Six major life lessons learned from six years of startup investing

Learnings about human nature through startup investing.

Investing in and working with startups is a very humbling experience. Every week, there’s at least one good news and several bad ones. With loss aversion (people need 2–3 wins to offset a single loss), this is structurally a psychologically difficult industry. But such a humbling experience also provides an unintended upside of accelerated learning. Here are some of my major learnings over the past six years.

1. Humans thrive in scarcity and decay in abundance.

Startups operate in constant scarcity of capital and labor. With such strong constraints, it is incredible to see how creative we can become to get the most out of every dollar and hour. This is the other side of Parkinson’s Law, where output reaches the maximum level within the given (little) capital and time available. This may be the only structural advantage startups have vs. incumbents, and we can clearly see this reflected in the speed of execution and decisions made by startups.

Some of our best life experiences come when we have some form of resource constraint, be it budget or time. The same principle applies to our health—intermittent fasting enhances brain and body function, while overeating contributes to chronic diseases¹. This scarcity-benefit dynamic may also extend to social connections; despite the abundance of 'connections' on social media, feelings of loneliness have only increased².

To be clear, scarcity here is one of moderation (the feeling of wanting a bit more left) and not extreme deprivation (e.g., absolute poverty or starvation). Constraints are beneficial, but excess scarcity can kill you.

Actionable Takeaways

1. Time & Energy Audit (“What gets measured gets managed”): I run an annual audit of how I spend time and get energy on the most representative two weeks (Mochary Method). Each time, I uncover new insights—good and bad—and adjusting even slightly restores a sense of control.. It’s incredibly easy nowadays to do this automatically by using AI calendar tools like Reclaim (for time) and wearables like Apple Watch/ Oura (for energy). Bonus: Audit every aspect of life from day-to-day like eating to major decision making³ to get a full picture of your baseline.

2. Create Controlled, Temporary Scarcity: Introduce small, controlled disruptions to your consumption (food, clothing) and experiences (comfort, social interactions). I take cold showers, practice Wim Hof breathing, and fast intermittently every day. The discomfort during these shocks followed by the feeling of bliss afterwards is something pure comfort can’t replicate. Intentional scarcity makes you appreciate what you have—and understand how little you actually need..

2. The best values are often free yet priceless

“Invest in branding,” “Paid ads fuel growth,” and “Leverage influencers.” While these acquisition approaches are relevant, the effect seems to be short-lived. Lifetime perspectives reveal different behaviors. When analyzed over customers’ lifetimes, customers generally fall under three main categories:

1. Zero LTV: The majority of customers (& leads) are here, where they provide almost zero value.

2. 1~3x LTV/ CAC & CRC: The majority of “average” good customers belong here, where they generate slightly more value than the cost startups took to acquire and retain them.

3. 10~100x LTV: Very few customers will give the greatest return. They stick around for long, share their experience with others, and bring in other customers, investors, and employees to startups. They make the startups’ fate. Yet, they were acquired and retained organically.

Similar dynamics occur in life. The very best friends, partners, and mentors provide such high value to our lives that they shape who we become. Yet, these people often enter and stay in our lives organically.

Actionable Takeaways

1. Evaluate Lifetime Value in Relationships: Things change. People change. Assess how your relationships may look like with them in the very long run, with many of their current features stripped off (like job titles, social status). Prioritize and nurture the high-value category, no matter what.

2. Test Zero-Cost Acquisition Strategies: If you haven’t experienced high-value category yet, it’s likely just a matter of exposure. Test free approaches like:

   1. Hang Where You Belong where people do what you love to do (probably why Run club has become the new Tinder).

   2. Be Easy to Befriend by lowering friction and allowing others to have easier access to you.

   3. Leverage Existing Connections by tapping into your medium-value category people in your life to make warm intros.

3. Trust your gut, but know its blind spots

In venture investing, we go through dozens, if not hundreds, of pitches, decks, and due diligence just to invest in one startup. The default answer is 'no,' and it takes both art and science to reach a 'yes.’ We can always rationalize decisions we made in hindsight, but in the end, intuition trained on thousands of past data points can predict far better than rationalization alone. Most successful investments came from good intuition despite bad logical explanations, and most failed investments came from good logical explanations despite bad intuition.

In life, the same principle applies. One or two interactions are sufficient to know whether we’ll be great friends, partners, or colleagues with them or not. Once we have met enough good and bad people, our intuition is well-trained to make subconscious decisions that are good for us. The only two instances where intuition can give wrong signals are:

1. When we have strong emotions, where our emotional state governs thought process and decision making, and

2. When we do not have enough data points about what we are making decisions about, such as it is our first exposure to it (be it people or places).

Actionable Takeaways

1. Trust and iterate your gut feeling by getting more exposure. Intuition improves with experience. Quantity matters, but quality of data points is far more important. You need both great positive and great negative, as well as diversity of experience to refine your internal compass. Meet different people, visit different places, try different work.

