Want To Be A VC? Start A Company.
Steve Blank has a great post up on his blog suggesting that VCs should require startup CEO experience in their partners' resumes. He quotes from me in that post but I'm not going to state which one came from me. You can guess if you want.
You might be surprised to know that I agree with Steve. I have never run a startup company. By Steve's measure, that is a weakness in my background and experience. And I agree that it is. I've managed to overcome that weakness, but it is a weakness nevertheless.
I particularly like this paragraph in Steve's post:
What running a company would do is give early-stage VC’s a benchmark for reality, something most newly-minted partners sorely lack. They would learn how a founding CEO turns their money into a company which becomes a learning, execution and delivery engine. They would learn that a CEO does it through the people – the day-to-day of who is going to do what, how you hold people accountable, how teams communicate, and more importantly, who you hire, how you motivate and get people to accomplish the seemingly impossible. Further, they’d experience first hand how, in a startup, the devil is in the details of execution and deliverables.
Newly-minted partners are a big problem for entrepreneurs (and VCs too). And Steve's suggestion that they get a dose of reality before opining on stuff in board rooms is great. If a super talented young person in our firm shows an interest in a partner track, I would strongly consider Steve's approach.
John Doerr famously said that it takes $30mm of losses to train a VC. I am proof of that theory. But as Steve points out, you can start a company and operate it for a year for less than $500k these days. That sure sounds like a less expensive way to learn how to be a VC.
Sorry for the sappiness, but this is a good opportunity to say this…One of the things I’ve admired about you for a long time is that you don’t try to claim the mantle of “entrepreneur”, even though you absolutely are. From everything I’ve read of the early days of USV it was clearly a startup. You and Brad bootstrapped it out of your own pockets, LPs didn’t want to hear about investing in the web in 03-04…. I’m sure getting Flatiron off the ground wasn’t easy either.Lots of VCs (though less these days) try to pull the “I’m an entrepreneur too, I run a fund” shtick even though they have little justification to; you would have every justification, and yet you choose not to. I find that very admirable. (As an aside, I don’t like the way many people think a service business like VC is not a “real startup” as opposed to a product business. My Mom runs her own law firm, and let me tell you, it is a startup. Growing 100%/year, bootstrapped, all the highs and lows that come with that, and her ambition is to build the biggest corporate law firm in the world in twenty years, and if it was possible for law firms to raise outside capital and go public, boy, it would be a VC-caliber investment. And yet people sneer law firms as “lifestyle businesses”–some of them clearly are (and ain’t nothin’ wrong with a lifestyle business), but there are also lifestyle businesses in e-commerce, digital media… Anyway. That’s a rant I’ve had on my chest for a while.)
i appreciate your perspective on thisUSV was a startup in 2003but once we had investors, it really wasn’tthe terms of a VP LP agreement are pretty cushy for VCs
True, once you have LPs you have pretty much secured an income for 10 years regardless of whether you succeed or fail. But raising LP capital is just the beginning, and once you have capital the hard part starts. Generating deal flow (reputation/brand building), selecting investments, deal structuring, working with the portfolio, realizing returns…these are our services and products and, like any startup, if we ever stop learning from the market and improving our offering, we will surely fail (=poor returns/no subsequent funds).Notwithstanding the significant qualitative differences between a service and product startup, I totally view our fund as a startup in every respect. To be clear, I’m not suggesting that the VC startup experience suffices as the ‘run the company’ experience Steve discusses in his killer post. But after the past two years, I have a very hard time describing our experience at IA as anything but building a startup.
The well funded VC, the institutional real estate developer and the bingo hall owner are the three best financial algorithms in the world.The VC has a guaranteed payday for simply managing the money.The real estate developer leverages skill with no risk and big numbers if done correctly.The bingo hall owner has a fixed payout regardless of how many customers are in the room.
spoken like a man who has done at least two of those three. i often think you have done all three.
Sense a lot of emotion in you, I do. 😉
You say that like it’s a bad thing. 😉
Never a bad thing, emotions are.Let them out, we must. Else accumulate and bubble up in unexpected ways, they will. 😉
love the Yoda tone I do, great!
Love to hear the voice of Yoda.
Wondering where you were, I was.Quiet, of late, have you been.Visit here more often, I will.Duty to the jedi order, I have.
as someone running a service startup myself, i agree it’s a start up for sure.as someone who ran a tech startup (that failed) i’d say there are some pretty big differences building a service offering based on one’s skills and bringing a product to market.that being said, nice comment 🙂
Thanks. :)(And I definitely agree the two are different; I don’t think one is harder than the other, though.)
I think statistically speaking, the tech product start up has less chance of success. However, if it is successful, it has greater chance of having an over inflated valuation for at least 10 years of 1 billion dollars or more. 🙂
higher risk, higher rewardVC is less risky but the entrepreneur makes the bigger payday when it hits
IF he/she has been smart with his legal work and dilution. And IF that’s a proper capitalist market.Really differs from market to market Fred.We failed in Singapore not because of lack of effort but because we didn’t understand the system.In the Singapore system, you’re better off diluting most( maybe even 80%) of your equity to the government, then using their support to make yourself successful.And I guess even in the US system, you need to be good with your deal-making..
