What do you do when you realize you invested in a stupid team?
I don't think it's happened yet. Between the application form and a 10 minute conversation, we can usually tell roughly how smart people are. And being super smart is not that critical anyway. Determination is more important.
The real problem is when a team turns out not to have enough determination to see a startup through. Startups are hard; most people wouldn't be determined enough.
When a group we've funded seems demoralized, we try to encourage them. It takes a few iterations to tell whether a group is just suffering from a temporary setback, or whether they intrinsically lack energy. If by Demo Day they've gotten nowhere, we start to think it may be the latter. But we're naturally optimistic. Usually groups give up before we give up on them.
Maybe the statement should be a little sideways: "If your answer is ads it is likely to be the wrong answer."
At least more so then other answers you might hear.
Doesn't mean there aren't good businesses to be built on ads. Just that there tend to be many not good ones.
Actually we're not as down on ads as other investors seem to be. We liked Heyzap, and they make money from ads.
"The last thing you want to do is argue with the partners."
That's an overstatement. We don't like people who supinely agree with everything we say. That's as bad as refusing to listen to anything we say. What we look for is a middle ground: people who respond intelligently to our suggestions.
Some of the suggestions we make are stupid. If people agree with those, we conclude they're stupid. (We don't do this on purpose to catch people. We just don't understand very well yet what each group is doing.)