Back in 2010, Mark Suster penned a blog post entitled Invest in Lines, Not Dots and like many investors, Suster has sat on both sides of the table. It a must read for entrepreneurs, especially if you plan on raising money from investors, now or any time in the not-too-distant future, or ever. It’s also a great explanation of the importance of establishing relationships with investors before you need the money – and gives you something of an idea of a good investor’s mindset.

Why can’t investors simply understand what a monster company you’re building and just write the bloody check?

As Suster points out, “We want to make sure we’re in love. This sometimes frustrates entrepreneurs who just want to “get back to running the business.” But if you understand it you’ll see that it is perfectly rational and it should also influence how you form relationships with investors. And remember, if we get married you’re stuck with us, too.”

As David Arcara of Laconia Ventures said at one of our investor breakfasts, “Getting into bed with an investor is not like a marriage. If the marriage goes south, you can get a divorce. With investors, there is not divorce. You could be stuck with the investor for the life of your company.” See, this is where the ‘til death do we part,’ really does or could mean just that.

 

Not sure you want a Vegas wedding. In this case, what happens in Vegas, doesn’t always stay in Vegas.

 

“By definition if somebody is investing in you as a dot (limited thought, limited due diligence, maximum price) they are a dot to you, too. You can’t really know them in 2 minutes yet you’re letting them own part of your business,” Suster warns.

Suster wrote this piece during the halcyon days of investing, when even a back of the napkin idea could raise you to unicorn status – at least in Silicon Valley – and at the beginnings of a time when anyone who’d had a successful exit suddenly started a fund, no matter that they had no background in investing or even in finance. The laws of economics apply to tech companies, too, and while money talks, you do want to know the background of the bearer of those notes. Remember: there’s smart money, and dumb money, or let’s call it inexperienced money.

As Suster cautioned in yet another 2010 blog post (What Angel Investing & Florida Condos Have in Common), “Mine is…an argument…for sophistication over credulity. In boom times anybody’s money will do. I’ve lived through two tech market corrections at close range. The first money to pack-up and head for the door is always the least knowledgeable / least committed to the long-term of our industry.”

We are not in boom times, to be sure, and you want investors – and business models – that are going to blow up in your face.

 

Dots, Bubbles. Tomato, Tomahto

How important are dots – and connecting them? Retail is taking a hit right now. Gas is expensive. Many people are having to make the hard choice between gas and groceries, and even if you don’t own a car, those goods you’re walking to the store to fetch are being transported in from somewhere. It affects you, too. Here are 16 Online Shopping Statistics for you, from Big Commerce. Online shopping currently is primarily about clothing and is the domain of the post-Boomer generations – the so-called digital natives. With gas prices increasing on a weekly basis, this will change. We’d wager that more people – and older generations – will turn to ecommerce and heads up, founders: shipping costs are the #1 reason for shopping cart abandonment. We’d wager that ecommerce will be a growth sector worth watching. Not that we’re suggesting that you pivot in that direction: we’re just suggesting that, while you’re heads-down working on your newco, it’s also important to be observational. Everything counts.

We have long been a proponent of sustainability, but we also put equal weight on observation. Not to be political here – just instructive. Former President Obama, who put a major focus on climate change, bought ocean front property in Martha’s Vineyard after leaving office, all while warning that the sea levels were rising. We also saw this just this past week: Obama Installs Massive Propane Tanks at Swanky Mansion While Pushing Green Policies. What? No solar? BTW, the tanks are being installed underground and hidden from view. Optics uber alles.

 

So, that’s two caveats for you: While it is important to connect the dots, it’s equally important to be observational and not fall for just any line as we go onward and forward.