If the VC is less at risk and the entrepreneur makes the bigger payday when it hits, then the risk/reward is proportionate as it should be.Fred, I think you’re due a lot more credit than all that. @pegobry:disqus is right — USV is your direct start up experience plus on top of all that you’ve been in the front lines of a lot of companies going from mere concept through all the cycles of maturation. I know I speak for a lot of entrepreneurs when I point out that a lot of people value what you’ve got to say on the topic of successful start up strategy. Don’t short change yourself, Fred. You’ve been around the block plenty. You know what time it is.
HARD TO SCALE SELF.THAT WHY.
don’t remind me.
in service company your employee is another investment .. if does not give returns … cut it off..in product company your employee is another vein your body…cut it and bleed to death.
Pascal -Regarding your point about “lifestyle businesses,” there is nothingwrong with them, and yes you find some very successful ones in the technologyspace that have grown to tens of millions, if not over a hundred million.I can’t speak to a service business not being considered a startup, becauseI’ve never heard that, but rather I can speak to it (typically) not being a VCcaliber investment not because of a lack of growth, but because of themodel. When your revenue is primarily service based, it doesn’t scale inthe same way that a product company does. It isn’t just about topline growth, but two key factors I can bring to light are profitability margins (product based companies can lead to more profitable companies) and recurring revenue (important for continued financial viability and for annual budget planning in terms of how much “new” revenue you need each year relative to your existing base from multi-year contracts). Both of these are important elements to an investment’s success, among other factors.
I’m aware of all these concerns and I think they’re warranted to a certain extent, and yet I look at the market cap of, say, Accenture…It’s perfectly possible to build in 10 years a service company that’s as big as many “product” businesses. There are exceptions to every rule, and VC’s jobs is to look for exceptions, not rules.
There are always exceptions and Accenture is certainly one. It has a lot of recurring revenue due to its managed services business and its margins are on average much higher than the pack because it typically does specialized, non-commodity work. However, just because someone works hard and builds a big services business doesn’t make it investment worthy. Accenture is an exception to most all other services companies, and as its services continuously become commoditized, they continue the difficult task of moving up the enterprise stack to higher quality higher margin business while seeking out recurring revenue sources — or else it will cease to be an exception.BTW – This conversation reminds me of an excellent post by Mark Suster http://www.bothsidesoftheta…
Will read that post, thanks.
Why is that about lawyers?Today is the day that NYState releases its July Bar Exam results – frankly there aren’t enough jobs. It would be very amazing if groups of these people got together and hustled for a better firm.
I think it’s a cultural thing. In France, by tradition, lawyers are always expected to strike out on their own after a while. In the US, it seems to be the opposite. But every big law firm was started by someone!
In the US, it is an up or out sort of business. It used to not be. I sometimes wonder if the idea of a law partnership has gotten to be a bit more of a joke in biglaw – most are not competing with each other as much as the firms they service when it comes to pay and benefits. I wish we could move away from that big lie.It still seems to me that service businesses could scale to some degree, and that it is extremely odd that lawyers can’t take outside investments (except for bank loans, which are often rejected). Look at Linkslater!
“lawyers can’t take outside investments”Same with physicians.But what you can do is invest in the infrastructure and make money off of leasing space, equipment and employees. (Remember that McDonalds makes money off not only franchising fees but also by owning the real estate.) So you actually can make money investing in law/medicine.”That all changed in 1956 when he hired Sonneborn, who convinced him that the real money was in real estate. Sonneborn’s idea was to have the McDonald’s company lease a plot of land and the building for each restaurant.” http://money.howstuffworks….
Until the word “entrepreneur” became vogue to use in business schools, nobody knew whether they were an entrepreneur or not. They just used to be called “businessmen” and left at that.Entrepreneur is a perfectly silly word but I do admit to liking it very much.Every time I am accused of doing something faintly ridiculous or silly, I simply play the “entrepreneur” card.Well, I can’t help myself, I am an ………………………………..entrepreneur.I do admit to liking the convenience of it all.
Oh I agree.
Perhaps, although I hate the word entrepreneurship.”I’m interested in entrepreneurship” makes one sound like an academic theorizing on the abstract, as opposed to an applied practitioner of whatever entrepreneurship is.
Don’t get me wrong, it is a very, very important word because there is real truth behind. It connotes independent thinking and singular focus and bravery.It is one of those great American Dream kind of words.It is the fundamental misunderstanding of what and who entrepreneurs are that we are currently unable to create jobs in America.
Well said! ~Geoffrey
Fred you should run a startup that strategically identifies and places VCs in other startups so they can get a similar experience.Could this be a problem that other VCs are facing ?
i suspect it is the word i use the most on this blog
Small law firms are not so different from small digital agencies: people can do excellent work, have autonomy and work with people they know and like
Makes sense. I can see where he, and you are coming from. Applying it in a different field and context, I think the world might be a better place if bankers spent time in real companies making real products/creating real change.
ME LOVE SUGGESTION BANKERS ACTUAL HUMAN BEINGS. IT HILARIOUS!
The force we must thank, Grimster.For all wisdom flows from the force..It does. yes..hmmm
“IT HILARIOUS!” (sic)Cool. Phrase now in public domain.
Love’d Steve Blank’s post. The great thing about it is that some of the companies might actually succeed and a new breed of entrepreneurs would be born, those that thought about being a VC but found they enjoyed Company building. If half of the MBA grads turned VC associates started companies a lot of them would probably do well, create new jobs and wealth in a different way.
yup. from where i sit, the world needs more entrepreneurs but not necessarily more VCs.
