Investors make two kinds of errors. When we back startups that end up failing, it is an error of commission and we have to deal with it on an ongoing basis as the startup goes belly up. The errors of omission are harder to track—the companies we should have funded but failed to do so because we did not recognize their potential.
We learn from our failures, and tracking the successful startups that we failed to invest in—our anti portfolio—is extremely important because otherwise we tend to get too cocksure about ourselves. I was very excited when the founders of Mad Street Den pitched to Mumbai Angels in 2015. The founders were remarkable. This was a husband and wife team, with complementary skills, who had come back from Stanford.
Artificial intelligence (AI) was a new area at that time and he introduced me to the importance of neural networks, graphics processing units, and how feed-forward and back-propagation algorithms work. This was fascinating, especially because they had plans to monetize this by selling the technology to retailers.
Unfortunately, the venture capitalist who funded them did not want angels on their cap table, so I didn’t get a chance to invest. They have done extremely well and have grown phenomenally in a very competitive market.
The silver lining is that thanks to their pitch, I was introduced to the world of AI, and I started to learn more about machine learning (ML) and algorithms. AI/ML has become a buzzword today , but since it’s a field I have been tracking for quite some time, it’s harder for founders to take me for a ride.
I measure my performance in the startup ecosystem by my LOI—learning on investment. The lesson I learnt is if you’re impressed by the founder and his ability to explain and implement, it’s worth putting your money where your mouth is!