While it's easy to stop funding obviously failing companies, the most difficult decisions involve startups that are doing okay but are not on a trajectory for venture-scale returns. The emotional challenge for VCs is balancing their supportive, founder-friendly role with the tough-minded discipline required for their LPs.
A prior investment, DealerSocket, had such incredibly efficient sales that it set an unrealistic internal benchmark. When HubSpot pitched Meritech, their sales efficiency metrics seemed 'terrible' in comparison, causing the firm to pass on what became a massive success. An outlier success can create a flawed model for future evaluations.
Thematic investors often develop strong opinions about a market. A key mistake is imposing that vision onto a startup, effectively acting as its strategist. True alignment comes from backing the founder's vision, not getting excited about how the company could fit the investor's pre-conceived thesis, which can lead to failure.