I dont disagree that we need more entrepreneurs, but slightly disagree about the VC part. I think we need more of the better VC’s and less of the bad ones.
Also, to respond to the actual post. ;)I obviously appreciate Blank’s perspective, but I think it’s a bit contrived. Would it be great if all VCs knew what it’s really like to start a company? Sure. But wouldn’t it be great if all VCs also knew what it’s like to scale a company? Also. Wouldn’t it be great if all VCs investing in tech had a PhD in computer science? And so on.It’s great to get more entrepreneurs in VC, and it’s happening (Founders Fund, Khosla, A16Z…), but one of the things I like about VC is that there’s no set career path. What do the careers of Mike Markkula, Mike Moritz, John Doerr, Fred Wilson and Vinod Khosla have in common? Very little. One was an entrepreneur, one was a career VC, one was a journalist, two were big-company execs (one in sales, one in marketing)… And as I wrote here (though I’m biased 😉 ) I think tech bloggers can make great VCs: http://pegobry.tumblr.com/p… And Georges Doriot, the father of venture capital, was an investment banker and a business school professor, which on paper today looks like the worst kind of VC resume you could imagine. ;)I don’t think there should be legalistic “requirements” for VC because I don’t think there should be these kinds of requirements for much any profession. It’s like saying you should get an MBA before starting a company. All else being equal, is an MBA going to help? Sure. Should it be a requirement? Heck no.
yes, but what if a tech blogger were to join a VC firm, and that firm said, “here’s $500k, go start a company, and when you are done come back?”
I’d say where do I sign, Fred. ;)I’d say a couple things:- First, if there’s one thing I’ve learned in my failures and successes as a want/entrepreneur it’s that entrepreneurship is meaningless without passion and it’s unlikely that that person would have passion for his venture and therefore would learn much;- Second, you would still get asshats in the bleachers saying that tech blogger isn’t a “real” entrepreneur because he didn’t bootstrap or have to sell angels on his vision or whatever, because one of the pathologies of the startup world is constant pissing contests about who’s a “real” entrepreneur and who’s not.
those are damn good critiques PEG. makes me say “hmm?”. which is something i always want to be doing at some level.
plus i have a new word in my vocabulary — asshat 🙂
a great word. describes a lot of people i know
Depending upon latitude can be used interchangeably w/ “ass clown”.
I agree with Pascal. This would reduce starting up to becoming a means to an end. The end being the promised land of being a partner in a VC firm.And that would be a shame.
CHANGE SENTENCE.”HERE IS NOTHING. CALL ME BACK IN YEAR WHEN HAVE AWESOME STARTUP.”
Great points Pascal. And also let’s not forget what it’s like as an entrepreneur trying to raise that first round. When you finally scrape it together, you work that much harder to show the people who believed in you that they didn’t make a mistake. Maybe instead of handing them the $500k, make em earn it.
Maybe, but if so, how is that much different than any other entrepreneur who becomes a partner at a VC firm?Then Blank’s suggestion boils down to basically “there should be more entrepreneurs in VC”, which I agree with, but don’t think should be a *requirement*. There’s too much evidence you can be a great VC and not an entrepreneur, and there shouldn’t be academic-type requirements for 99% of careers.
I’m not saying that it should be a requirement. I don’t think there’s ever really a uniform approach or prerequisites to get somewhere. Some of the best CEO’s are college dropouts and other great ones got their MBA’s or other secondary degree. I agree with Blank that someone who never experienced being an entrepreneur is missing something, but is there ever someone who’s fully experienced everything there is in molding them ini being the perfect VC or anything else for that matter?
That’s exactly my point. 🙂
Usually people with a high IQ can compensate for something they haven’t done by learning it. That’s an important factor that’s not often discussed, but is visible via the outcome of the results.And not everyone has a high IQ, although many think they do.
I was agreeing with you :).
Great! Kumbaya! 🙂
BEST CASE SCENARIO != REQUIREMENT.
Indeed. But Blank wants to make it into a requirement. Which is the part I disagree with.
Great comment. The passion factor applies to VCs as well. I’ve danced with a few recently and I can tell you the ones where I saw passion in their eyes & a genuine interest in seeing me succeed- I can count on 3 fingers. All others were money managers, not just being asshats, but sitting on their fat asses too.I once made a call on a VC who was referred to me & it was a 2pm appointment. The lazy ass VC literarily dozed off in his chair by 2:15pm.
Agreed. Though you’ll learn a lot from a person if you just hand them $500k.So depending on what your tolerance for risk is.. it could work. But it doesn’t necessarily mean that person will turn into a good VC, because they’ve not stressed through anything really being on the line.
Did you and @JLM:disqus have breakfast together. You are both on a roll. Go PEG !
Not yet. Hopefully some day!
interesting comment, considering where Mike Arrington is sitting now. This really depends on your view of techcrunch.
BEST PERSON HELP YOU SUCCEED IS ONE THAT HAVE SUCCEEDED.
And one that has failed as well.
ONLY IF LEARNED FROM FAIL.
Fake….Some times…there’s been plenty of one hit wonders out there off to their next venture with a pile of cash. As far as I’ve seen many don’t return to their past glory.ONE THAT HAVE SUCCEEDED MULTIPLE TIMES is a better one.
