[00:00:00] Cheryl Mack: Okay. Three, two, one. Hey, I'm Cheryl.

[00:00:04] Maxine Minter: I'm Maxine.

[00:00:05] Cheryl Mack: This is First Cheque, part of day one, the network dedicated to founders, operators, and investors.

[00:00:09] Cheryl Mack: If you want to be a better early stage investor, this is the show for you.

[00:00:12] Cheryl Mack: So TLDR, if you don't want to suck at investing, listen up.

[00:00:21] Maxine Minter: Hello. I am so excited to dive in today on probably my favorite topic. When it comes to investing, this is the stuff that I, you know, read at 10 PM when I'm, well, I don't go to bed at 10 PM, but, you If hypothetically, I went to bed at 10pm, this is the stuff I would read. Put myself to bed, the stuff I read on my Sunday mornings.

[00:00:38] Maxine Minter: Um, so I am danced to talk about decision making, decision diaries, anti portfolio views, and all of that kind of great, good decision making hygiene. Um, I feel like I kind of dragged you into this one because this is probably not your favorite topic to know that on, but hey, we're here.

[00:00:55] Cheryl Mack: No, it's not. I mean, I think that I'm so excited to get into it because a, it's probably the thing that I get asked about the most is like, how do you actually make the decision?

[00:01:04] Cheryl Mack: How do you like, how do you evaluate a startup? Um, and I think it also varies across investors. So there's like such a wide range of like how you can make decisions. Um, and I think, Getting a sense of how other people make decisions is really, really important. It's also the thing that I think makes you go from like a good angel investor to like an excellent angel investor.

[00:01:24] Cheryl Mack: So if you're, if you are looking to level up, this is kind of probably like level leveling up episode. It's not really a one on one one on one episode. This is like, if you want to, if you want to take your angel investing game or investing game in general. Um, to the next level, then like the, these are the tactics that you really need to start to employ

[00:01:41] Maxine Minter: 100%.

[00:01:42] Maxine Minter: Yeah. I would venture against that. Most investors, professional investors are using some version of this, like they're building this infrastructure into the way that they're making investing. Cause you just can't go away without it. I don't think so. Yeah, looking forward to diving in. So, first of all, decision making when it comes to investing.

[00:01:59] Maxine Minter: What are some of the frameworks or mental models that you use when you think about deciding to invest in a map?

[00:02:05] Cheryl Mack: Yeah, so this is a really interesting topic for me because I think I have gone from like this really basic, uh, kind of version of it to a much more sophisticated version of it over the last five years.

[00:02:15] Cheryl Mack: So, when I first started, I, I was like, I just want to make decisions quickly. Like, I don't have time to write all these notes and go through everything. And also I was just like, give me all the deal flow. And I just want to evaluate all of it the same, which I found is since then have found is, uh, is near impossible.

[00:02:33] Cheryl Mack: Um, but one of the things I found at the very early days was like this really quick kind of like checklist. I, which I can't remember who the investor was, but it was, and I wrote, I Pulled it and copy and paste it and of course didn't write down their name. Um, but it was just like a really quick checklist of like, you know, problem.

[00:02:49] Cheryl Mack: Is this a really painful problem? So those like four bullet points per section. And there was, there's like four or five sections. And to me, that was such an easy way of just like tick, tick, tick. No tick tick. Great. Okay. Like, you know, score eight out of 10. I, and I loved that mental model and I use that one for a very long time where I'd have conversations with founders and would go through that pretty quick mental model to decide like right there on the call, it also, Is worth mentioning that like at that stage, my check size was fairly small.

[00:03:23] Cheryl Mack: So I also had to be really mindful of my time with those founders and a really quick checklist style, mental model that I could go through was really helpful in that scenario. Um, now I have a whole like evaluation sheet that like I sit down with founders and spend 45 minutes, uh, you know, asking them deeper questions on things that I really care about, but I also didn't really know what I really cared about When I first started, and I think that's okay.

[00:03:46] Cheryl Mack: Absolutely,

[00:03:46] Maxine Minter: yeah. I mean, I think when I first started, um, same as you, it was just kind of like, oh, I think I should do it. Like, that was the, the question I would answer, uh, answer for myself. It was like, obviously not particularly robust thinking. And then over time, kind of built my way into a more of a kind of checklist style.

[00:04:03] Maxine Minter: And I think checklists, Especially for investing is so important to do because of the number of complex questions we should be asking ourselves to kind of really think through the quality of the deal. And it's nearly impossible for 1 person to consider and keep in mind all of those things every single time they kind of do it from a mental checklist.

