Making Something From Nothing

I spent some time yesterday at Musee De l’Orangerie with two of my teenage kids. Its an art museum in the Tuleries housing the art collection of Walter and Guillaume and Monet’s famous Waterlilies paintings. That’s a Modigliani painting of Paul Guillame from the l’Orangerie collection on the right.

As we walked through the lower level which houses the Walter-Guillaume collection, I was struck by how many amazing paintings are in this collection. Its a tour de force and easily worth hundreds of millions of dollars, if not more.

And yet every single one of these paintings started with a blank canvas and some paint. And of course the mind and hands of a master painter.

So much of what we come to value in life starts this way. Google started this way as did Microsoft and Facebook.

People ask me all the time whether the venture capital business is affected by the market meltdown. And for sure it is. Its probably less affected by the capital markets themselves and more by the bad economy that we’ve ended up in. But surely this mess we are in will impact venture capital and the startup economy.

But I also remind the same people that venture capital doesn’t make money buying an asset that’s worth one price and then selling it at another. Venture capital, and the entrepreneurs who fuel it with their ideas and hard work, makes money going from nothing to something.

That’s a fundamental difference and we cannot ever lose sight of this fact. Nothing costs nothing. We don’t have to pay for our ideas, imagination, and hard work we put into turning nothing into something. Well to be exact, the entrepreneur doesn’t have to pay for any of those things. The VC does pay for those things and gets a piece of the ride from nothing to something as a result.

Yes, if price/earnings ratios go from 20 to 5, VC returns will go down. But we can still make money going from zero earnings to tens of millions of dollars of earnings. There’s a return in that value creation in all markets, good and bad. And always will be.

I am going to spend a good part of this new year’s day at my favorite art museum in the world, the Pompidou, which houses amazing works of modern art, many of which have been created in the past decade.

And I am going to think about how that art was concieved of, created, and realized from basically nothing. Its inspiring and I want to go into this new year inspired so that I can participate in the nothing to something company creation process with enhtusiam and zeal.

Welcome to 2009 everyone.

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Comments (Archived):

  1. fredwilson

    That¹s a great Churchill quoteI just reblogged it at

  2. Nate

    Markets go up and down. It’s human progress that matters.Great point about creating value from nothing. The most important things humans have accomplished are essentially “free” and infinitely scalable, that is, they’re the intangible products of human ingenuity. Even if Newton, Einstein, Mozart, and Picasso had been paid trillions, they still would have been under compensated for what they contributed to the world.I’m a bit of a pessimist about humans. It seems like most of us are just one step removed from our cave dwelling ancestors, but I’m an optimist about the human race because our high achievers more than make up for everyone else.Happy New Year everyone! I predict 2009 will be thick with crisi-tunities.

  3. Halley Suitt Tucker

    Think too about how so many of the artists who made these works were told, “why bother?” and “what a waste of time!” and the parental, “Painter?! You’ll starve!” and “You’ll never make it!” and “Your mother and I demand that you stop thinking of this foolish art career and go to law school.” and on and on and on. Entrepreneurs surely share this marginalized territory in most societies, especially when they are young and others around them are being pushed to make conservative work choices in bad times.If VC’s can make any investment in 2009, I hope they can learn to make a psychological investment in their out-of-the-box Penseurs and Penseuses (see Rodin) to help them hang in when the going gets tough and remind them the tough need to stay the course, keep dreaming, keep believing, keep thinking up wild and wacked-out projects and products, especially in rough economic seas.The good side of the bad economy is that entrepreneurs are now in fine company when it comes to failure and falling flat on their faces — something all “successful” artists and dreamers need to do on a regular basis. With creative destruction all around, their prat falls will blend right in. Like Churchill said, “Success is going from failure to failure without loss of enthusiasm.”