MORE GOOD IS MORE GOOD THAN JUST GOOD.IT LAW OF PHYSICS.
Big difference learning how to rap from Vanilla Ice or Eminem.MORE GOOD is not in the same category as JUST GOOD.Physics has lots of high powered exponential laws so I’m sure it works out.I can’t keep up with the comments this evening, too many.
Haha…yup can’t argue that
Will there ever be a day when an investing VC fills her board seat with someone other than a partner? Seems to me that at some point, there will be VCs who recognize that while they might be great at identifying opportunities, they are not so great at helping companies operationally, and the best thing they can do for their new portfolio company is to put the best fit person onto the board.
That’s a two-way street though. If the entrepreneur doesn’t think the VC whose term sheet he’s signing will be the best fit person to sit on his board, why is he signing the term sheet?
Because he knows that the VC will put a great (non-VC) person on his board who is a better fit to help the company execute.
Sure, why not. Anything’s possible.
Hey Tom — Just mentioned you in a comment to @JLM:disqus to get your attention because he referenced “Brothers, Rivals, Victors” which confirms what I suspected. He was the person who recommended the book.
“What do the careers of Mike Markkula, Mike Moritz, John Doerr, Fred Wilson and Vinod Khosla have in common? Very little.”One of the problems of trying to reverse engineer things like this is that it isn’t exactly double blind gold standard research. For example you don’t know what other total life experiences the above people have had which allowed them to succeed. Fred for example the other day mentioned how he wrote software for his mother in law’s company (which gave him exposure to a small company). Who knows whether he worked there or what he observed or learned while doing this. Everything you do in life adds up. It’s not only the obvious titles etc.Edit: Also when dealing with someone with a title you never know who surrounded them that helped with the success, or the particular circumstances that led to the success.Take Jon Corzine. Ran Goldman but now having a little problem with another position.
Corzine is likely going to jail.
He must have missed 2008!Being out at 34 to 1 is a recipe for death.
It’s not about must or must not have but where you can find advantage in what you do every day. Carrying as many cat tails as possible in as many ways as possible to build your experience is probably one of the best things you can do is this very generalized and specialized changing faster then we can keep up world.
One thing I think is significant here is that the finance/mba path that many folks use to get into the VC business is a lot less legit. Even if you haven’t run a business but you know some product space *really* well (i.e. journalist or engineer) thats great. I just see almost zero value in a VC whose background is running numbers and/or “analyzing” companies wall street style.edit: well not zero value but let just say (much less likely to be really good) value.
i agree with you hank and that is my background. #doasisaynotasidid
lol. yeah. the interesting thing is you *became* a product guru, as in journalist, I think in large part through writing this blog. You guys did pretty darn well at flatiron (and no disrespect to my friend Jerry) but in this second round you have gone stratospheric, and I think the journalist piece of what you do has played an incredible part (says the arm chair analyst)
certainly it has helped me a loti saw jerry last night. he’s great.
EXCEPTIONAL PEOPLE ARE EXCEPTIONS.
That is pretty much the grist of it……
Rockin’ it GRIM.
I think there’s a huge difference between an MBA with an engineering undergrad and maybe a few years of experience and an MBA who was a history or poly-sci major who went to biz school right after college. You were course 2? So you took 2.70? 2.70 is the microcosm of the first steps of a startup.Here’s a box of stuff (resources), here’s a problem, now solve it better than anyone else.
in the dark years before the internets, i was a newspaper reporter. being stubborn, i saw no value in j-school (you don’t need to go to school to learn to write) and got a policy degree in grad school instead. it made the getting started harder (no internship pipeline) but i learned infinitely more than if i had gone to a trade school.i banged around doing that for a while, still waiting for the internet, learning to write and ask questions and figure things out.and then the good things with talking to people thru computers started happening, and i added the boxes and arrows partstechnical finance skills are valuable, but they are commodities. a pricey commodity, but a fungible item available in bulk.tech finance skills plus passion/knowledge … now you’re talking about value
It is much easier for a brilliant engineer or product person with an awesome product to hire an MBA to run finance and operations than it is for an MBA to hire a brilliant engineer of product person to build an awesome product.That’s what the .com bubble was all about.
the first bubble had a lot of fun things happening
SUIT IS COMMODITY. CREATE IS NOT.
“That’s what the .com bubble was all about.”Astute observation, Erik.
“and i added the boxes and arrows parts”Ha! Understatement, but what a great way of putting it.
maybe some dotted lines, too
Don’t you think it depends on what stage investments you’re making? To my mind VC starts to converge with other forms of PE in the late rounds.
you hit the nail on the head. Of course I don’t consider VC == PE. Many folks do.
i might beg to differwas yuri milner’s decision to pay $10bn for Facebook based on numbers?i think not
We both know it wasn’t, but even the most cynical LBO isn’t based on numbers alone. My point was that the finance/MBA track becomes more legit in the later rounds. I’ve always thought of it in these terms:VC – I want your money and your love.PE – I just want your money, honey.Usual caveats apply, but as your business matures the two seem to converge on the money even if you still have to whisper a few sweet nothings from time to time.(Am I really making a defence of finance muppets? I repent – please don’t take away my geek badge!)
That is hilarious — the description of VC and PE.
🙂 It’s funny because it’s kinda/sorta true. But then there are notable exceptions like the very mature Atlassian, who took $60m in growth capital they probably didn’t need simply because they felt being partnered with Accel was preferable to not being partnered with them.
