This first fieldnote is a brief glimpse into Johannes’ study of the international venture capital (VC) industry. Through interviews with different venture fund personnel and his own work in a small fund, Johannes is attempting to document how these investors are creating the next generation of businesses: what drives their decisions to invest in certain start ups? What kind of a future do VCs want to produce? His fieldwork will take Johannes from Cambridge and London to Berlin and Munich and finally to New York and San Francisco.

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When I first talked to Sam, a relatively young, charismatic partner at one of the big several billion pound funds in London, he wouldn’t stop talking about the role of excitement in the investment process:

“I’m looking for [companies] where, you know, at the end of it, there’s some big payoff, there’s some big reward, some big thing that […] will change things or generate value, or whatever it might be. […] I […] imagine when I’m meeting someone – what if I was going to get to work with this person for the next seven to ten years? […] You know, would that excite me? Or not?”

Yes, there was money to be made, but as Sam explained, there was also something “bigger” at stake that you had to believe in. The analysis – turning numbers, business plans, excel sheets upside down – was never enough to convince Sam. Believing in excitement was quintessential because what is often referred to as the due diligence – doesn’t really suffice to make him want to invest:

“So, you know, the math doesn’t really work. I mean you can’t really sort of accurately plot why your five, six million dollars is going to be worth, you know, a hundred times that in ten years’ time. You just can’t. It’s just complete fantasy. So it’s gotta be something bigger than that, I think.”

Numbers alone aren’t capable of making a decision when it comes to early-stage startups. Not only do they only have shaky calculations of revenue, customer acquisition costs and customer lifetime value, what are important performance indicators initially might also change over the course of the coming months as the business model evolves. Any speculation about the future – how big can the company grow, how are the numbers going to develop – is fantasy anyway. The math doesn’t really work. Numbers have to be plausible – is the market big enough, is your necessary market share realistic – and shouldn’t have blatant red flags in them but they are never enough even if they are good; they won’t ultimately convince a VC of an investment. Excitement will. At least if you believe in it.

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I get this focus on excitement. It is the feeling I get when it seems like we are on to something new and big. Let me recap the last time I had this feeling. It was August in Berlin. A very hot week was just behind me; temperatures had been so high that even just sitting was too much. I did about one first call every day, having an initial conversation with a new company we were interested in. One day, I spoke to London-based entrepreneurs working towards making banking a service you could easily access via your phone. They were already too big for our small fund. Another day, I spoke to an experienced CEO who was taking on the challenge of educating parents about the best ways of dealing with their new-borns. He was engaging and both the founding story of the company and the business roadmap were not only convincing and realistic but promising. I am still working on a follow-up with them.

The same week, I also had lunch with Thomas, the founder of a car sharing venture in Germany. This was the second time I saw Thomas, who both Max and I met for the first time in Munich before. Max was very excited – both of the general car sharing space and of the venture Thomas was heading specifically.

“There is space in this sector for a new player. The two big ones just went together; there are many more car manufacturers who will want to get into this. Great exit opportunities. And they also have a different business model than the others.”

Before and after the first meeting, we looked at the numbers – how well are the cars used, what are the margins, how many times do people use the cars per week – and were happy. I was sceptical and I didn’t fully understand why Max was so interested and wanted me to meet with Thomas again. In the meantime, I had actually tested the service, driven around in a couple of cars and came to the second meeting with very concrete questions: how do you reduce the amount of time you spend walking to the car? How do you increase your brand awareness? Using the product made all the difference both in terms of understanding the problems and getting very excited about it. Meeting Thomas again, I was finally also able to understand his enthusiasm: “VW is interested in working with us; several other manufacturers have already knocked on our door. With this round [of financing] we will be able to expand to all big German cities.” Having sat in one of ‘his’ cars myself, I understood how proud it must make him feel to see thousands of people engaging with his idea. I felt his excitement. I was willing to believe in Ben’s vision of the company.