VC Cliché of the Week
The father of this weekly series, the guy who taught me at least half of the cliches I know, is a guy named Bliss McCrum. He and his partner Milt Pappas taught me the venture capital business from 1986 to 1996 when I worked with them at their firm, Euclid Partners.
One of my favorite cliches from Bliss is a rising tide lifts all boats.
Whenever things seemed too good at a portfolio company, in the stock market, the economy, or somewhere else, Bliss would quip, "well you know that a rising tide lifts all boats".
It was his way of saying "don’t mistake a good market for a good business". The insinuation was always that the tide would come back in and so would the boats. And you had to be prepared to make things work in tough times as well as good times.
And we are in good times in the venture business, the internet business, and for the most part, the US economy. Consumer confidence hasn’t been this strong since before the Iraq war. The Fed has raised rates 15 times and may not be done, signalling that the economy remains stronger than they’d like it. Venture money is flowing freely in Silicon Valley and China and in many parts of the developed or developing world. Advertising dollars continue to move from offline media to online media and that is one rising tide that is certainly lifting all boats.
But we know these good times will come to an end at some point. Are we in 1998 as Caterina suggests and have another year or two before the good times end? Who knows? I don’t expect this run of good times to play out like the last one anyway.
The best we can do is prepare our companies to withstand a business environment that is less friendly. Companies need a business model, they need a seasoned and well constructed team, and they need patient and experienced financial partners. With these ingredients, hard work, and some luck, you can survive a downturn.
Some of the best companies I’ve ever worked with were funded at the height of the last bubble and they are doing great now. So it doesn’t really matter when you start a company, but it does matter that you can make it through tough times. Because right now we have a rising tide that is lifting all boats and that won’t last forever.