This is probably my favorite PG essay to date, something I've spent a lot of time thinking about as well.
I think what separates novice investors from good ones is that a novice investor will start asking questions that only make sense at a later stage. They're committing a cardinal crime in startups: premature optimization. For some reason, even though they explicitly say they invest at the seed stage, they're looking at it from a warped lens of "let me think about how this works, in your current implementation, at enormous degree of scale." And of course the implementation will change, so the logic immediately breaks down on itself because you're assuming the thing you see now will be the same in 5 or 10 years. The baby analogy seems perfect for this reason. A baby will arguably have little to no resemblance to itself in 5 or 10 years, everything about it will have changed significantly.
The nice thing is you don't have to explain these things to the investors that "get it." It just clicks instantly, and I think this happens even before the meeting--it probably goes all the way back to the introduction that someone else makes for you. Good investors at a seed stage understand there's some degree of risk in a small yet still fragile startup that has at least some degree of promise to it. From the top tier people I've spoken to in the past, they focus less on the specific numbers and metrics, and more on the "does this fundamentally solve a problem in the market right now? Is there a real need for this thing to exist, and what's better about this than everything else out there?" They look at similar companies in different spaces and draw interesting comparisons. "You guys are like this other company, which started out much like you did, and you're applying a very similar solution. I think this will work!"
The really good investors don't try and evaluate your company as a Series D investment, they look at where you are right now at the seed stage and see it for what it is, and what it could be. I suppose this all sounds obvious, but the real world is full of surprises that contradict assumptions.
I think what separates novice investors from good ones is that a novice investor will start asking questions that only make sense at a later stage. They're committing a cardinal crime in startups: premature optimization. For some reason, even though they explicitly say they invest at the seed stage, they're looking at it from a warped lens of "let me think about how this works, in your current implementation, at enormous degree of scale." And of course the implementation will change, so the logic immediately breaks down on itself because you're assuming the thing you see now will be the same in 5 or 10 years. The baby analogy seems perfect for this reason. A baby will arguably have little to no resemblance to itself in 5 or 10 years, everything about it will have changed significantly.
The nice thing is you don't have to explain these things to the investors that "get it." It just clicks instantly, and I think this happens even before the meeting--it probably goes all the way back to the introduction that someone else makes for you. Good investors at a seed stage understand there's some degree of risk in a small yet still fragile startup that has at least some degree of promise to it. From the top tier people I've spoken to in the past, they focus less on the specific numbers and metrics, and more on the "does this fundamentally solve a problem in the market right now? Is there a real need for this thing to exist, and what's better about this than everything else out there?" They look at similar companies in different spaces and draw interesting comparisons. "You guys are like this other company, which started out much like you did, and you're applying a very similar solution. I think this will work!"
The really good investors don't try and evaluate your company as a Series D investment, they look at where you are right now at the seed stage and see it for what it is, and what it could be. I suppose this all sounds obvious, but the real world is full of surprises that contradict assumptions.