[00:04:24] Maxine Minter: Also, it's really easy to. Feel something and not check that feeling. So have an intuition or a gut and not check that against more fact based consideration. If you're not going through the process of actually like physically writing out your thinking or like talking out your thinking, kind of like passing that through, um, the kind of rational part of your brain.

[00:04:46] Maxine Minter: And so I think I did the same thing, right? My progression was to a checklist. Actually, my first progression was into a decision theory. A friend recommended it. Um, Decision Diaries is an entry point for me to capture my thinking and how I was making this decision. And then, um, I just went really deep on it.

[00:05:03] Maxine Minter: And Decision Diaries are this incredible tool to allow you to not only do that checklist work, um, to make sure you're kind of asking yourself those key questions, and also asking yourself some of those, like, prudence and diligence questions that are not really about, does this company work necessarily, or does it kind of, Is it a painful problem?

[00:05:21] Maxine Minter: Is it like a big problem, big solution? Those kinds of questions. But also like, what kind of entity is this? You know, some of those own goals where you can kind of get all the way along the journey and then realize, oh, this is actually like, there's some structural stuff that needs to be changed. But I think the kind of decision diary was really useful because it also pushed me to explain my position.

[00:05:41] Maxine Minter: So yeah, as opposed to like a yes or no answer, it's like, why, right? Why is this problem really painful? What is the ultimate thesis I think I'm applying here? You know, what is the second and third or the thinking on that thesis, right? If that thesis is right, then what, and then what? And that motion was really helpful to consider the number of things that can go wrong for a business at the stage that we invest in.

[00:06:04] Maxine Minter: Pre C, C, and Series A, there's still a long road still ahead of them. And so pushing my thinking on kind of what do I think the progression is going to be. And the last bit also was the kind of system record piece, right? Using a decision diary to capture. How you're thinking about each of these stages at the time, then allows you to go back and actually learn the quality of your thinking over time.

[00:06:25] Maxine Minter: So my, I kind of like skipped the checklist a bit and went straight to the more robust kind of filling out process and also, you know, what you mentioned there in terms of when you first start angel investing, you're just like, I want to see all the deal flow. And I think I can go through this process with every single one.

[00:06:41] Maxine Minter: I can guarantee you with a full time, you know, job running a startup, filling out a decision diary for like, yeah, probably saying 30 companies a month, which at the time I was like,

[00:06:51] Cheryl Mack: I mean, I'm like, I was at like 500 a year.

[00:06:54] Maxine Minter: Yeah. Yeah, exactly. You know, I was just like, Oh, this is so much work. This is not possible.

[00:07:00] Maxine Minter: So it kind of forces the prioritization that you have to work on as an investor anyway, to be like quick blush. This isn't a fit. Well then. You know, um, a deeper diligence and then an even deeper diligence. Um, so I found it as a really, really helpful tool. Did you graduate to Decision Diaries? Are you still doing checklists?

[00:07:19] Maxine Minter: How are you thinking about it?

[00:07:20] Cheryl Mack: So I've graduated to a more complicated or detailed version of Decision Diaries. I wouldn't say like, I don't call it a checklist anymore, um, but I certainly don't do a decision diary. Uh, and that's one of the things I'd love to get into with you a little bit more, but like, did you find that you started to also prioritize like sections of your, I guess, evaluation process as you started to get more sophisticated?

[00:07:45] Cheryl Mack: Cause I went from like, I want to ask about everything and go into detail about everything to being like, well, I, you know, Again, have to be mindful of the founder's time. And also like, I actually don't care that much about your business model. So I don't need to go super deep into that. And I also don't really care about like what the product is at this stage.

[00:08:05] Cheryl Mack: Like it's going to change. So like. You know, give me an overview, but I, like, that's not something I need to go deep on, or as I realized that things I really cared about was the founders. And I feel like I made mistakes early on, not digging enough into the founders, uh, problem and market size. So my like detailed analysis with the founders now really focuses on those three areas.

[00:08:27] Cheryl Mack: And I basically skip over everything else, um, or do a really high level version of it. Um, did you find the same, or do you, do you go through each, each Each section like problem, solution, product, market, traction, business model, use of funds. I can't even think of, there's probably another three sections that I'm forgetting.

[00:08:49] Maxine Minter: I, so my decision diary actually does ask me, like, I don't prompt myself on those questions. For, I mean, yes, for pre seed in particular, right, like asking the question around business model, they, they're more like a mental checklist that I go through, but that actually doesn't materially factor into my decision to invest or not.

[00:09:06] Maxine Minter: The degree to which the founder knows the space is, you know, a space that I fill in and like ask myself about in my, in my decision diary. And that ends up unearthing a discussion about the business model because often, you know, if the founder doesn't really know the space that well. Then they will propose a decision model that, sorry, not a decision model, a business model that just makes no sense, uh, kind of in that, in that context, or that we've kind of seen not to be successful, et cetera, but as you said, right, the probability that they're building the same business model by the time they get to series A, if there's not really, uh, kind of there, there is none, especially if they are a business model.

