. Save everyone some time. But as we suggested, be sure to ask questions and find out who you’re talking to, and what their criteria are – besides the sales pitch they put on the website. Each fund – and each particular person in the fund – speaks their own truth no doubt from their own experiences, like the investor on that dais, and each have their own filters, so be sure to keep that in mind if they offer you advice. After all, there’s a world of difference between filters and blinders. Onward and forward.