The long-term convergence point of companies: Ultimately, why investing in people is inevitable

On the diverse rise and fall of companies

The rise and fall of companies is always an interesting story, not just when it comes to startups. There are so many cases — like the once-mighty film camera company that collapsed with the advent of digital cameras; a firm started by a founder with a legendary backstory, expected to struggle after his death, only to continue thriving for over a decade; or a company that created the revolutionary GUI but failed to capitalize on it, watching as another company succeeded instead. There’s a whole world of stories out there.

Source: The CDO TIMES, WallpapersOK, Xataka

There are so many different cases that it’s hard to generalize about why companies rise and fall. Especially when it comes to the market, the macro environment, or, to use a less technical term, plain old “luck”—these all play a big part too.

But I think things get a bit clearer if we focus on two key traits of startups we VCs usually encounter.

First, we invest mainly in “compact organizations”—in other words, pretty much all the companies VCs back are likely to be small and early-stage.

Second, we take a “long-term view” when investing. Since we focus on unlisted, early-stage companies, we’re pretty much bound to hold our positions for at least 4 to 5 years.

Put it together, and this is really a story about the mid- to long-term rise and fall of relatively small, early-stage companies.

A graph BASS Ventures believes in

Given this standard of “mid- to long-term rise and fall of relatively small, early-stage companies,”

To cut straight to the chase, I believe in the graph below.

To explain, the red line might represent the ever-changing company valuation (which naturally goes up and down for early startups), or quantitative lagging indicators the company produces (like revenue top line, service metrics, and the like). Of course, you’d wish this was always a lovely upward—straight or even exponential—line. But having it actually play out that cleanly is like wishing a drama plot would unfold in real life. At least for me, I don’t make investments imagining such a scenario. A ton of internal and external factors play into those fluctuations.

You can’t predict the market, but companies ultimately reflect the founder’s growth.

Sometimes, there’s a huge amount of hype in the startup funding market regardless of the founder’s intent, or what you’re working on might happen to be the hottest area to invest in at that moment. In those cases, your evaluation might look better just thanks to sheer market supply and demand, regardless of what your team itself brings to the table.

On the flip side, even if your team performs at a high level, you might not get a fair evaluation if the general market environment is bad. And it’s not just external stuff—internal, short-term choices or events (like certain hires or a key sales win) can swing your numbers up or down. That kind of volatility is just part of the package when it comes to small, early-stage companies.

“Ultimately, the company converges on its founder.”

But are these short-term swings just the unpredictable stuff of “luck is 70% and the rest is skill”? If you apply our second key condition—a 4 to 5+ year time horizon—the story changes. Over time, all these short-term fluctuations tend to settle toward something. Personally, I think what they ultimately converge on is “the founding team,” or more specifically, “the founder/CEO.” That’s the blue line in the graph.

Of course, nobody starts out as a perfect founder or CEO. What matters more is the rate of change in that blue line—the founder’s growth over time. For small, early-stage companies, this effect is even more pronounced. In a small team, the founder isn’t just a leader—they shape company culture and how people work. Put simply, the founder’s leverage over the organization’s results is huge. You can’t control the market (in the short term), but responding to it falls on the leader (in the long term). You can’t avoid occasional mishires or sales setbacks (short term), but learning and improving (long term) is within the founder’s control. That’s why,in the long run, the company ultimately converges on its founder or CEO.

No matter how well things go, lose your long-term perspective and it’s game over.

There are a few different stories that can appear on this graph. First, what happens when you break your “long-term” streak.

(No matter how high the blue line climbs, it’s meaningless if the game ends)

Anyone who’s actually done it knows—starting a company and running a startup is a brutal process. That’s why just sticking with it and not giving up is a real achievement. Because if you lose that grit—if you give up—it doesn’t matter how good of a manager the founder is or how much they’ve grown: that red line simply stops existing.Don’t give up.

Playing the timing game is not BASS Ventures’ strategy

Another variation is reacting quickly—in simple terms, buying in at the bottom of the red line and selling at the top. That could yield good results regardless of what the blue line (the founder's capability) is doing.

(Buy at A, sell at B? Anyone who’s done stocks or crypto has dreamed of that at least once)

Of course, that kind of thing can happen. The founder and investor could coordinate closely to make it work (buy at A, sell at B), or maybe just one of them manages to do it—usually, that’s the investor. But as BASS Ventures, we don’t see ourselves as that kind of investor.

First off, that approach requires a real trader’s mindset—and honestly, we’re much more comfortable with a long-term lens. On top of that, early-stage companies will likely find such nimbleness from an investor more burdensome than helpful. It’s more likely to create management headaches than positive outcomes,. And perhaps more importantly, a lot of it simply comes down to luck. Sure, luck matters, but it’s not something either VCs or founders can really chase after.

At the end of the day, it all comes down to the people.

I know that saying “we invest in people” can come across as naïve VC talk. Honestly, for a long time even I felt awkward using that phrase, and in a way, it’s still tough to bring up.

(Yep, guilty as charged—the guy who says “I invest in people” is right here;;)

But with time, it gets harder and harder to find a better way to put it. I’ve made plenty of early investments, cheering on sparkling 0-to-1 results, breakthrough tech that looked impossible, or beautiful up-and-to-the-right metrics—but for some reason, a lot of those startups ended up drifting downward not long after. On the other hand, some founders have managed to turn things around and persevere through tough times.

“In small organizations, it’s all about the leader.”

In the end, this essay is really about the fate of companies (maybe all organizations!) that ultimately depend on the founder, CEO, or leader. It’s also about why being the boss in a small team comes with a huge advantage. When a founder really steps up as a leader, the company’s performance can change drastically. Put simply, there are few jobs as rewarding as “it goes well if I do well.” (Not many roles in life actually work that way!)

All of this raises a lot of questions. What exactly is the founder growth that everything converges to? How do you judge it? Can you measure that change? What is “growth” in the first place, and is real growth even possible? And besides that, what else influences a company’s results, and how should we view those things?

Our future articles will try to answer these questions, partly by sharing stories about the startups we’ve invested in, and also by laying out the standards we use ourselves. Stay tuned for more! :-)

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