[00:09:44] Maxine Minter: You know, high execution, really great at working to a problem sets as a skill set. Like they'll find their way to the right business model. There have been things that have switched in and out of my decision diary, but they are less that like more traditional diligence checklist and more the questions that I have found over time are actually things I either need to be prompted to think about because they don't My bias is that they don't pop up for me to like innately ask those questions, or there are prompts for me to kind of think more deeply about certain topics, things like second and third order effects of my primary thesis, or they are things that I want to make sure I capture my thinking on for the betterment of my overall decision making over time.

[00:10:29] Maxine Minter: And so, you know, thinking Predictions on the founding team, my, like, articulating where I think they spike, what I think the gaps might be, you know, where I think the risk areas are on this particular founding team.

[00:10:44] Cheryl Mack: So help me understand, like, in my mind, and this could be totally wrong, you're, like, talking to the founder, writing notes based on questions that you either have a, like, a template for, or that you, like, have thought of.

[00:10:58] Cheryl Mack: By reading the pitch deck and you're taking notes based on that, like, I don't know, question thing that you have. And then later on, when you're not talking to the founder, you sit down and go through your decision diary. Is that right? Or are you actually like, the decision diary is the only thing that you fill out when you're talking to the founder and separately

[00:11:15] Maxine Minter: both.

[00:11:16] Maxine Minter: And the reason I say both is that kind of meshed into one in our process. So like very tactically, the fields that I'm filling out from. So when I first made a founder, I'm not filling out my decision diary yet. Because I'm doing my first filter and so I'm asking questions like first filter questions around like, what's the space you're chasing?

[00:11:34] Maxine Minter: Why are you chasing it? Like, why do you want to spend the last 20 years of your life chasing this thing? Fundamentals about the business. But coming back to the point, like, those are not things I forget to ask.

[00:11:43] Cheryl Mack: Right. They're

[00:11:43] Maxine Minter: not things I have a bias around.

[00:11:45] Cheryl Mack: But do you write notes on those somewhere else?

[00:11:47] Maxine Minter: Yeah. No, I write notes on those as I am asking those questions and then they get pulled through into our kind of questions section of the decision diary. So I anchor back on my point of I'm trying to get better at decision making constantly and part of a decision diary is a system of record. For me to know what I asked and what I answered.

[00:12:11] Maxine Minter: So it's as informative to me if I completely didn't ask a question that would have unearthed the piece of information that would have helped me make a better decision, both positively and negatively, as did I ask the right question and still didn't get the right answer and like still didn't unearth those questions, or did I ask the right question and they gave me the right answer and it just wasn't knowable at the time that I made the decision.

[00:12:32] Maxine Minter: What I do with those three categories of information are two very, uh, three very different things. But to answer the question, yes, and I capture all of my notes as I'm Um, it's just a question of kind of how I collate them, but I ultimately start filling out my decision diary at the point that I, I decide that I'm ready to start making a decision on that company, right?

[00:12:49] Maxine Minter: I'm starting to lean in and do my diligence process. And so the actual, like, deeper 2, we do 2 deeper diligence calls. And so those 2 deeper diligence calls is the process I'm going through to fill out my decision diary and also answer any other kind of like tactical questions I need to get answered.

[00:13:04] Maxine Minter: How do you run it? How many calls do you usually have or don't? And do you do checklists? Well, you don't do a decision directly. Are you working through a checklist? How do you do it?

[00:13:11] Cheryl Mack: Well, now that I think about it, I guess actually I've kind of pulled some elements of a decision diary into my like evaluation template.

[00:13:19] Cheryl Mack: Like to me, I've, I've thought that a decision diary was something like you just reflected on separately and that that was the step I wasn't doing, but it sounds like actually I'm doing most of this just in one place and kind of a little bit less structured than you. So I start by meeting with a founder for 20 minutes.

[00:13:34] Cheryl Mack: And that's because I generally get a lot of referrals. And if I get a warm referral, then I want to actually meet with that founder. So, uh, that initial 20 minute call allows me to meet with like five or six founders a week while also maintaining a full time job at Aussie Angels. Um, and you know, doing a lot of other things.

[00:13:50] Cheryl Mack: So, um, that initial 20 minute call, I really focus on understanding who the founder is, why they're, why, why they do what they do, like why they're really excited about this and want to work on this for the next 20 years. Like why them. And if from that point, then I make a decision as to whether I want to go deeper on the other things that I care about, the second call is usually a 45 minute call where I go deep on, uh, like more on founders.

