👋🏾 Hi friends!

I recently I’ve been getting a little philosophical, so much so that I’ve changed up my daily journalling routine to give myself a bit of an additional challenge.

I’ve gotten back into journalling over the last couple of years, but, breaking from the norm, I find it very difficult to do this by hand – apart from anything else, being left handed, I find it increasingly difficult to read my own handwriting 😬… So my default is to use Notion for my writing (also given that I typically journal in the evenings and in bed, I give a bit of consideration to my long suffering wife and keep the lights off!).

Recently I decided to take advantage of the AI assistant in Notion and have been getting it to prompt me with a philosophical question that I can write about. It’s really useful to challenge my thinking on topics that I maybe have considered but not given a lot of time to. Check out one of my questions and answers below, let me know what you might have added or changed 😀 

In other news, my latest article for the Evening Standard went live a few weeks ago discussing the reality of venture in the context of the UK’s Future Fund, launched during the pandemic to assist early stage businesses with financial support at a time where businesses were facing an existential threat to their survival. My tl;dr? It’s too early to talk about whether this was a success or failure, but one thing is for sure, we’d have fewer businesses in the ecosystem had the scheme not been put in place.

Read the full article here.

I’m well underway writing about all the things I’ve learned from the last couple of decades as founder, CFO and CEO, so sign up for early access to Off Balance – The Book and feel free to share with anyone else you think might enjoy it 😄.

Now let’s get down to business…

In this weeks Off Balance, I’ll be chatting about:

🎙️ George Askew and Sam Ettelaie – Co Founders of Thema on the podcast
☠️ Survivorship Bias in Venture Capital

Founders – if you think you had it tough, try raising a fund…

In this episode of Nothing Ventured, I sat down with George Askew and Sam Ettelaie, Co Founders of Thema, which supports and enables emerging managers to launch venture capital strategies, providing them with an all-in-one package.

Thema also acts as a strategic cornerstone limited partner, writing first tickets of up to £5m, offering operational and regulatory support, office space, and curated LP insights.

Prior to founding Thema, George founded several startups before working with a number of funds including Force Over Mass Capital and Cell Capital whilst Sam spent over half a decade with the British Business Bank where he led and supported investment in funds like Ada, Concept, Dawn Capital, Seedcamp, JamJar and many others.

In this episode we talked about:

➡️ Is fund structuring and regulation really cool?

➡️ How Thema is acting like a catlyst for LPs.

➡️ 486 funds signing up within 6 months of launching.

➡️ Only 6-8% operator VCs in the UK vs 60% in the US.

➡️ LPs have come back to the market and started engaging with funds.

➡️ Is the lack of patient capital having an impact on the ecosystem.

Listen on YouTube, Spotify, Apple or wherever you get your podcasts!

Also, if you have any feedback, or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

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Now let’s get into it.

Off Balance

How much does survivorship bias impact us?

I think about this a lot in terms of venture.

For example, did a specific startup become successful WITH funding from a16z or BECAUSE it got funding from a16z – i.e. did a16z’s success and reputation essentially boost an unremarkable business further than it should have otherwise gone?

(I’m using a16z as an example, but it could be any recognised fund).

There are quite a few instances of survivorship bias in venture capital, obviously coming down to the fact that it is a game of outliers.

Here are a few I’ve been thinking about more recently sparked by how I’m seeing the landscape and ecosystem changing at the moment.

Survivorship Bias in Venture Capital

Overestimation of returns – We know that data around VC performance tends to overindex towards successful funds whilst down playing underperforming ones – or worse looking at averages when the whole game is one of outliers. This leads to inflated expectations both in upcoming VCs as well as the startups and founders that look for their funding.

Failure is more common than perceived – We all talk about 90% failure rates in venture but the reality is that what we see are the highly visible success stories. This leads to a miscalculation and underestimation of the true risk involved. This means that many founders end up building businesses with rose tinted glasses because they only see the companies that survive, noone really talks about the thousands upon thousands that didn’t.

A skewed perception of industry viability – If all the stories you read are about incredible software businesses, and all the reporting gives at least the illusion (if not the reality) that these are highly lucrative – bolstered again by the few outlier success stories, one can get headfaked into thinking that ANY software business should follow a similar trajectory. But most don’t even get to profitability let alone an exit.

Misguided advice – Exited founders have been on one journey. The expectation that what worked for them will work for you is not rational. And let’s face it this advice often fails to account for market timing, luck, and other factors that simply aren’t replicable.

Overconfidence – All of the above leads to an overconfidence across both founders and investors that is often misplaced. But whilst an investor can build a portfolio to hedge that risk, sadly founders only have one shot at any given time. So whilst being confident is necessary, overestimating ability is likely to end in tears.

All of this to say, don’t believe the hype, play your own game, not anyone elses because their journey is unlikely to be the same as yours.

As always, my office hours are open, if you’d like to chat about this or anything else, just grab some time 😊.

I hope you found Off Balance #33 useful. As always, I’d love to get your feedback and understand the sort of topics you would love to hear about.

Just hit reply to this mail or drop me a line at hello@emergeone.co.uk and let me know 😊

🚀And that’s a wrap for this edition of Off Balance – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

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That’s it from me so until next time…

Stay liquid 🙂

Aarish