The Worst Part of Investing

Ask most people what the worst part of investing is and they’ll say the obvious things:
losing money, red days on the screen, or watching a “sure thing” quietly implode. In
venture and SaaS investing, founders will often add dilution, down rounds, and painful
pivots to the list. All of that hurtsbut none of it is actually the worst part.

The worst part of investing is having to be the one person in the room who says the
uncomfortable thing out loud. It’s the moment when everyone wants to believe the new
forecast, but you’re the investor, the board member, or sometimes the founder who has to
say, “This plan doesn’t work. The money won’t last. We need to change something, now.”

That’s especially true in SaaS. Investing in a SaaS startup isn’t just buying a line on a
cap table; it’s a long-term relationship with a team that’s betting their lives, their
reputations, and often their family’s financial future on a single idea. When things get
rough, being honest can feel less like “portfolio management” and more like telling your
friends their dream might not work in its current form.

It’s Not Losing Money, It’s the Lonely Truth

In public markets, being wrong is often anonymous. Your ETF goes down, you mutter a few
words at your broker app, and you move on. In venture and private SaaS investing, being
wrong is deeply personal. You know the founders. You’ve met their team. You’ve seen the
product roadmap, the deck, the dreams.

That’s why the worst part of investing isn’t the loss itself; it’s the moment you realize
you’re the only one willing to say, “The current trajectory is not enough.” You see the
quarterly numbers flattening, churn creeping up, the sales team quietly missing quota, and
you know what the math sayseven if the room really wants to believe the story instead.

Founders are wired for optimism. Great investors actually like that; it’s part of what you
bet on. But optimism plus denial is a dangerous combo. When the runway is shrinking and
the next round is far from guaranteed, someone has to de-fog the mirror. That “someone”
is almost always the investor or the board member who has seen this pattern before.

Why Investing Hurts More Than Spreadsheets Admit

Loss Aversion: The Pain Feels Bigger Than the Loss

Behavioral finance has shown again and again that humans feel losses more intensely than
gains of the same size. A $1 million gain feels nice; a $1 million loss feels like a gut
punch. That’s true for public markets, but in startup investing it’s amplified. You don’t
just lose moneyyou lose time, relationships, and sometimes reputation.

Investors and founders are just as prone to emotional decision-making as anyone else:
selling too early because a previous loss still burns, doubling down on a struggling
company because you can’t bear to “lock in” the pain, or clinging to a too-optimistic
forecast because the alternative feels unbearable. On paper, you should simply update the
model and move on. In real life, you’re negotiating with your own psychology as much as
with the market.

Volatility and the Urge to “Do Something”

Market volatility, whether in public stocks or private SaaS valuations, makes people want
to act. When charts wobble, the natural instinct is to pull levers: cut the marketing
budget, fire quickly, hire faster, pivot harder, chase the next hot segment. Doing
nothingsticking to a thoughtful long-term planoften feels wrong exactly when it’s most
right.

Think of it like flying through turbulence. The plane is built to handle it. The pilots
know what they’re doing. But as a passenger, every bump feels like a signal that someone
should “take control” more aggressively. Investing is similar: the more noise you see,
the more you want to “fix” it, even when the best move is to accept that rough patches
are built into the journey.

The SaaS Version of the Worst Part

When Growth Stalls and Burn Doesn’t

In SaaS, everything is a ratio: growth vs. burn, new ARR vs. churn, LTV vs. CAC,
valuation vs. revenue. As long as growth outpaces burn and each quarter looks better than
the last, everybody’s happy. You might argue about pricing, roadmap, or sales comp, but
the basic story hangs together.

The worst part hits when the ratios break. Growth slows while burn stays fixed (or worse,
increases). New pipeline is soft. The next round is no longer “automatic.” That’s when
investors have to stop asking, “How do we get you to the next round?” and start asking,
“What if the next round never comes?”

Those are brutal conversations. They sound like:

• “We need to cut burn by 40% in the next 60 days.”
• “That senior executive we were excited about isn’t working outwe can’t afford happy ears here.”
• “The current plan assumes a fundraising environment that does not exist.”

None of that is fun to say. But it’s far better to say it at $300K MRR with 12 months of
runway than at $350K MRR with four months left and no term sheets.

Cap Tables, Dilution, and Awkward Math

Another “worst part” for both founders and investors lives inside the cap table. Early
rounds are often done with optimism and rough math. Everyone thinks, “We’ll clean this up
later.” Then “later” arrivesusually right before a major round or an exitand the cap
table tells a story no one loves.

Common issues include:

• Too many early checks with messy terms and odd preferences.
• Founders over-diluted before product–market fit, now holding a small stake in a still-risky company.
• Employee option pools that were never refreshed, leading to a demotivated team when new equity grants arrive.
• Complex anti-dilution or side letters that scare off new investors.