[00:14:16] Cheryl Mack: And if there's a co founding team, we'll often meet the co founder, understand how they interact together. Um, and then go through market size and problem space and then tactical stuff, like how much you raising, who are you talking to? Cause I don't lead. So I need to understand where they're at in that raising process, how much I've raised previously.

[00:14:32] Cheryl Mack: Structure, things like that, um, and also give them a chance to, uh, to answer questions or to ask me questions. And that also gives me a sense of like how they're thinking about the round and whether they're being smart about this. Uh, and then after that, I I'll usually go and like do my reflection. And what I'm using during that 45 minute call is this like template of sections.

[00:14:54] Cheryl Mack: That has like problem space and it's got a whole bunch of questions that I'm prompting myself to ask and then when I'm after I've done with the call, then I'll sit down and kind of reflect on on those questions and make my own notes, but I don't fill the whole thing out. Like, generally, the solution section is just always blank.

[00:15:11] Cheryl Mack: If you look through all of my evaluation. Templates. It's just always blank. Um, same with, uh, same with probably, what are their sections? Yeah. Anyway, there's a bunch of sections that are just generally blank because I'd rather spend more time on things that I care about. And I generally believe that like, if I'm backing good founders and then after that, it's usually another like 30 minute call or I can move quickly and we can do it over email.

[00:15:33] Cheryl Mack: Um, where we'll go like back into some of the questions that I had remaining on, like, this was my thesis here. This is what I think. Um, but all of it goes into those notes and. So I think actually I am probably not as like, like the things that I know you record, like, uh, you know, your emotional state at the time, or like, did anything big happen in your life at that time?

[00:15:54] Cheryl Mack: Or I don't know. What are some other like weird things that you record as part of your diary?

[00:15:59] Maxine Minter: How dare you? They're not weird. They're very informative to how I make music. Yeah. I record my emotional state. Right. How I feel about the decision. I record the time at which I make the decision and the day that I make the decision because I'm learning over time.

[00:16:11] Maxine Minter: Like

[00:16:12] Cheryl Mack: to the minute.

[00:16:12] Maxine Minter: Yeah, it just gets pulled in from my database. So when I like, it let in it pulls it in. But I used to like when I used to use motion as my. Operating system. Write it down.

[00:16:21] Cheryl Mack: It is 8 53 a. m. on Monday the 4th.

[00:16:27] Maxine Minter: Pretty much, yeah. Um, I think that to be honest with you, I don't know that I've got any particular insight there in relation to the time when I've done my anti portfolio reviews, but I have got insight in terms of the day, right?

[00:16:39] Maxine Minter: I try not to make investment decisions on a Friday, for example.

[00:16:42] Cheryl Mack: Why is that?

[00:16:43] Maxine Minter: Because I'm tired, I'm more impatient, I can be less interested or seem to be more short sighted in summary. And so I'd fall into the trap of, you know, especially as an early stage investor, I think it is so easy to fall into the trap of diligencing what's in front of you as opposed to what it could build into.

[00:17:03] Maxine Minter: And so especially when you're in that kind of like messy early stage where someone has like sub 150k in revenue, it's coming from a bunch of different pockets, you know, they're still in the early stages of integrating the product. It's really easy to get stuck in like not enough traction and you know, don't think the business is where it needs to be, blah, blah, blah.

[00:17:22] Maxine Minter: As opposed to, okay, what has to go right for this to be successful? I do more of that form of thinking on a Friday. And more of the latter thinking the front half of the week. And so I try to hit these investment decisions kind of Monday, Tuesday, Wednesday, as opposed to Thursday, Friday. But I find that I am much better at doing like follow up diligence calls Thursday, Friday, because Monday, Tuesday, I am in, I know I'm in kind of rapid execution mode, so I can be quite impatient about asking questions.

[00:17:52] Maxine Minter: So I'm trying to get to insight really quickly. Also on those days for we've got internal meetings on Mondays and Tuesdays is when I meet all my, all most of the founders. And so I can shortcut exploration of things where I actually want to give it space. So I do a lot of my like, what deeper diligence conversations on Tuesday, on Thursdays and Fridays.

[00:18:12] Maxine Minter: So I think I don't, you know, that has been a learning over time, but I seem to make better decisions by doing that. I keep in mind, I think an important thing name here is. Investing in early stage businesses is investing into complex systems so that you can't, the goal here isn't to find the formula that is perfectly predictive.

[00:18:32] Maxine Minter: That's a fool's errand. We're trying to identify correlations where you behave in certain ways or make decisions in certain ways that seems to correlate. With a better decision making process, a better founding team that you're backing, more insight in the product that you're building. And I think that is really important to embrace because I think it can be really easy when you're stepping into this environment of uncertainty to try and make a decision making process that just suffers from false accuracy.

