VC Cliché of the Week

Being a venture capitalist is one of the greatest jobs in the world. You get to spend your day meeting with incredibly smart and talented people who come to you with their ideas.  And you get to pick the ones you like best to invest in. I know that’s a vast oversimplification of the job and leaves out the hard parts, but even so, it’s a tremendous gift to be able to work in this job every day.

But one of the problems (the kind of problems we all like to have) is that you can’t kiss all the pretty girls. I see opportunities every day that I get excited about. I come home and tell my family about this new service, a great idea, some wonderful people I met. They ask me if I am going to invest. And I shrug and say, "we’ll see".

If we invested in every idea we liked, every person who we know will make it, every new web service that we can’t wait to use, we’d end up with a portfolio of thousands of companies. And that is unmanageable.  So we have to pick the ones that make the absolute most sense for a variety of reasons and let all the other ones go.

And believe it or not, that’s hard, because given the option, we’d all like to kiss all the pretty girls. At Flatiron Partners, we invested in 56 companies between August 1996 and August 2000. Here’s the breakdown of new deals per year:

1996 – 4 companies
1997 – 4 companies
1998 – 5 companies
1999 – 24 companies
2000 – 19 companies

Clearly in 1999 and 2000 we tried to kiss all the pretty girls and it hurt us. We’ll end up making a little money on our investments in 1999 and 2000 in the aggregate but it has been an incredible effort to do that.  And we are not in the business of making "a little money".

So discipline is the hallmark of a successful venture capital firm. I’ve done it right and I’ve done it wrong and I prefer doing it right.  So we won’t kiss all the pretty girls. But someone will try, you can be sure of that.