What are the biggest lessons you've learned from investments that didn't work out? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Brian Rothenberg, Partner at Defy.vc, on Quora:

It's all about the people. There have been a couple times where I fell in love with an early product or business, but didn't have the sense that the founder was exceptional with a truly unique insight on the business they are building. In most cases, this doesn't end well, particularly at the early stages where the business is still evolving so much and the early team has to seek out product-market fit and quickly transition into scaling stage. Similarly, there have been startups that my partners or I have passed on where we thought the founder was truly exceptional, but we weren't as enthusiastic about the business - we can point to several examples here that are now creating very large businesses. Overall I think there are more examples where exceptional founders just figured it out over time, finding their way to the right product for the right market with the right approach to distribution.

Distribution, or how a product or service grows its customer base, matters more than most people think. I have seen a number of startups fail despite having a product that people loved, namely because they didn't innovate on distribution in addition to innovation of the core product. Reid Hoffman captures this well: "Many people in Silicon Valley like to focus on products that are, in Steve Jobs' words, 'insanely great.' But the cold, unromantic fact is: a good product with great distribution will almost always beat a great product with poor distribution." My advice here is that startups need to innovate on distribution in addition to building a product that people love.

While it's impossible to see the future, as an investor or founder, it is possible to foresee some of the most critical risks for a business. One exercise I do for serious prospective investments, and that I recommend for founders, is to write the pre-mortem for the business in advance. If this business doesn't work out, why won't it? What are the biggest threats to capturing this full opportunity? Be honest and think critically here. Listing out these key risks can help you understand the type of risk you're taking on, whether you're okay with that type of risk, and also help you outline a few key hypotheses that you need to prove or disprove, and key areas you want to work to improve over time.

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