  4. Dan Blank

    Fred,What a great post to start the new year with, and I believe it holds true for many professions outside of venture capital. I have watched fear sweep our culture, and am often surprised in the ways people react to “doom and gloom.” I have seen people who are afraid of losing their job become so demotivated that they put in less effort, become more bitter, and lose site of what it was that they were creating. That choice – to stop creating – to stop growing – to stop becoming – is just horrible to watch.I know nothing about venture capital beyond what I have read on your blog; the reason I keep coming back here is that I am always impressed at how obvious it is that you are hoping to shape things in positive and larger ways. That the passion around creation is a driving force in your life. And that is a welcome sentiment to see every day.My wife is an artist (http://www.sarahblankstudio…) and I am constantly in awe of her. I watch those blank canvases go into her studio and come out as something multi-dimensional – something new – something meaningful – and something that beyond the painting itself, is a vehicle for her own personal growth. It is amazing to watch.Have a great new years!

    1. fredwilson

      Thanks dan. Its interesting to me that this blog is worth a daily visit from someone not directly connected to web startups and vcI’ll check out your wife’s work. Thanks for the link

    2. Nose

      Are you sure that you have a wife?

  5. IanWilson

    I think your point about going from nothing to something becomes confused when you state that it is Venture Capital *and* entrepreneurs who do this. Venture Capital, and more often than not Angel Capital go from something to something bigger. Only entrepreneurs, in most cases, go from nothing (via minus) to something.In artist terms that seems to be saying “that is a fabulous painting, I will give you money to make more or make that one bigger”. The only artists who get money to go from nothing to something are the “past masters” who are being commissioned to do new works (the serial entrepreneur who has already made some VC money).Not to belittle at all the contribution of the VC industry to great companies but it is the most fundamental misconception of new entrepreneurs (who surely will gravitate to this blog) that the VC industry funds the equivalent of starving artists with dreams, which is unknown entrepreneurs with only an idea.

  6. Geoff

    Yet another great post Fred, you are going from strength to strength. I once went to a film screening showing the work done on blank canvases in prisons. First was painting and the second.. boxing! It was really thought provoking about the different ways of exploiting a simple blank canvas.Wishing you and your family (including your extended business one) a Happy and successful New Year.

  7. csertoglu

    I’d also recommend seeing From one Revolution to Another, at Palais de Tokyo.

  8. Yule Heibel

    One of my favorite artists just became a venture capitalist. She used to sing with The Sugarcubes – great song called “Birthday” comes to mind, in time for this new year’s birthday – but now is known simply as Bjork. ;-)See

    1. fredwilson

      I wish her luck. $800k is not enough though. Anything less than $100mm US$is not enough in my mind

      1. Yule Heibel

        True – I hadn’t thought that far, especially since anything after 2 or 3, maybe 4, zeros gets out of my day-to-day understanding…Well, maybe Bjork can be the “sugarcube” that lures some dray horses (heavy lifters) into this venture!

      2. Jason

        Have to disagree. With all of the disruption in the venture/finance business people can participate in radical new ways on many different levels. 200MM is certainly one level, however 800k is indeed another. Each might yield the same returns too (~10x) and be thought of as a success in their own right. It seems the future will hold even more mixed/distributed/crowd-sourced/creative methods of financing which will become an eco system by and of itself. The smart players like yourself will most likely adapt and leverage these shifts while 20th century and me-too financial strategists will struggle to break even. The point is, the future says you don’t need 200MM to play and it will be open to more people at more levels than ever before.

        1. fredwilson

          I hope you are right

    2. terra210

      Wow; I will be fascinated to see how Bjork’s fund progresses. It is terrific she breaks out of her millieu and is investing in her country as it struggles. I would think the 800K is just a statement of good faith. Hopefully others will follow. Creatives leading funds will work; they provide cultural insight in a dry house. Being an insider in finance is no particular recommendation for success, (thank-you Mr. Madoff).

      1. fredwilson

        True. But she needs more capital if she’s going to be impactful

        1. terra210

          On further reading it appears the initial 800K did not come from Bjork, and that the fund is hoping for 17 million. It will be interesting to watch, though I am now unsure what her role actually is, other than “icon”.”It is hoped that the fund will have close to ISK 2 billion (USD 17 million, EUR 12 million) in capital and that companies will be able to apply for grants from the fund next year. Audur Capital has already contributed ISK 100 million (USD 867,000, EUR 614,000) to the fund.”…