[00:19:02] Maxine Minter: And I'm sure I'm so confident there's false accuracy kind of all the way through my current decision making process. Um, but it seems to work for me so far.

[00:19:11] Cheryl Mack: I'm so interested, do you, are you more likely to say yes or no on a Friday?

[00:19:15] Maxine Minter: I don't know, I haven't run that analysis, whether I'm just like that binary, yes, no, I'm not sure.

[00:19:22] Cheryl Mack: You're just not, you don't like your decision on Friday.

[00:19:24] Maxine Minter: Correct, yeah, I'm more likely to anchor on short term stuff on Friday. Thursday, Friday, especially if it's been a big week relative to Monday, Tuesday, whereas Monday, Tuesday, the world is my oyster, you know, it's a much more expansive thinking. I've had a good weekend.

[00:19:39] Maxine Minter: I'm much more recharged. And I actually think that that is the mindset you need to be in to be able to see the vision that these founders see. Whereas if you come in being like, tell me how you're going to be, you know, You know, cashflow positive and news time. Well, like you kind of missed the point if you receive investing actually raises for me.

[00:19:57] Maxine Minter: My good friend Mahesh has this framework that he uses when he thinks about early stage investing, and he, um, invests in super, super early stage companies out of New Zealand, and he frames early stage investing as input investing. We're kind of mid to late stage investing is output investing. So what he means by that is the inputs into this system, uh, the market context that they're operating in and the founders and the rest of the team that are going to be kind of around that journey and capital.

[00:20:28] Maxine Minter: And so the question you're asking yourself is all about, like, these inputs, are they likely to come together? And create the magic of a highly successful company as opposed to later stage venture. You're investing in outputs. You're investing in revenue and output from the system. You're investing in traction and output from the system.

[00:20:46] Maxine Minter: You're investing in, you know, who's already invested, right? The capital that's already been allocated. So, it's kind of backwards looking as well as a forwards looking. process. And actually, it makes me think of, there is a researcher from Harvard called Gondos, who does a lot of research on how bases make their decisions.

[00:21:06] Maxine Minter: And, I find it really clarifying and maybe even validating, but his research, he's collaborated with a bunch of other folks, um, from Stanford as well, he's worked really closely with, but I find it really validating because he essentially validates that the early stage, you know, the vast majority of early stage investors are heavily influenced by intuition and or qualitative elements to their decision.

[00:21:30] Maxine Minter: Whereas mid to late stage, then. majority influenced by quantitative measures to their investing. In fact, I think he said something like 15 to 20 percent. That makes sense though, right? It makes sense, right? Yeah. But it's nice to know that that is the majority, right? Because the number, I think, especially as a fund manager, the number of LPs that will ask you about your decision making process, implying that there is some kind of formula or some kind of like

[00:21:57] Cheryl Mack: secret formula that's Yeah.

[00:21:59] Cheryl Mack: It's definitely going to work.

[00:22:00] Maxine Minter: Exactly. Like what kind of revenue do you invest in, et cetera?

[00:22:04] Cheryl Mack: I think it's different for everyone. Yeah.

[00:22:06] Maxine Minter: I think that's

[00:22:06] Cheryl Mack: right. And we'll, we'll, we've talked to so many different investors on this podcast so far who have like had different portfolio construction strategies and that has to factor in, right?

[00:22:15] Cheryl Mack: Like if there was one right answer to how you make decisions, then everyone would do it. And the number of investors we know that like run really complex analytics on. Like the market on like deal flow and still aren't necessarily always coming out on top just shows that actually this is, this isn't a one size fits all and there's no right formula.

[00:22:38] Cheryl Mack: Right.

[00:22:38] Maxine Minter: It's also why I get so frustrated. Um, there was this kind of, especially coming out of the Zurb era, but like still kinda, I meet a lot of companies that are trying to make the like investor. Matching process, a product, totally programmatic, or the investing process, totally data driven and programmatic, and it just isn't, it's just not data driven, it can't be 100 percent data driven.

[00:23:05] Maxine Minter: And because it is a complex system, right? I just don't think it is fully predictable and therefore you can't just use data to predict it. I'm probably just going to get like a barrage of hate from this comment, but it's true. I

[00:23:17] Cheryl Mack: have a confession. I was one of those founders. I tried at one point. Right.

[00:23:24] Maxine Minter: I, like, Can you talk me through that?

[00:23:26] Maxine Minter: How did you get there? Like, how are you like, Oh, this feels like it's predictable.

[00:23:30] Cheryl Mack: So it started with getting frustrated at the fact that it was difficult for me to help founders connect with the right investors. And I knew which of the investors invested in which categories in which they didn't like consistently.

