FOLS, the Fear Of Looking Stupid, is the counterpart of FOMO: VCs fear making an investment that the whole scene sees as a bad decision. Founders counter FOLS in two ways: by creating healthy, not artificial, FOMO, and by avoiding naive statements about go-to-market, market size, competition, positioning or strategy that make them look stupid.
Everyone knows FOMO, the Fear Of Missing Out. But most don’t know it’s counter concept, even though it’s as important:
FOLS, the Fear Of Looking Stupid.
Shocker: VCs are humans; they have emotions and fears. One of their biggest fears is looking stupid by making a bad investment decision.
When you buy shares of a publicly traded company, and it turns out to be a stupid decision, nobody (except, perhaps, your spouse) will know about it.
Like me, when I bought Xiaomi shares that have gone down by 50% since then.
But when a VC invests in a startup, in most cases everybody in the scene will know about it. As a VC, you want to be proud of your investment.
As a VC, you don’t want others in your industry to regard your investment as a dumb decision.
Especially not, when it actually turns out to be a bad decision.
As a founder, you need to understand this psychological driver deeply. VCs are afraid of investing in a startup and looking stupid afterward.
The worst is when you hear as a VC that dozens of other investors have rejected the startup you’re looking at. Strong FOLS.
So, what can you do to avoid VCs looking at your case have FOLS?
First of all, you need to counter by creating FOMO. FOMO is the strongest weapon against FOLS. Giving VCs the sense that many other VCs are interested in you, that you’re not dependent on their money, that you’re self-confident, that they will miss a big opportunity if they decline, etc.
And second – don’t say things that can make you look stupid. When you say things that VCs consider as “stupid”, it will create FOLS, because VCs will unconsciously assume that investing in you will make them look stupid.
Some of the things that could make you look stupid are being naive about your Go-To-Market strategy (“We’ll grow with PR and Virality!“), your market (“If we only capture 1% of…!“), you’re competition (“We don’t have any competitor!“), your product positioning (“We’re ticking all the product feature boxes and the others don’t!“), your strategic thinking (“We have so many opportunities!” instead of a clear focus), etc.
Be aware of FOLS. Go against FOLS by creating healthy (and not artificial) FOMO and being very deliberate about everything you say – and don’t say.
Frequently asked questions
What is FOLS in venture capital?
FOLS stands for Fear Of Looking Stupid. One of the biggest fears of VCs is making a bad investment decision that everybody in the scene knows about.
Why is FOLS stronger for VCs than for stock investors?
When you buy shares of a public company and it turns out badly, almost nobody knows. When a VC invests in a startup, in most cases everybody in the scene knows about it.
How can founders counter FOLS?
By creating healthy FOMO, the strongest weapon against FOLS: showing that other VCs are interested and that you are not dependent on one investor’s money. And by being very deliberate about everything you say and don’t say.
What statements make founders look naive to VCs?
Examples from the article: “We’ll grow with PR and virality”, “If we only capture 1% of…”, “We don’t have any competitor”, claiming to tick all feature boxes, or listing many opportunities instead of a clear focus.