  9. reiboldt

    The best quote from this post is “nothing costs nothing.” This is something literally every American has found out this year. Even though everyone probably *knew* it was true, now everyone is feeling it, and it’s happening in ways many people never realized. CEO’s with once unstoppable companies are out of jobs. Investors who thought they were the best or with the best are finding their assets diminished to almost no value. An incoming gov’t is realizing that promises are more of a challenge to fulfill when faced with major hurdles. Start-ups with products of seemingly endless value can’t even raise operating capital, etc, etc, etc. This is why I wrote a few weeks back that 2008 would be known as the year of great humility (; because, everyone was humbled in 2008, even asset managers with $50 billion or a Governor who thought he was untouchable. But, the great thing about 2009 is that once we learn these lessons (the hard way unfortunately), now is when the real progress can take place. I’m glad 2008 is behind us and am looking forward to 2009!

    1. fredwilson

      Or as my friend howard says, ³broke is the new rich²

  10. fredwilson

    Fear of failure is so debilitating and failing is the best way to get overit

    1. NYCStartupfiend

      And if you have not failed, you are not trying hard enough or taking enough risk. End game success is made up of many hundreds of small and big failures learned from and adapted to. With my business partners and employees, we like to use the saying “today is a great day to stop doing something dumb”. I like it because it acknowledges the reality that we don’t know everything and everyday we learn something new but also because it explicitly acknowledges that making mistakes is a part of getting smarter and being successful.

      1. fredwilson

        When brad feld was an entrepreneur and running a tech company in the early 90s his motto was ‘we may suck but we suck less’It recognizes that fact that you aren’t always going to be perfect.I also like ‘fail fast’ as a motto

  11. Jim Kovarik

    Interesting post Fred, nothing like Paris to inspire. Your comment about entrepreneurs not having to pay for ideas, imagination and hard work struck me as incredibly true – and draws great parallels to artists. It reminded me of a quote from a speech JK Rowlings made at Harvard’s commencement this year titled ‘The fringe Benefits of Failure, and the Importance of Imagination’. The quote reads: “So why do I talk about the benefits of failure? Simply because failure meant a stripping away of the inessential. I stopped pretending to myself that I was anything other than what I was, and began to direct all my energy into finishing the only work that mattered to me. Had I really succeeded at anything else, I might never have found the determination to succeed in the one arena I believed I truly belonged. I was set free, because my greatest fear had already been realised, and I was still alive, and I still had a daughter whom I adored, and I had an old typewriter and a big idea. And so rock bottom became the solid foundation on which I rebuilt my life.

  12. Havelock

    Yes, good thought.But there is a categorical difference between the creative impulse of artist andentrepreneur. The entrepreneur must consider the market, the problem solved or need addressed, and be able to map that to an at least reasonably concrete set of value expectations in order to be financed. Better still the “unfair competitive advantage.”The artist may have such things in mind (Warhol: “art is commerce”) but cannot pursue the creative impulse with any market destination as a primary driver. The artist’s act of creation is more of a hero’s journey into unknown, unanticipated results, or at least must be to get anywhere primal and “valuable.”I may have this all wrong, but I do speak from some experience, as an entrepreneur several times over and now happily a kind of artist/inventor collaborating with visionary artists who autonomically originate aesthetic experience (I process, transform, and render it – a sort of aesthetic Turing machine). And I have known people, including one who became “great,” who were once thought to be creatures of a market place and time, but whose aesthetic journey was idiosyncratic, subjective, even sui generis, ultimately redefining both art and marketplaces.It takes courage and creativity to create a great company. And code sometimes approaches art in its elegance and virtuosic technique. But to be funded and to thrive requires market orientation and performance goals, both stultifying to artists who must first relinquish dreams of financial success and recognition in order to finally allow their defining subjectivity to run free.With respect and appreciation for this thoughtful post by Mr. Wilson, have to say that suggesting some kind of equivalency between entrepreneur and artist exalts the successful entrepreneur on the wrong grounds and misleads the hopefuls, while misreading and in ways devaluing the artist’s experience and struggle.Like many things in Paris, the comparison is romantic and tempting. But it would be wiser to resist.

