So You Want To Write About Venture Capitalists

Gary Rivlin has a story in today’s New York Times titled "So You Want to Be a Venture Capitalist".

It’s a good story line.  It goes like this. Everyone wanted to be a VC in the late 90s.  A bunch of big names tried it and didn’t make it.  The proof – they are now gone from the firms that hired them.

The problem with the story line is that its based on a small sample size of exactly three, Mitch Kapor, David Beirne, and Stewart Alsop.  And it uses the past five to six years as the time frame for the story.

I think the reality is very different.  All three of these guys are very talented people and would make great venture capitalists under different circumstances.

I think you need to look a lot more factors than Rivlin did to understand these stories.

The first place you need to look is at the firms.  NEA, Accel, and Benchmark are big firms now.  Each manages a large pool of capital and has a large investment team operating out of mutilple offices. I am not suggesting that such a structure is bad, but it does tend to create a hierarchy and a structure that often is not the best environment for learning the VC business at the partner level.

I couldn’t help but wonder if a smaller, more collegial partnership might have worked better for all three of these three guys.

The next thing you have to look at is the time frame.  Anyone entering the VC business at the tail end of the last bubble would have failed miserably.  If you did a lot of investing in 1999 and 2000 and that was the start of your venture track record, you’d have a hard time justifying your returns to anyone.

The fact that these three guys put up bad numbers in that time frame means that they performed about the same as everyone else in the business.

Finally, you need to look at the people.  I don’t know any of these three guys very well.  I’ve met them all at least once but I can’t speak to their talents as investors.  I suspect they didn’t love the venture capital business.  Many people who have been very successful in other tangential businesses decide to get into the VC business and find that they don’t like it.  They leave and move on to other things. 

I suspect that is what is going on with these guys.  Learning how to be a VC is tough.  And not everyone is good at it.  But I also think that it is a business you can learn to be good at if you love it, and if you give it time, and if you are in the right partnership. These ifs didn’t add up for the three guys in Rivlin’s story, unfortunately.

UPDATE: Silicon Beat says that Gary Rivlin is going to have a monthly piece on venture capital in the NY Times.  I hope Gary’s future work is better.