[00:23:43] Cheryl Mack: And I still consistently get founders a reaching out to me, pitching B2C apps when that's not what I invest in and B getting founders coming to me being like, Hey, this is what I do. And. Who should I talk to? And I was like This needs to be a better process. So it started with a sense of like, there are filters.

[00:23:59] Cheryl Mack: I know what these filters are, and there should be an easy way for a founder to, uh, just filter by this is who I am and it'll say these, the investors that match you, that part I think is still valid. And now there's a lot of directories that do that, but at the time, that's what it started with. And I set out to just like, Document that type of like high level filter data and then feed it back to founders in a really efficient way.

[00:24:22] Cheryl Mack: Then more from there to say, well, if I'm doing it this way, why couldn't I then do it the opposite way for investors to see like, where, what are the startups that match you and then start to pull in even more data. around what we know has been successful and different rounds that have been done and a whole bunch of other stuff.

[00:24:41] Cheryl Mack: Uh, and then use that to predict what's going to be the best investment for you as an investor. Um, that was the piece that, uh, investors got really excited about the like deal flow opportunity. Um, but ultimately realized we realized two things. So I did this with a co founder, um, several years ago, ultimately realized two things.

[00:25:02] Cheryl Mack: One that investors. Didn't, there was like, uh, adverse selection bias. Like if you have access to it through a platform, then it's not proprietary. And investors all wanted to be able to say we've got proprietary deal flow. Um, and two, we just weren't the best people to, uh, to pull in and work on, like AI was starting to come up and we're like, we're not the best people to actually do this, even if this was a thing.

[00:25:25] Cheryl Mack: Um, but ultimately it, investors didn't want to, uh, have that kind of like intuition. Feel taken away from them. And I actually, I get pitched this still as well, where people want to do that matching and I get excited cause I can see the potential, but yeah, ultimately it didn't work.

[00:25:44] Maxine Minter: Yeah. Savage. I mean, I will say, do you think it ever can work?

[00:25:49] Maxine Minter: Like what would have to be true for that to be able to work in terms of decision making on investment and like driving success?

[00:25:55] Cheryl Mack: I think it can work up to a point, but. Because the market is always changing and you win in this game by being contrarian and being right. So you will always have an opportunity as an investor to go against the consensus or the patterns that everyone else is seeing and be right.

[00:26:14] Cheryl Mack: It's interesting. I was talking to John Sharp from Hatcher Plus. Yesterday, the day before, and they run a platform that has analyzed like 6000 startups, and if you use their software as a VC, you can, like, plot those charts on how, how well a potential startup might do based on the inputs that you put in, which I think is really interesting.

[00:26:38] Cheryl Mack: And, um. I think that's like a perfect example of this can always be a tool that investors use, but I don't think it will ever replace and fully get there. Like it will never be all of it. It will be some of it and we will get better tools, of course. Um, but yeah, not, you're not going to be able to program an AI to decide which startups to invest in because as soon as you do, then somebody else will be like, well, I'm going to invest over here.

[00:27:04] Cheryl Mack: And oh, look, I'm going to I got a winner and then you have to retrain. So, yeah,

[00:27:07] Maxine Minter: totally. I hope that's interesting. I mean, like, I think the attraction of, like, Moneyball but for VC is so alluring and this is a game of interest. Meaning, like, if you can systematically de risk the investment and or, like, systematically Decrease the possibility, the probability that they will die.

[00:27:25] Maxine Minter: You are systematically increasing the probability that they will live and thus systematically increasing the possibility and the probability that they're going to be an outlier. And so, could you use a data product to put that detail in and like make that prediction? Like, absolutely. In theory, but I also, I don't know that we know what I don't think that we like on average across the entire ecosystem, especially across geos.

[00:27:50] Maxine Minter: Like, I don't know that we know totally what predicts success. We know it's correlated to it. And maybe you can like. Increase those factors that correlate to success, but I just I'd like I just maybe that's why it's like so intoxicating as a space still to be like operating in is because it's not predictive.

[00:28:08] Maxine Minter: Like, there is so much human still in it. You know that you can't predict, uh. And it's such a human industry. And so maybe that's why I like it. Maybe it's why, uh, I have tried so hard to put like more decision making rigor.

[00:28:22] Cheryl Mack: That's why we are, that's why we're all here. We like to feel,

[00:28:25] Cheryl Mack: yeah, we, we like to feel like we, we can do something that others can't, we should actually get John on the, on the podcast to see if he wants to talk about through how they use the data and what it's useful for.