@cammacrae:disqus The hilarity for me is that it did ring true from my observations, albeit limited, of both camps and even though one of my dearest friends is a very successful PE guy — but his relationship to his work is much different than many of the VCs I observe. (Admittedly, I’m probably observing a limited sample of VCs whose values I tend to resonate with.)
So why are the MBAs seemingly more likely to becomes a VC, if it is that kind of unhelpful…
Its probably helpful to get the associate job and get in the door. But IMHO it doesnt make you a very good VC. Andrew Parker’s point about successful VCs is a good one, many were not entrepreneurs. But lots were journalists or entrepreneurs, like Mike Moritz (journalist) or John Doerr (engineer). These guys loved products and technology. I think you have to love products and technology to be a great VC.
Well, how do we teach that?
How do you teach loving products and technology? hmmm… in your heart it must be (said in yoda tone).
love products and technology, you must. hmmm in your heart, it must be.. yse
that’s a great recipe for a great VCyou can cook one other ways, but that’s the highest probability of success
when a startup i was at got big enough to add an mba layer on top of the tech/hippies/ux/content/design layers, some were awesome and some were capable pretty much only of taking last year’s xls and increasing a percentage here or a budget line therefinance skills are necessary but far from sufficientwhat companies today would hire the young steve jobs, if he was looking for a gig? probably only startups.
Conversely would spending a year shadowing a VC partner well serve an entrepreneur?Pattern recognition, 30,000ft market view, business model analysis, USP creation etc
yes, very much soat some level, that is what our “two years and out program” is all about
For sure! It’d be a great way to learn from others’ mistakes!
So true. While there is a certain value in learning from our own mistakes, it is just so much more efficient to learn from those of others. 😉
I was thinking about the strategic value of having a decked out VC contact and industry list. What a killer asset for any startup. Great point.
” it takes $30mm of losses to train a VC”. That’s a costly education!On Blank’s point, I think the net result would be what we have now that’s called Entrepreneur in Residence. If you’re at a VC and they spawn you and your venture, then it looks and smells like EIR. If you succeed, you likely become addicted (perhaps failure has same effect) and you start another startup. If you fail, will VC really take you on as partner? I’m skeptical.
Agree with this post a lot. It’s hard to be a great coach if you’ve never played the game. Not impossible, but hard.
That’s right. Nice touch.
Again just a great post. Go through the mud to understand what it’s all about. It’s great that a VC is be able to give experience he’s seen throughout his career in other companies. But what I believe is more important is to be able to advice entrepreneurs on real life company building experience. That’s the hard stuff!
It’s interesting that we say the term “serial entrepreneur” but we don’t hear the term “serial VC”. Is it because VC is seen as a career whereas being an entrepreneur is more of a rite of passage or something that has an end & you have to do it again to keep that title.
i’m a serial VC. three firms in three decades. i hope i’m done but i can’t promise you that i am.
Back to back is a career, definitely serial too. What I was getting at is that entrepreneurs typically have an “exit”, and they choose to return on their own. A VC has to stay longer in the game, and the great ones (yes looking at you) stay for a very very long time!
You are a deal junkie, a people collector and will never stop — why should you?
can’t imagine that i willpeople collector is an awesome term. i will wear it proudly.
It takes awhile to know how you will react to making difficult and unpleasant decisions. Rarely can you do them right out of the box. I’m talking about the gut wrenching ones that no one wants any part of. Not everything goes right and somethings go really badly.I would imagine having gone through this yourself will be great training for being a VC. It also helps in understanding the character of the people you are investing with,
Learning by doing. Things I’ll be learning for the rest of my life: how to hold people accountable, how teams communicate, how you hire, and how you motivate people to do the impossible…
It takes 10 years to build a solid general manager. People can show results sooner, with some combination of luck, leadership skills, charisma, and senior-level support/mentoring…
I appreciate the “10 year” perspective, and also believe their is a great desire for more mentoring in this day and age. I see it where I’m working, and looking for it, myself, everyday.I’m inspired by a few people in my organization, who coach in every direction (up, down, laterally).Feedback is the food of champions.
Mentoring feels even more important today than it did early in my career (90s.) Our workplaces have become so transient. You could once count on being surrounded by a cadre of people (up, down, and lateral, as you say) who had seen you in action for a number of years. Mentoring arose naturally through those relationships.Today, we move so frequently. The onus is on us to create and develop mentoring relationships that transcend our movement between workplaces. Developing and maintaining those relationships is an important, and refined, skill. Necessary, though, if you want to eat the food of champions served up by people who really see you. I wish you the best of good fortune with this!
@WhitneyJohnson:disqus has a good HBR article out on mentoring: http://bit.ly/v68Byk
“Feedback is the food of champions.”word
The Northbound Train, The Power of Alignment, Re-Work, the Checklist Manifesto, Competing on Analytics.Read those 5 books with a big grain of salt and reflect on what they say — add you own secret sauce to them and you will be far up the curve.Hire for attitude before all other traits.
I would like to see the first job description that seeks “mindset” vs. “skill set”
I actually do put “mindset” qualities in job descriptions. I sure as heck recruit and assess with these in mind.
Yes Donna, you do and that is why you are successful! But when you see the number of people applying for jobs and hear that no one that applied is qualified….Well, you are an outlier in your field.