Guess who often has to deliver the bad news? The existing investor who knows how new
capital will look at the cap table. Again, the worst part isn’t the math itselfit’s the
human conversation that follows: “Yes, you built something real. No, the economics at
exit will not feel the way you assumed in the early days.”

Board Meetings: Where Optimism Meets Reality

Board meetings are where the worst part of investing shows up on a calendar invite. Most
founders come in with a deck full of green arrows, bigger logos, and updated forecasts.
Most investors come in with questions about retention, sales efficiency, hiring, and
runway. The tension between those two perspectives is healthyuntil it isn’t.

The loneliest seat in the room is the one where you see that the story and the numbers no
longer match. You’re the person who has to say things like:

• “This forecast is not credible given the last three quarters.”
• “You don’t have a fundraising story that fits the current market.”
• “You’re over-hiring ahead of proof, not because of it.”

Great founders don’t love hearing this, but they respect it. The worst founders ignore
itor quietly shop for new investors who will tell them what they want to hear. Great
investors know that short-term discomfort is better than long-term disaster. Still, being
the one who forces that discomfort never really gets easier.

Common Investor Mistakes That Make Everything Worse

The worst part of investing is amplified by a set of classic mistakes that show up across
public and private markets. Among the big ones:

Trying to Time the Market

Whether you’re trading stocks or making venture bets, perfectly timing entries and exits
is almost impossible. In public markets, jumping in and out based on headlines usually
leads to buying high and selling low. In venture, waiting for the “perfect” signal often
means you miss the great companies that never looked perfect at seed or Series A.

Not Understanding the Investment

Investing in a space you don’t understand is one of the fastest paths to regret. In SaaS,
that can mean backing a company with a product that sounds clever but solves a problem no
buyer actually prioritizes. In the public markets, it looks like buying complex products,
leveraged ETFs, or exotic strategies because someone on Twitter made them sound smart.

Over-Concentration and Story Addiction

Many investors fall in love with a single story and over-concentrate in one stock, one
sector, or one company in their private portfolio. Sometimes it works spectacularly.
Often it doesn’t. Diversification is unglamorous, but it’s also one of the few free
lunches in finance. A portfolio that can survive multiple things going wrong gives you
time to let your winners compound.

Emotional Trading and Panic Decisions

Selling everything in a downturn and piling back in after a rally is one of the most
documented ways investors destroy their own returns. In SaaS, the equivalent is pulling
support abruptly from a company right before a key product release, or doubling down
blindly on a struggling company because you’re desperate to “make it back.”

How Founders Can Make the Worst Part Less Terrible

Founders can’t eliminate the tough parts of investing, but they can make those moments
healthier and more productive. A few practical moves:

• Treat your board like an early-warning system, not a stage. If board meetings are
  theater, investors will feel pressured to applaud rather than speak candidly.
• Send ugly numbers early. If churn spikes or pipeline collapses, don’t bury it in a
  quarterly PDF. Flag it in real time, ask for help, and invite unvarnished feedback.
• Keep a living “Plan B” and “Plan C.” Scenario modeling is not pessimism; it’s risk
  management. When you’ve pre-discussed alternative paths, the eventual tough call feels
  less like a surprise ambush.
• Keep the cap table boring and clean. Simple terms, straightforward ownership, and
  clear vesting schedules reduce drama when new capital or an exit appears.

Most importantly, founders can give investors explicit permission to be brutally honest.
A simple line like, “If you think we’re off track, I want to hear it even if it stings,”
lowers the emotional barrier for investors who don’t want to crush the mood every time
they open their mouths.

How Investors Can Be Better Partners

If you’re an investor, you can’t avoid the worst part of investing, but you can decide
how you show up when it arrives.

• Set expectations early. From the first check, be clear that your job includes telling
  the truth when things are hard. That way, tough feedback later feels like follow-through,
  not betrayal.
• Separate the person from the performance. You can say, “This go-to-market strategy
  isn’t working” without implying, “You’re a failure as a founder.”
• Bring data, not vibes. When you say, “This plan won’t get you funded,” back it up
  with benchmarks, market comparables, and examples from other companiesnot just a hunch.
• Offer a path forward. Critique without alternatives is just complaining. Always pair
  tough feedback with at least one credible plan the founder can explore.

The worst part of investing doesn’t have to be a relationship killer. Done right, those
brutally honest conversations become the glue that strengthens founder–investor
alignment, even when the numbers aren’t pretty.

Practical Scripts for Tough Conversations

Sometimes the hardest part is knowing how to start the conversation. Here are a few
simple scripts you can adapt:

When Runway Is Tight

“I’ve run the numbers three different ways, and in all of them we’re below six months of
runway. That’s not a moral failing, but it is a math problem. We need to talk about
changes to burn, plan, or bothnow, not in three months.”

When the Forecast Isn’t Credible

“The new forecast implies we’ll triple sales productivity in two quarters without any
major changes in team, product, or market. I don’t see a mechanism that makes that
believable. Let’s walk through what would have to be true for this to happen.”