    1. fredwilson

      Romantic and tempting: that’s what’s in my mind right now for sure. I agree that the metaphor breaks down quickly when you test it, but my bigger point was about making something from nothing. That’s the big idea I want to convey

  13. Scott

    Great post to start the new year.It reminded me of this quote and post:Eleanor Roosevelt once said, “Great minds discuss ideas; Average minds discuss events; Small minds discuss people.” @

  14. Sameer

    Great Post! It inspired me to write about the title of my own blog. Have a great 2009!

    1. fredwilson

      Link please!!

  15. NYCStartupfiend

    Happy new year! great post. Valuations are fashion, susceptible to the whims of human psychology and crowd behavior. At the bottom things seem bleakest, at the top they seem brightest. Valuation go up, they go down but if you don’t like how they are now, just wait a little while.Innovation on the other hand is truth and the money made from it – both by the creator and the financier – is justified and well earned. For a great contrast to your comments on innovation and creativity being rewarded, read Wolff’s article about what has happened in the leveraged PE sector:… . If you put into the spreadsheet that costs go down and revenue goes up and you buy the whole thing with cheap money borrowed from someone else who takes all the actual risk, it’s not hard to predict what the outcome is but the simple fact that you have added no value and created nothing does not change. The rebirth of a US economy based on creating real value – and rewarding those who create it while not rewarding those who skim of the labors of others – is very much the silver lining in all of this.

    1. fredwilson

      Yes indeed. That’s what I am saying. And you totally get it. Happy new year

  16. David Saintloth

    It seemed as if you are saying that the entrepreneur puts nothing into making their vision successful.”We don’t have to pay for our ideas, imagination, and hard work we put into turning nothing into something.”This is readily identified as nonsense. We pay for our ideas through the time we spend having them, the energy we expend during that act, simple ideas (and easily thought up by others) take up less time to create in general than more novel ones. Individuals with more skill (read acquired experience either by previous study of the problem space or innate gift) may need less time but the more novel the idea the more time it takes to envision it and the more time we need to do that means we had better already be able to sit down and think. (and not be worried about catching food for the day for example) The costs of ideas are hidden in each entrepreneurs ability to free time to pursue thoughts that may be novel AND useful in some business context. If you don’t have that time, you can’t generate those ideas.”Well to be exact, the entrepreneur doesn’t have to pay for any of those things.”Wrong, he/she does pay and big time by freeing time from the world through previous payments. Investments in education, investments in physical labor, investments in using an acquired expertise. These bring money which can be used to free time to crystallize the vision with deeper thought.”The VC does pay for those things and gets a piece of the ride from nothing to something as a result.”The VC invests in a presented vision after being convinced that there is profit in doing so. If they chose poorly and an investment doesn’t pan out, it isn’t because the entrepreneur who they backed paid “nothing” for the vision. It is simply because the vision is not valued by the market at the time or the vision was poorly executed. The fact that the idea was had and some steps taken toward achieving it, requires that effort be made to take it there and that effort as mentioned earlier costs time and time is always paid for.

    1. fredwilson

      All true and good points. But you missed the metaphor, the big point, that starting something and financing it is different than all other forms of investment

      1. David Saintloth

        Fred, did I miss a metaphor or did you fail to point out where you were using one? Your latter point here (starting something/financing it) is quite obvious, I was just responding to the particular lines quoted which simply aren’t true in any context that was presented in the original article as far as I can see. Whey you type:”the entrepreneur doesn’t have to pay for any of those things. The VC does pay for those things and gets a piece of the ride from nothing to something as a result.”It is just wrong. Not all entrepreneurs whip up an idea and try to sell it as the next big thing sans implementation to VC’s. Some entrepreneurs actually build or try to build their vision first, expending lots of time and money before they consider talking to a VC, or are you referring only to the “I got a business plan and a dream.” type of entrepreneurs? If so, I think you should qualify your position to make that clear.

  17. Jared hutchings

    Great post Fred. Reminds me of the Nobel prize for human capital. That value certainly didn’t drop double digits in 2008.

  18. fredwilson

    That’s better and maybe its enough to have some impact in a small country like iceland. Its certainly better than nothing. But I still hope this attracts more capital

  19. fredwilson

    Maybe her role is like Bono’s role at Elevation

  20. Prakash

    I wish all of us could work like artists. A lot of us have ideas but do not bring it to life. Success comes only to those who have dared to sketch on the empty canvas without fear of spoiling it.