Being called an outlier by you Carl is a high compliment. Thank you.Still working on the “successful” part. ;-)Winding paths don’t always get you there as quickly but you learn a lot more in the process.
Success is not the shortest or quickest path between two points but rather a lifelong endeavor.Anything shorter can make you fear failure, become impatient with experiencing, and turn you into nothing but a drunk at a bar who has relived a thousand times throwing the winning touchdown in high school 30 years after graduation.Success is always a goal, not an achievement.
I agree.BTW, the illustration used in your comment calls for a song…http://www.youtube.com/watc…(Springsteen has this knack for making happy songs about depressing topics.)Edit: Removed the version with the commercial — even though video quality is not as good.
…its actually not an illustration, because I can give you their names! :)I remember, after playing in a high school state championship, wondering what to do next. Somehow I decided all on my own at the tender age of barely 18 to begin preparing for the next championship; to not look back but always forward.For some reason this last year has been one of the worst that I ever remember and its all due to the fact that I am being forced to look back; I want to regain the vision of working toward something rather than dwelling on the past….
Carl – love this quote.
“It takes five years to become a productive board member” would be your quote.I’m not sure I totally agree.Working at a startup, yes. Being CEO from the start? Nice but not have to have. I got my start working at troubled companies of a entrepreneur that had dozens. It was great, I was part of the exec team but not the CEO.I would say if the point is having somebody that went through Ivy League schools then an associate track making partner makes you unable to understand and have empathy for startups, I would agree.No different that my buddy that makes his lawyers at a huge chemical company work in a business development where they learn the other side.However, reflecting more it would be hard to place those “junior birdmen”, boy I wouldn’t want one at my firm.
I think Fred is probably one of the exceptions in having the ability to add value without previous entrepreneurial experience.Brad Feld, Mark Suster, Ben Horowitz are the type of entrepreneur turned VC that you’d die for to get on your board for their pure, in the trenches experience. Particularly when you get beyond series A.John Doerr is also someone with that type of experience.I’ve worked with boards made up of traditional (MBA type) VCs and entrepreneur turned VC, in reality you want the mix because at some point you will probably need the money more than the experience! I have no objection to a “pure money” VC as long they stick to what they know and don’t try to interfere too much with the running of the company i.e. if you are going to send an associate along to the board meeting make sure he spends his time listening and understanding rather than spouting crap because he/she feels the need to have some “input”I’d probably sum it up by saying it’s about passion for what you are doing more than the type of experience. If the VC is passionate about their investments rather than seeing it as just another portfolio company then they will do what they can to help the company in whatever way they can.
There’s also a time factor for judging success.If an entrepreneur had a successful exit in 3-5 years, that’s the result of a lot of hard work, and a bit of luck.If a new VC claims great returns in 5 years, that’s sheer luck. 5 years is barely a warm-up in a VC’s life.
Lets see,We want our VC’s to have start up experience, we want our entrepreneurs to have “people” skills, and by the time we are done, we have created an apprenticeship program and everyone under 50 would be in the program.We sit here and go on and on about the benefits of experience and yet at the same time there are news articles about how people over 50 are finding it impossible to get jobs; in fact, next to urban minorities they are experiencing the worst unemployment.If we admire experience and the resultant wisdom so much then how many start ups have someone over 45 in key positions?A local university has started an entrepreneurship major and I was asked my opinion (sometimes I think I am asked this question just because people are sadistic) and I responded by asking, “…where is the class on ‘risk’, where is the class on ‘passion,’ or on ‘thinking outside the box? How come you have no class offerings on developing ‘people’ skills?”Oh, and five minutes after opening my mouth I wish I had just said, “Oh, that’s a wonderful idea!”If you are looking for a great CEO or COO do you really think a “numbers” guy/gal, or an MBA is what you need? Or if you are looking for someone to manage your “small business” department, is an MBA with 1 or 2 years experience the ideal candidate? How about someone with 25 years of small business experience?
When the University of Texas started its “entrepreneur” track, it brought in some just unbelievable guest speakers and then made some of them adjunct professors.The program was so successful that the UT admin hijacked the courses, made the profs tenure tract and whisked the entrepreneurs out the door.The Acton School in Austin was the result of those entrepreneurs wanting to keep their hand in the game. One brilliant one, in particular.If my son asked my advice — a year at UT McCombs and then the Acton School.I consider the Acton School to be the equivalent of the Command & General Staff College of the Army with a bit of the War College thrown in.
JLM,I cannot help but let my sense of humor get away from me…If your son asked me for my advice, I would tell him that he has gotten everything he needs from a college education from you…..You need to send him a bill for tuition! 🙂
Carl, only guys like you and I would appreciate this.My 25-year old son was in town and he said to me w/ great earnestness — “Dad, you are a lot smarter than I ever realized. I wish I had listened to you more. I think I have figured out how you have managed to live the way you do.”I just got off the phone w/ my 93 year old Father who is literally the smartest guy I have ever met. Cunning and clever in the bargain. A skillful inquisitor and the finest moral compass ever fashioned, tested and never bested on things of huge importance. A guy who when he walked into a room, you immediately knew this guy was in charge.I asked him if I listened to him when I was my son’s age and he said — about the big stuff yes. Everything else — no.I remember his teaching me how to read the WSJ when I was a kid and my investing in a ML Sharebuilder Acc’t. It was a great lesson and kindness that I have never forgotten.Two times in my life he sent me off to momentous rendezvouses w/ destiny and danger from the Asbury Park, NJ bus station w/ words of wisdom so brilliant they are tattooed into my soul.More than twice I sent him off to war w/ tears in my eyes from the same bus station.I was in Asbury Park recently w/ wife and drove by the bus station and it was gone and a piece of my soul w/ it.Today when I speak to him, it is like visiting the heavens and having a chat w/ the Holy Ghost. Funny thing is he thinks I am “clever” and I couldn’t hold this guy’s jock on my best day.Ah, life, you merciless bitch.