[00:28:35] Cheryl Mack: Um, but let's go back to decision diaries though, because, um, I have always felt like decision diaries have been this, like, complicated thing that's going to take six hours of my time on a deal and, and, you know, is that something that I really feel is going to, like, move the needle again? Maybe inches.

[00:28:54] Cheryl Mack: We're in an inches game here. Um, but like, if I was to. What's a base level of, like, what would you recommend, uh, for the average angel investor who isn't doing a decision diary at the moment? What are some of the things that you might say, like, we'll start here, do these five things. Um, you know, is it the time of recording the time of day?

[00:29:12] Cheryl Mack: Is it recording the emotional state? Is it like, what are, what's, what's the biggest impact things you think we could add in?

[00:29:18] Maxine Minter: Yeah, definitely not the emotional state in the time of day. That definitely doesn't give you deep insight to the way you're making decisions. That's more about maybe misguided optimization.

[00:29:27] Maxine Minter: What would I suggest? There's probably five questions I would encourage you to ask yourself in the decision making process and record your answers to them so that you can learn over time. Why you can learn over time, both the quality of your decisions and then my tactical bits to help for the first bucket of questions I would suggest you ask is that you record what you understand the product to be the space that they're chasing and your predictions on the founder.

[00:29:58] Maxine Minter: I think spending time kind of capturing your current thinking as you are under those three buckets, founders, uh, is really helpful. Um, I think the second thing that I would encourage you to capture is your prediction or the thesis you have in mind. Coming into the deal. So, essentially, what is the core driver of the value that you think, if right, will be the difference for this deal being successful, and if wrong, it won't.

[00:30:27] Maxine Minter: A tactical example would be the fact that everyone uses Uber for the example for everything, but, like, if you were writing your core thesis for Uber, if you were investing at Seed, your core thesis might be that mobile phones are going to become ubiquitous, which, you If true, everyone will be able to access this easy ability to get a, in that car, in that moment, black cab, right?

[00:30:51] Maxine Minter: That is your core thesis. Core thesis, platform shift, which then drives Uber being a mass market product, as opposed to a niche market product, if iPhones weren't, or smartphones weren't ubiquitous. If you got the platform shift wrong, if you predicted that the platform shift wasn't happening, There's no world where you think Uber becomes huge because you can only book, like the vast majority of your market is booking on a desktop, which no one does, right?

[00:31:16] Maxine Minter: No one's carrying their laptop around and pulling it out to book an Uber when they're on the, or a black curve on the street corner.

[00:31:22] Cheryl Mack: I don't even know if you can book an Uber on a laptop.

[00:31:26] Maxine Minter: Fair question. Fair question. And then the next question I would ask yourself is what is the second and third order effect of that?

[00:31:36] Maxine Minter: Second order effect being, okay, if your primary thesis is true. Then what is, what becomes true? And third order thesis is that but another step. So it might be, okay, I find to become ubiquitous. That's your core thesis. And the second order effect of that is that maybe their distribution channel also is going to become ubiquitous.

[00:31:55] Maxine Minter: So open question, question, how do they grow profitably, right? And it might back you into a question about how expensive it was going to be.

[00:32:04] Cheryl Mack: Right, because everyone will have access to distribute through smartphones. So any other ride sharing app could also have that same channel. So then what does that mean for Uber and their like ability to win in that space?

[00:32:18] Cheryl Mack: So you start

[00:32:18] Maxine Minter: asking, I mean, if you're lucky and or smart, you start asking yourself questions about network effects. What does defensibility look like at scale? How does a product like this If they are successful, how do you maintain shareholder value as opposed to distribute that value just into the consumer base?

[00:32:36] Maxine Minter: I think this is a really valuable question to be asking yourself on AI right now, for example. So as I said, primary thesis, secondary and tertiary thesis. And I think those would be a great start for most people to capture how they made their decision. Oh, sorry. One last one. What do you predict will happen based on the information you have right now?

[00:32:54] Maxine Minter: What do you predict will happen? And I think this can be a really clarifying

[00:32:57] Cheryl Mack: As in like how many customers they'll get? Or, like, in what sense, what do I think will happen? Like, I think this company will be very successful. But that's my prediction for all of the companies I invest in.

[00:33:08] Maxine Minter: Right, but how?

[00:33:09] Maxine Minter: Successful how? Right, what you're doing there is pushing the discipline of, like, actually writing out what has to be true for this company to be very successful. Definitely, it's not useful if the question you ask yourself is, what do I predict would happen? And your error bars are, this company goes to zero, it's very successful.

[00:33:24] Maxine Minter: Tick, done, decision barrier completed. That's not going to be very useful for you when you go back to look at it. The purpose of capturing that is you having the discipline to look back and be like, oh, that's how I made this decision. So if in three or four years it's successful or not successful, it actually captures how you made the decision.