  21. terra210

    On further reading, it looks like they are hoping for 17 million, and that the initial amount did not come from Bjork:”It is hoped that the fund will have close to ISK 2 billion (USD 17 million, EUR 12 million) in capital and that companies will be able to apply for grants from the fund next year. Audur Capital has already contributed ISK 100 million (USD 867,000, EUR 614,000) to the fund.”…

  22. Jose Paul Martin

    Fred, great post – de-mystifies certain assumptions about VC. And just like valuing art – valuing companies, particularly early stage ones is difficult. The effort behind the masterpiece is more of skill, effort, or just brilliance of ideas. I hope people realize that.

  23. David Skinner

    Fred, thanks for starting my year with some inspiration. The blank canvas is a powerful analogy… so easy to forget that even great things came from humble beginnings. Just came across your blog a few weeks ago but been enjoying your regular posts, all the best for 2009.

  24. Kevin Cimring

    Hi FredThanks for the post. Its particularly opportune for me to read this post now as we head into the final couple of months prior to our launch. Creating something from nothing is particualrly gratifying in these times, when start-ups have the potential to hire people and generally inject some positivity into the surrounding environment. Its a ripple effect that susatins the underbelly of economy, expecially in these recessionary times.Kind regardsKevin

  25. fredwilson

    Great thoughts

  26. fredwilson

    I¹m sorry to hear thatYou should try the whitney. It¹s always less crowded and has great artOr just head to chelsea and visit galleries

  27. lebousquet

    Interestingly, the art and startup worlds have something in common these days–bubbleitis. The value of work by noted contemporary artists–Koons, Murakami, Hirst, et al–is falling, or at least not increasing, and the price pendulum is swinging back toward earlier artists.Artists’ reputations, and the value of their work, are subject to many of the same forces that govern any market. Remember Bouguereau? Superstar artist around the turn of the 20th; his canvasses sold for top dollar. Then, over a couple decades, pfffft. Picasso, Braque and others came along and rendered Monsieur Bouguereau’s quaint nudes obsolete, the painterly equivalent of Yahoo. The world changed, and so did taste and artistic sensibilities.Something is created–a painting, a string of code–and it changes things. How did we experience the Internet before Google and, perhaps more fundamentally, Twitter? Hard to pinpoint, but differently. How did we see the world before Cubism and Abstract Expressionism? Hard to say, but differently. The old aesthetic yields to the new. But only for a while. In the modern era, artists work by devouring the past. So do entrepreneurs (and VCs). Something springs from nothing, which springs from something.

  28. fredwilson

    The metaphor is the blank canvas which costs almost nothing to buy and whenpainted on by a master artist, can turn into millions of dollars of valueThe same is true of the germ of an idea that gets the entrepreneur motivatedto drop everything and start a new companyI¹ve seen that exact behavior so many times and I think it¹s a very similarphenomenonYou are getting caught up in the differences between the entrepreneur andthe VC in this market, which are all great points, but that¹s not reallywhat I was talking about

  29. Flying Leap

    Thanks for this, you inspired me to visit MoMA on New Years Day. Bad idea for New Years Day, however. Tourist invasion meant we had to settle for the MoMA design store instead 🙁 Maybe next week…

  30. patwoodward

    This post reminds me of a Zappa quote.”Art is making something out of nothing and selling it.”- Frank Zappa

