Lemons Ripen Early: Playing the Long Game

It’s a great term used in Venture Capital. Basically in your investment portfolio, your bad investments usually die early, leading to the very scary but normal J-curve where the overall portfolio value dips but then in theory grows in massive value after some time. 

I learned this during my time in VC and it’s a shock for newbies. But it’s actually a good thing in the long run as your winners start to emerge and you don’t have to spend your time on companies that will never go anywhere. Especially in the early stage like pre-seed and seed stage. 

I’ve seen this especially for investments in the peak of the money cycle, founders who expect that it’s easy to raise money, find it hard to adapt to a tougher fundraising environment. Or maybe even worse, when they are able to successfully raise money and develop some really bad and expensive habits, are forced to go out and raise with a bad business model, crappy unit economics and massive cost structure. Basically at least 50% of the so-called Unicorns in 2021. 

It’s like growing up rich and then finding out your family lost their business and money because your dad gambled it away at Vegas. Most people never recover from this. 

Where I would have questions is if you quit one year in (or less). I’m not sure you really have given your all. Even in a job, I don’t really find job hoppers who pop around to new companies or new jobs every year being super effective at what they do. It takes at least two years to see a project fully done and where you maximize learning. 

This is a grit and grind game. And it usually takes at least 2 years before you hit some product market fit. Most founders quit too early. It’s one thing if you work on something for 2-4 years and quit. It means you have done everything you possibly could, pivoting or adopting your product, looking at new customer segments. I can’t fault that, you died with honor. And for most investors, we’d be more than willing to fund their next company. 

So play the long game. Don’t worry too much about the short term pain and setbacks. Keep learning and keep going.