[00:33:42] Maxine Minter: As opposed to just that you made the decision. I thought it was going to be successful. Doesn't give you any data to build from one that I heard recently. So the generalist just recently did a conversation with Bernard Kossler just on tear, um, really doing some of his best work. Did you know that when he was?

[00:34:01] Maxine Minter: I think it was Kleiner. Um, he invested in like NetSuite and a bunch of the early internet companies and made Kleiner 10 billion dollars of returns on that 10 year tear. 10 billion dollars in returns.

[00:34:16] Cheryl Mack: That's a billion dollars a year. Outrageous. That's outrageous. I actually really love Vinod. Outrageous.

[00:34:22] Cheryl Mack: He is such a good human at the same time. Like, I met him a few times and every time he just. Yeah. Every time he speaks, he will go and just stand in the audience afterwards and let person after person pitch him, talk to him, ask him questions. And he just listens. And I'm like, man, no wonder you're so smart.

[00:34:38] Cheryl Mack: You just have the patience to listen to every human in these scenarios. Like obviously he has time to recharge and at other times, but yeah, like just such a good human.

[00:34:47] Maxine Minter: That's so impressive. I think that's really smart. So he, he, In the generalist coverage of him, he was sharing what he learned in that period while he was a Kleiner.

[00:34:57] Maxine Minter: And one of the questions that he asked himself, I think he was actually reflecting someone coached him on the question. What are the questions to ask that will dictate whether I invest in this deal or not? And just that prompt I think is a really interesting clarifying question to be like, okay, what actually matters here?

[00:35:12] Maxine Minter: Like, does it matter to me that the founder is growth oriented or not? In my case? Yes. Does it matter to me? That the founder is in Australia or the U. S. Marcus, no, right. So asking those key questions that for a deal are actually binary that will dictate whether you do the deal or not. I found that really insightful.

[00:35:30] Cheryl Mack: Yeah. I love that. That I think is the majority of what I've built in. And when I talk about like focusing on things that I care about, it's like, what are the things that really matter to me about this, this investment or not? And like, Being clear about those things, I think I have gotten to a stage where I'm like, I am super clear that these are the things that matter to me.

[00:35:48] Cheryl Mack: And I make sure that I ask all of these questions so that I feel like, yes, I can absolutely take off these buckets. And then everything else is ancillary.

[00:35:55] Maxine Minter: Yeah. Sounds like the solution that they're building is ancillary. So you should just go ahead and delete that off the checklist. I think it's right though.

[00:36:02] Maxine Minter: Like, you know, if you're asking them other questions about space and like the technical I think that's fair. That's actually appreciated.

[00:36:11] Cheryl Mack: I, I looked at a lot of product demos in early days and sometimes I would get really excited about a product because I liked the look of it and maybe didn't go deep enough into like other areas.

[00:36:23] Cheryl Mack: And then of course, you know, they realized that the customer didn't want that product and had to pivot. And then other times I would look at a product and I'd be like, this is crap. And again, like just, I don't know. Like, cause I'm, I feel like I'm such a visual person that sometimes I over index on product demos.

[00:36:39] Cheryl Mack: And so I actually like, I don't do that part. I've made investments where I have never seen the product because I know that like, that's something that triggers me in the wrong direction. Um, and if I do look at the product demo, it's usually later in the game after I've like made my decision. And it's more of a like due diligence thing to say like, okay, well, let's just make sure the product actually works the way that you said it does.

[00:37:01] Cheryl Mack: Um, And that, that point, I think, is really important that I've understood about my decision making process that sometimes I can, I can be clouded in the wrong way by seeing a product too early in the process.

[00:37:13] Maxine Minter: Yeah, so powerful. I think just like recognizing so much of early stage decision making is instinct based.

[00:37:19] Maxine Minter: And it's qualitative based, and I think normalizing that, especially in the Australian ecosystem, is super, super important.

[00:37:25] Cheryl Mack: Yeah, and I think understanding where your instincts are leading you in the right direction, and where they are leading you in the right direction, and to double down on the ones where your instincts are right, and try to mitigate the ones where they aren't.

[00:37:38] Maxine Minter: This has been the best. I have loved diving into this topic with you. I could nerd out a bit about this all day, every day. I'm excited actually to see if it's resonated with anyone. They reach out to us and tell them about their early decision making or early checklist.

[00:37:50] Cheryl Mack: I would love to hear anyone. If you have a framework or a decision making diary, please share.

[00:37:56] Cheryl Mack: And also, um, Maxine, I'm sure you and I are happy to share some of the templates that we have.

[00:38:00] Maxine Minter: For sure. Yeah, we'll put them in the show notes.

[00:38:02] Cheryl Mack: Sounds good.