How do you deal with information asymmetry and uncertainty in deal sourcing and screening?

A clear "big picture" investment thesis is important however it also causes many premium deals to be missed. The value proposition and the potential/risk of an investment is found by looking closely at the value proposition of the specific business based on the acumen of the people, the achievable market opportunity and the ability for the company and it's products and services to reach it. Far too often "deals" are passed on due to a narrow thesis that does not apply to many opportunities and turns the investor away.

Each startup will present their vision for the future. How they will ride trends, capture markets, and build competitive moats. As a thesis-driven firm you'll have a clearer picture of whether that vision aligns with your own view of the future. This allows you to spend more time focusing on the qualitative aspects of the business and the team, rather than trying to understand the future potential. Data suggests that thesis-driven firms are also statistically more likely outperform their peers, which may be a reflection of this approach.

This is actually the most important point. As a VC you craft a case for why this might or might not be a good investment, and have a few items that will move the needle for you on the investment, some you can validate with hard data, others you need to build conviction around. You can't escape the second type, since that's the type of risk that drives your fund returns. Ultimately, like a scientist, you leverage your network to reinforce or shatter your conviction on those few elements, your network is king as an investor.

The world of venture capital has been synonymous with network building for as long as it has existed. We have always thrived on the idea of social capital, the cultivation of relationships, and the intricate web of connections that run the invisible engine of deals, opportunities, and partnerships. However, the digital age calls for an upgrade -- from solely 'outbound' networking to 'inbound' networking via thought leadership. Social events, while still essential, often provide only temporary opportunities on inconsistant basis. Thought leadership, on the other hand, allows for continuous engagement and deeper relationships. It's time we leverage our innovation expertise to transform not only our investments but our networking approach.

Tools and data are important however do not forget that most deals come down to the ability of the people to implement regardless of the data that supports their potential for success.

The array of information relating to a potential startup investment, whether it is market data or financial projections, can be overwhelming. Investors need a strategy to synthesize all of those inputs in order to produce a useful output. That strategy is coherence. Startups will tell a particular 'story' in their pitch, about their product roadmap, their team, the market they are entering. Are all of these other sources of information coherent with that story? If so, that's a strong indicator of confidence.

As the world faces challenges that are pivotal for humanity, the shift to sustainable business models is crucial. However, I think that this shift also feeds the uncertainty and the information asymmetry in VC deals. Hence, these 5 tips can help to create a guidance for investors to find a balance between rigidity and flexibility.

Many focus on 'things' e.g. data/tools. But they forget that it's ultimately all about people, trust and relationships. Learn how to relate to and see people, not just transactionally or to get something out of them, but for people as an ends in themselves. When you do that, you will find yourself, be genuine & authentic, and bring your full self to any business dealing. When people see your genuineness and vulnerability, they will also open up and build a real relationship with you. Your interests become aligned & will transcend transactions or material gains. Then they will share with you info/data you need but would never have otherwise discovered via any other means. Because they now genuinely trust and care for you, as you would them.