This is poetry, JLM. What a tribute, what a legacy. And you slayed me with the last line.So sorry that you will not be in NYC next week.I have decided that somehow I have to get you and my husband in a room together someday. I can now say your name and immediately get his attention.
what we need to do is get JLM on stage with us at 5am eastern, 2am pacific
Fred, I cannot tell you how much I needed that belly laugh. The tears-streaming-down-the-face variety. Thank you.
i wasn’t joking. i’m not sure it’s his “thing” but it sure is mine
You like doing your little turn on the catwalk?Good luck on stage.
Turntable is addicting.And you do have DJ skills!
that explains a lot
It’s hard not to compare yourself to your father, but I gave up on that a long time ago. Fathers are more like legends that we’re blessed to have as lifelong allies.
That last sentence is pure gold Mark. I’m going to borrow that phrase if I may.
Yes, I relate, not only with you but with your son.From my father I learned about leadership, motivating people, and building teams; about getting people to give more than they thought they had, to achieve more than anyone thought they were capable of….and to dignify them and empower them with allowing them to take credit.Everyone seems to have a real misconception of the military and or military families. Yes, we have traditions and we all have what I call “touchstones” like the Asbury Park bus station. All successful companies have traditions, cultures and “touchstones.” Its also the first thing I create in a company whenever I am hired or take over one.Its funny, he never laid a hand on me….his punishment was much worse. He would just look at you and ask, “….exactly what were you thinking? What goal did you have in mind? What were you attempting to achieve?”There were lots of times I wished he had just disciplined me like other parents! He never once even yelled at me. But that taught me everything I needed to know about leadership, human resources, and dealing with people.
Knowing JLM, I think he will surprise us next week & show-up by a helicopter landing on the roof.
Back in the day, I would have rappelled down — Australian, mind you, head first. Only the first step is an issue. After that gravity is the law of the land.
Have you checked the flights to NYC yet? There’s a reserved bar seat for you at the After-AVC event. Maybe you could kill 2 birds & get interviewed by Fred.
Guy joins up with our 2-some on a golf course, late on a lovely spring evening in Calgary. I’m recently engaged, taking all advice on family life from all comers.He says 2 things about kids that sounded true then and I know one of them to be true, for sure, from my own experience:1) Boys are harder to raise than girls; until 12 – then it switches.2) Starting when my son turned 15, I began to walk down into the Valley of Stupid. I hit the valley floor when he was about 24. I got out the other side when he was about 30. Then it happened again with the other 2 boys.I love playing golf in interesting places, but never in a full group. The things you learn from the people you meet.
I used to love to play right at 5:30 PM and just walk to the first tee, the guys I stumbled into were just amazing particularly in Austin.Now, I guess it’s the Internet.
Command & General Staff College (just up the road from me) was the subject of a recent conversation. It is a most unappreciated school for those not in the know. I only discovered because while serving as an adjunct professor a fellow colleague left the school I was teaching at to start teaching there. He explained ‘some’ of what they do – he said a lot I only understood some. ~ Geoffrey
I miss not seeing your words more often Carl. Nicely said.
In addition to you, some other VCs that have never held the title of CEO.Mike MoritzJohn DoerrVinod Khosla [edit: was CEO of SUN, I’m wrong here…]Jim BreyerTim DraperRoloef BothaDavid SzeIn fact the only mega-famous VC I can think of off the top of my head that has CEO experience is Marc Andreesen, but his reputation is more for the companies he has built than the investments he has made.I think Steve’s advice is good advice, but I don’t see how it is coorelated with success as a venture capitalist.
most of those guys (I dont know about all of them) were serious product guys either by training as an engineer or journalist. I think the financial engineering route is much less successful, but I have no stats to back that up. At least half your list (some I dont know their backgrounds) fit that description.
Good point. Product-oriented VCs are the ones I get along with the best. Pie-slicing financiers are rarely as helpful as VCs who don’t hesitate to embrace the gritty messy details of building a great product.However, that’s not Steve Blank’s point. Steve says in his opening paragraph: “Running a company is distinctly different from simply having operating experience – (working in bus dev, sales or marketing.) None of that can compare with being the CEO of a startup facing a rapidly diminishing bank account, your best engineer quitting, working until 10pm and rushing to the airport and catching a redeye for a ‘Hail Mary’ close of a customer, with your board demanding you do it faster.”In short, Steve’s point is “CEO or Bust.” and I don’t agree that has anything to do with being a successful VC. I love Steve’s advice from a personal perspective… I really wish I had been a CEO so I could have a better understanding of the experience Spark’s portfolio company CEOs are enduring. However, I don’t think the data fits Steve’s thesis, and I think he should have an answer to why that’s the case.