2. Pause when emotions run high: I still find this the hardest to do. Strong emotions like fear or frustration can override our otherwise well-trained intuition. I have started to, and strongly encourage others to, sleep over any major decision when there’s some level of emotions involved.

4. The world is run by extremes

This is not a political statement. Power law, or a non-linear relationship between input and output, dictates our world far more than we can process. In VC, the best investment often returns the sum of all the other investments. This return of the best investment (”an outlier”) is so extreme that the difference between the best and the second best can make or break the fund’s success and, subsequently, the fund’s continued existence.

With AI, the extremes are only getting more extreme. AI startups are now breaking the classic software playbook by setting record growth (like Cursor AI reaching $100M ARR in 1 year and Lovable $10M ARR in 2 months) that no physical businesses (like restaurants) can ever achieve. We have already started to see $100M valuations per employee over the past few years, and we will see a few $1B valuations per employee popping up very soon.

Very few experiences and relationships offer disproportionately high emotional value in life. The best friendships, life partners, or colleagues in life are not just marginally better than the rest—they are exponentially more valuable to the scale of 1,000x that they’re incomparable. The best people in our lives don’t just add value—they shape who we become. Finding and staying with them is worth the effort.

Actionable Takeaways

1. Go extreme. Don’t settle for “good enough.” Seek the outlier—the friend, partner, or colleague who is above the rest for you. Prioritize and nurture them, no matter what.

2. Expand your exposure. If you haven’t found the clear outlier yet, you likely just need more exposure. Get at least three data points (be it friends, dates, jobs or places): one shows it’s possible, two gives contrast, and three reveals depth.

5. The world shapes you more than you shape it

One of the most surprising findings I’ve had in startup investing is that the social and physical environment that the founders surround themselves in is a strong predictor of how they will perform and the progress they will make. This does not guarantee a successful outcome, but it is surprisingly easy to predict their progress by how they will behave given their environment. This is likely the biggest contributor to the SF Bay Area’s consistent success in giving births to unicorns. For work, you can be 15% more productive just by sitting next to high performers⁴.

We’d like to believe that we control our environments, but our environments influence us far more than we’d like to admit. We naturally walk faster in NYC, we become more polite in Japan, and we become friendlier in Mexico. These are physical cues (buildings, nature, etc) as well as social cues (people around us), and, increasingly, digital cues (The UI of the apps and other users on social media that we submerge ourselves in). Behaviors are socially contagious.

We may not be able to influence our environment or control how it influences us. But if our environment matters more than our willpower, then we can, and should, curate the right environment that is most aligned with what we’d like to achieve, rather than relying on sheer self-discipline. If we can’t, soon or later, AI will then shape our environment, to then shape our behaviors.

Actionable Takeaways

1. Design your environment. Surround yourself with people, places, and digital spaces that align with your goals. For any intention you have, move toward high-density area where many with the same intention are working on it.

2. Audit and iterate. Check your physical, social, and digital surroundings and how they make you feel and behave. Experiment by tweaking each surrounding to see its impact on your intention-action gap.

6. The ultimate variable? People

In the end, all the successes and failures of startups come down to the people. Despite the never-ending discussion on whether we should invest in people, products, or markets, we won’t have any product or market if there is no one to start in the first place. The founders, employees, customers, investors, and other stakeholders can make or break the startups’ destiny.

People are also the ultimate variable in life. Last year, I had the best work meeting and the worst work meeting on the same afternoon. What made them great and bad was just who I was speaking to. It’s incredible how we get caught up in focusing on salaries, titles, and # of days off and not paying enough attention to whom we work with. People can make or break your life.

Actionable Takeaways

1. Test relationships early. Whether in work or life, small tasks or shared experiences can show your true compatibility faster than endless conversations. Include friction in trial. How people respond to friction is a great predictor of how any disagreement or conflict will be handled.

2. Opt for high-value people. Decide what you’d like in long-term relationships. I optimize for

   • Competence (smart yet action-driven),

   • UX (great energy to be together), and

   • Integrity (strong morals).

   The last is perhaps the most important. You can find their level of integrity when 1. they can influence things in a zero sum game but they choose not to, and 2. they are put under stress but they don't escape, give in or blame others. I have yet to find a great method to find their integrity prior to being in either one of situations (when it’s too late). But please let me know if anyone has figured this out :)

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With love,

Koshu

1. National Institute on Aging. (2022, August 18). Research on intermittent fasting shows health benefits. U.S. Department of Health & Human Services. https://www.nia.nih.gov/news/research-intermittent-fasting-shows-health-benefits.

2. Ritchie, H., & Roser, M. (2018). Social connections and loneliness. Our World in Data. https://ourworldindata.org/social-connections-and-loneliness

3. https://tomtunguz.com/decision-making-auditing/

4. Nathanson, S. (2017). Sitting near a high performer can make you better at your job. Kellogg Insight, Northwestern University. https://insight.kellogg.northwestern.edu/article/sitting-near-a-high-performer-can-make-you-better-at-your-job