Don't be fooled my smooth-talking founders!
Would you rather have invested in a gold-plated piece of lead, or a lead-plated piece of gold?
I am not an investor, but I am on the receiving side of the table as a software and technology developer in the travel tech industry.
Being a person who is a lot more interrested in creating cool stuff than talking about it, I am at times quite frustrated about the state of mind of tech investors.
My question is this:
"Would you rather have invested in a gold-plated piece of lead, or a lead-plated piece of gold?".
Of course the answer is obvious when (after the fact) you discover the piece of gold you invested in was actually a piece of lead when you start polishing it. Not worth much, you end up with lead poisioning, and it is too late.
I will argue that the gold-plated piece of lead is the equivalent of an amazingly charismatic founder, selling a great story to the investor, but not being able to back it up with a great product.
Of course, the investor team should discover that this golden nugget they are about to invest in is really crap during their due diligence process.
However, there are many examples of this not happening (for instance Elisabeth Holmes of Theranos - in jail, Sam Bankman Fried of FTX - going to jail soon, Adam Neuman of WeWork - has amazingly received new funding).
Imagine all the money wasted on these investments due to those charismatic founders and greedy tech investors afraid of loosing out on the next big thing.
Highly focused developers
The lead-plated piece of gold is the equivalent of those highly focused developers sitting in front of their computers creating great stuff which really brings value to customers and users.
These founders are seldom able to even reach the state of due dilligence with an investor:
- They tend to just continue programming and creating stuff, not wanting to approach
investors because they are not mentally able to do it.
- Only being able to speak about their tech stack, amazing code quality, and the automatic testing rig they have set up, the investor team will not be able to see past the stuttering developer and give them a fair change
I know, because I am one of those developers and founders. I absolutely love programming and creating cool stuff. But I hate the process of trying to sell it so much that I constantly go back to the creative process of development (which will not pay your bills).
Imagine all the money that was never made and all those great products and technologies that were lost because the projects never had a chance to raise the capital they needed and deserved.
As an investor, which piece would you be left with after polishing it?