    1. fredwilson

      Great quote. Thanks for sharing it

  31. Lloyd Fassett

    Ripple in still water,When there is no pebble tossed,Nor wind to blow.- Ripple, The Greatful DeadI really like this post because it’s about the emotion of creation. It’s about the person from a crowd who starts a thing..says that they can imagine a better way through the mountains. Huzzah’s for the multiple commentors that call out the defiance of some artists.”Some people see things as they are and ask, “why”? We dream of things that never were and ask, “why not?” – John F KennedyI also like it because startups usually create from scarce resources. In the end, the resources as hand don’t usually have too much of an impact either. Both are environments where ideas and achievements seem to get etched out of air to most people.And what a great day to to look at artistic achievements too and wonder back to the blank canvas at the beginning, like looking back on 2008 and the blank canvas that it was at the beginning. In a lot of ways art can save your life. I’m personally preferential to books and recommend a tiny, tiny book called The Tale of the Unkown Island by Jose Sarramago. It starts out “A man came to a door and said, ‘Give me a boat'”.But, it’s emotion. Emotion starts and keeps the ball rolling.Fred, you haven’t said anything about The Black Swan. You shouldn’t give up on that book. It’s a decent take on looking at an achievement and going back to the blank canvas learn.”…The problem of Inductive Knowledge – certainly the mother of all problems in life. How can we logically go from specific instances to reach general conclusions? How do we know what we know? How do we know that what we have observed from given objets and events suffices to enable us to figure out their other properties?” – page 40Thanks for the upbeat post to bring your readers into 2009. It’s really great to read that creating value is the name of the game, more so than 5 or 30x EBITA. Creating is a wonderful way to spend one’s career because it is emotional and it is defiant.

    1. fredwilson

      I like the black swan but it didn¹t inspire meNot sure why

  32. marshal sandler

    I am not a VC but your efforts are appreciated ! This is a portion of one of my posts , where I complement Adaptive Blue for filling in it’s canvas with a universal appeal. Art gives us an insight into the human conditionthis is important in any venture! Digital Media must learn to talk to people not just machines !Since with a lot of time in grade I know there is no free lunch without work!”You might read this blog and this article Helping FriendFeed? better yet have the Executives at Friend Feed follow the folks at Adaptive Blue these people have developed an application for all of us and they will succeed. -… !” Msandler

  33. fredwilson

    That’s great company to be in!

  34. benjie t

    Fred, I was going to refer a friend to your post and I realized I should share an excerpt from a Fortune article.… It’s not about BLANK canvases but it is highly relevant, and Buffett uses the same metaphor you do both in building his own business and in considering the motivations of people he buys businesses from. Take a look.-benjie tWarren Buffett:”Why do I go to work in the morning?” I’ve got enough money. I’ve got Social Security now, even. [Laughter] I’ll make it, you know? The kids won’t get much, but that’s their problem. So I say, “Why do I go to work in the morning?”Well, there are two reasons. I love painting my own painting. I come down to the office, I get on my back, and I start painting. And I think I’m in the Sistine Chapel. It’s my painting. Now, if somebody says, “Use more red paint instead of blue. Paint a seascape instead of a landscape,” I would hand them the brush in five seconds and I’d say-I’d say a few other things, too – but I’d say, “Do your own painting. I’ll go paint what I want to paint.” I get to do my own painting. And then I get applause – if I deserve it. And I like that. I like having the painting admired, and I like to get to paint my own painting. That’s so much more important to me than getting my golf score down three strokes or beating somebody at shuffleboard or something. I mean, it is the ultimate pleasure.Now, if that turns me on, why won’t it turn on these people who have built their own businesses? They have spent their life creating a wonderful painting. Now, for one reason or another, maybe tax reasons, maybe sibling reasons, who knows what, they need to sell it, they need to monetize it.They come to me, and they know that at Berkshire they’re going to keep the brush, they’re going to keep doing the painting, and I have to look at them and decide whether they are people that really care about their painting or care about the money. [One giveaway is] if they auction the business. We’ve never bought a business at an auction. Never. Anybody that wants to auction off their family or auction off the creation of a lifetime, that’s not what we want.I tell people you’ve got two choices. You’ve spent a lifetime building this business. Or maybe your father built the business and you carried it on. Maybe your grandfather. You’ve given up vacations sometimes. You worked on weekends and all these things to create this really incredible painting that you’re bringing to me. Now, if they want to auction it, they’re not for me.I tell them they have two choices. They can sell it to us, and it’ll be in the Metropolitan Museum of Art. We’ll have a wing for their painting. People will come and admire it, which they do. And they will say, “That’s one hell of a painter.” And you get to keep painting. Or you can take this marvelous painting and you can sell it to a porn shop. [Laughter] And he’ll take the thing and he’ll make the boobs a little bigger, something like that. And put it in the window. And a guy will come over in a raincoat a few years later, and he’ll buy it, post it in his window, and it’ll become a piece of meat, basically. We get the ones who care about having in it the Metropolitan Museum.