Unfortunately, at pre-seed / seed, investors rarely have access to structured data and suffer from poor information on future financial outcomes. Instead, I soon understood that if I wanted to make returns, I would have followed bold investment theses because a follower approach doesn't repay, accepting the idea to be a contrarian most of the time. Due to this, decisions are often blinded and very few investors are able to lead disruptive investment theses, because betting on something closer to reality is always perceived as less risky. What still surprises me is the lack of transparency between the two sides, especially in the early-stage phases where decisions are often based on instinct and not on numbers. Nevertheless, the two sides of the marketplace (it is!) are often optimizing just for their own side: the first are commonly blaming the second for their scarce understanding of the market, questionable investment decisions, and unfriendly clauses the latter are often not satisfied by the quality of ideas and/or teams, or both, complaining about the maturity of the business or the risk-level. I will write an extensive article on the conflict of interests between LPs and GPs, where the latter are becoming just Asset Gatherers making money by gathering more money, a movie we have already seen in Traditional Finance. Venture Capitalists need Founders' ideas to deploy their own investors' capital efficiently and get returns for then hopefully increase their funds' AUM more AUM means more management fees.Founders need Investors' capital to speed up and sustain their business for solving market failures and/or societal needs where more capital means faster execution and higher reach (on paper). In the last few years, I am luckily spending more and more time with both Venture Capital Investors and Founders, and I found out there is just one straightforward and logical equation governing the relationship:
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