As entrepreneurs come up, they’re told to “find a mentor”… the person who has been where they want to be, thrived, and done it repeatedly.
Initially, I too, believed that mentors were a must, but an incident I’m about to share taught me a valuable lesson about being my own person and not blindly following advice.
Before delving into the details, the fault lies exclusively on me. And to an extent, these sorts of things, with enough time in the investing game, are inevitable…
It was 2015/2016, and I wanted advice from my mentor on an investment opportunity that came my way, which I was highly bullish on…
The bull market in the venture capital world had been robust for about three years, and the term ‘unicorn’ was thrown around everywhere — startups worth a billion dollars.
However, the general sentiment at the time was uncertainty… how long could the bull market last before a significant correction?
And when bull markets turn to bears, venture capital and startups get crushed.
Although in our rearview mirror, ghosts of the Great Recession still haunted many investors and venture capitalists, my mentor being one of them.
So, at lunch, I wanted to run this investment opportunity by him and pick his seasoned brain. I was preparing to make the most significant investment I’d ever made into a startup. I was preparing to get out of my comfort zone, and this investment, if it went sideways as so many do at the seed level, would negatively alter my quality of life, at least for a year or two. On the flip side, if it went well, life-changing…
I let my mentor know that it would be a BIG swing for me, and he immediately recoiled in his chair before even hearing about the company or what it did. “Aaron, what do you think of the markets right now?” He continued without letting me answer, “There are some crazy valuations out there that are making all other startups too expensive…”
Unwavered, I didn’t respond with more than a nod and then explained the merits of the opportunity, passionately highlighting the company’s potential and the team behind it.
His mind was made up. When he heard the level of financial risk I was considering, he did everything he could to dissuade me. And it eventually worked…
You see, part of what made him such a great investor over the years was that he could quickly understand even the most complex technologies and models, ask the right questions to challenge founders on their thesis, identify where all warts or potential warts will be, and make a decision. My excitement and belief in the founders was no match for his level of expertise, and the chess match of convincing the other why they were ‘right’ was quickly won by him.
I became uncertain about my idea to invest after listening to my mentor, and as anyone who invests in startups knows, a lack of conviction or great uncertainty is a killer of profits. You won’t have the stomach to hold on for as long as a startup needs to develop with doubt in your mind.
It was clear that my mentor’s intentions were good. He cared for me and didn’t want to see me face financial hardship. However, his cautionary approach stemmed from a different position in life…
As a multi-millionaire, he had already secured his success and could afford to prioritize safety over risk. The mentor-mentee relationship had transformed into something akin to a protective mother advising her son. Unfortunately, this shift prevented him from fully understanding my hunger for growth and my willingness to take calculated risks.
Ultimately, I decided against making the investment, swayed by my mentor’s concerns and newfound uncertainty.
I moved on to other opportunities. Funny enough, I never took a financial swing like that until about three years later…which was right around the time early investors in that startup were able to cash out, at about a 30X their original investment. I would have made millions of dollars…
It took me a while to wrap my head around that missed opportunity and what the learnings were… but I now know.
To clarify, I had a fantastic mentor who taught me a lot. He taught me to quickly fail, and that time, as an entrepreneur, is always the enemy. He taught me the importance of developing systems, how to identify ventures that will have trouble scaling, and so many nuances of business. But if I can critique our relationship… he cared about me too much and lost sight of how he was when coming up as an entrepreneur. The risks he took early on were wild, and many paid off.
When an expert or industry leader advises, please take it as guidance, not gospel.