When a Key Hire Isn’t Working Out

“We were all excited about this hire, but the pattern across the last two quarters says it
isn’t working. Keeping them in the role is not neutralit’s actively reducing our odds of
success. How can we make a humane but decisive change?”

Field Notes: Real-World Experiences from the Trenches

To make this less abstract, let’s walk through a few composite stories drawn from real
patterns in SaaS investing. The names and details are changed, but the emotions will feel
familiar to almost any founder or investor.

Story 1: The Company That Waited Too Long

“Company A” hit $1M in ARR with decent growth and raised a healthy seed round in a
friendly market. For a while, everything looked fine: logos were recognizable, the team
was energetic, and the board decks were full of promising pipeline slides. Underneath,
though, there were warning signs: churn creeping above 10%, no repeatable demand engine,
and a sales team that kept blaming “deal slippage” for missed quarters.

One investor saw the pattern and started asking tougher questions about retention,
segment focus, and burn. The founder, exhausted and optimistic in equal measure, kept
leaning on the idea that “the next release” or “the next big customer” would fix things.
The investor hesitated to push too hardafter all, nobody wants to be the villain in the
founder’s story.

By the time everyone admitted the model wasn’t working, runway was under five months.
Big changes were still possible, but they now required layoffs, painful cuts, and a last
minute scramble for bridge capital. The worst part for the investor wasn’t marking down
the position; it was knowing that earlier candor might have prevented a crisis.

Story 2: The Cap Table Surprise

“Company B” was beloved by customers and had a strong SaaS product with real stickiness.
A strategic acquirer appeared with a solid offernothing legendary, but a life-changing
outcome for a small team. Everyone showed up to the first serious conversation excited.
Then the lawyers dug into the cap table.

Years of ad-hoc notes, side agreements, and friendliness had piled up into a messy set of
preferences and ownership stakes. Early angel investors had unusual terms. A former
advisor still held a surprisingly large chunk. The employee option pool had been promised
away informally but never cleaned up formally.

When the final waterfall got modeled, the founders realized that what they thought would
be a generational outcome was… fine, but far from what they had expected. The investors
didn’t love it either, but most of them were diversifiedthis was one line in a broader
portfolio.

The emotional gap between “what I thought this would mean for my life” and “what I’m
actually getting” hit the founders hardest. For the investors, the worst part wasn’t
their own returnit was having to walk the founders through the math and admit that no
last-minute trick could fix a cap table years in the making.

Story 3: The Honest Board Meeting That Changed the Trajectory

Not every story ends badly. “Company C” was a developer-tools startup in a crowded space.
Growth was okay but not spectacular. Sales cycles were long. Competitors were well
funded. At one board meeting, one investor finally said what everyone quietly knew:
“This business will not justify the amount of capital we’re planning to raise. But it
could be an excellent, profitable company if we change our target outcome.”

Instead of chasing a unicorn valuation that the market had no reason to grant, the
founder and investors agreed to lower burn, refocus on high-margin segments, and optimize
for strong cash flow and a strategic exit in a few years. Hiring slowed, experiments were
more disciplined, and the company stopped contorting itself to fit a narrative it didn’t
need.

Was the conversation fun? Not at all. Did it save years of frustration and misaligned
expectations? Absolutely. In the end, the company exited for a solid, unflashy multiple.
No one made “tech Twitter legend” money, but the founder and team walked away proudand
the investor who spoke up at that board meeting quietly became one of the founder’s most
trusted advisors.

What These Experiences Have in Common

Across these stories, a few themes repeat:

• The math usually tells the truth before anyone wants to say it aloud.
• The hardest conversations are almost always the ones you wish you’d had six months earlier.
• Cap tables and fundraising terms matter more than anyone wants to think about on “deal day.”
• Founders and investors both suffer when optimism isn’t balanced by realism.

The worst part of investing is rarely a single moment. It’s the accumulation of tiny
decisions to delay honesty: one more quarter of hoping, one more overly rosy forecast,
one more round done on terms no one fully understands. The best investorsand the best
foundersaccept that discomfort early, so they can steer before the wall is in full
view.

Conclusion: The Cost and Value of Telling the Truth

Investing, especially in SaaS, is a long game played with incomplete information and very
real human stakes. The spreadsheets matter, but the relationships matter more. The worst
part of investing isn’t volatility, losses, or dilution. It’s looking someone you believe
in straight in the eye and saying, “This is not working as-is, and we have to change.”

Yet that’s also where investing creates its greatest value. Honest, timely conversations
save companies that can be saved, return capital that can be returned, and protect the
people who will go on to build the next thing. If you’re a founder, give your investors
permission to be that honest voice. If you’re an investor, accept that this is part of
the job descriptionnot a bug, but a feature of doing the work well.

The worst part of investing never feels good. But handled with clarity, empathy, and
data, it can be the turning point that gives your SaaS companyand your portfoliothe
best possible shot at a meaningful outcome.