Yeah, I wasnt rebutting your argument, really just taking things in a slightly different direction. One thing I will say though is that a lot of the great ones have been around a *very* long time. I think its harder to be a great VC thats only been doing it five years with no operating experience. But we *are* seeing great VCs that havent been doing it that long that do have operating experience. In other words, long VC experience may trump or at least be equal to operating experience, but operating experience may still be a significant advantage.
steve’s real point is empathy for the entrepreneur is the thing most lacking in VCs who are early in their career. i’ve never seen that lacking in you andrew and that’s a great credit to your character. but i agree with steve in general.
I agree with you Andrew. From my perspective, there is no singular path to being good at VC. There are so many elements that go into being successful at it, and generally speaking, different people bring different things to the table (which is, btw, why early stage VC is such a collaborative industry). Having deep entrepreneurial experience is invaluable and irreplaceable, it gives you a foundation of experience to be a strong voice at the table in the board room. Despite the fact that I was an entrepreneur for two years and worked at startups for another year, I would LOVE to go back and do it again knowing what I know now and further build my corpus of entrepreneurial experience.But the voice of an entrepreneur is not the only voice that a startup board needs. It also needs people who are great at ‘doing the deal’ (BD/raising capital). It needs people who have a deep industry or domain knowledge (that doesn’t necessarily require or come from founding a company in the space). It needs people who have a massive stable of contacts and deep relationships.Sometimes one person has all of these capacities. More often, different people bring different things to the table. This is why *teams* are important in VC syndicates just as they are in companies.
Just to set the record straight on this: Vinod Khosla was the first CEO of Sun Microsystems. So add him to Marc Andreesen in your list.
I stand corrected, and that’s an important distinction.
Thiel as an investor will have the best cash-on-cash lifetime return ever. And yes he was CEO. But, I’m not sure he’s a VC. I know he has FoundersFund, but I can’t tell how much that’s his main gig. He’s an angel more so, and he certainly belongs in the hall of fame of investors if such a thing exists.
that’s a great point andrewbut i wonder if the past is a good arbiter of the future
Isn’t that how VCs invest, by doubling down on known operators?
our track record doing that, which we do a lot, is not as good as investing in unkown quantities who have never run anything and may not have even graduated high school yet
Now those are some interesting statistics. So you’re better off betting on unknowns? Or is that unknowns have to be so compelling for you to invest that they end up being more successful. True anomalies at a given time and place.
we take a balanced approach. we don’t optimize for either. serial entrepreneurs are lower risk, but also tend to be lower return. first time entrepreneurs are higher risk, but also higher reward
Great insight. Thanks
Known operators know the rules.Unknowns break them.Hence, the different risk / reward metrics.
Maybe the fact is the unknowns get pushed harder and analyzed more seriously than the known quantities? Maybe you also keep them on a tighter leash once you fund them?
nope. we are not “tight leash” investors. quite the opposite.
Sometimes a leash is more a perception than a reality. Younger entrepreneurs are, like younger employees, more apt to seek advice and mentoring.Its like the concept of “failure.” I hear younger people use this term frequently yet when I ask them if they understand what “failure” means they have no clue other than its something to avoid. I always tell them that the failure they need to avoid is the one that will cost them their life savings, their home, and all means of support for themselves and their family.Other than that, failure can be your friend.
thats awesomely encouraging :). cool.
Notice the key “experience” that really makes all the difference? Execution. That’s often the difference between a great idea and cash in the bank.I wonder how much time most CEOs spend looking at their workflows, accountabilities, and execution? I wonder, on the other hand, how many start up CEOs try to “do it all by themselves”? I’m sure most start that way, but then – at what point should you transition?Would love to see future posts on execution and performance management in tech start ups.
The problem is most of those are busy executing and don’t have the time to write about it.
Couldn’t agree more with today’s theme.The VC world has an amazing opportunity to contribute to the real-world economy. It’s already been doing so in many instances over a number of years, but what with bank/credit issues and the culture of safe-job-for-life/corporate-suited-career eroding rapidly, never before has the challenges facing the VC world been so great/so potentially rich – fiscally and ethically.Interesting/disruptive times.Let’s see who is up for it…
I don’t agree with this at all. This assumes that entrepreneurialism can be taught. I think great entrepreneurs are born or are shaped with determination and drive from early on in their lives. If you are starting a company with $500k only to become partner after a year it means the business has failed or the founder has quit after a year. It’s no different to a rich dad giving you $500k and saying “have a go”. I believe that founders need to be resilient and hungry and have no other means to survival to stay laser focussed and make their startup work. If the person who is being hired as a VC cared enough to start a web/mobile/cloud startup they would have done so anyway out of passion not as part of a training program. If they are given $500k they will blow in on stupid things because its not their money. The best guys to invest in are the ones who have bootstrapped for 3 years because they understand the value of every single penny. Furthermore the skill set in starting a company is completely different to the skill set of working in, running or starting a VC fund. A VC partner role is a financial/banking discipline whereas the entrepreneur mindset is a creative, technical, scrappy get shit done mindset.They are completely different disciplines. One might need to the other, but they are different skill sets. Should soccer players coach? Should coaches play soccer? VC’s take lots of bets and build a portfolio – then get lucky hopefully – whereas Entrepreneurs focus their resources with laser precision and try to make the most of what resources they have. I think the mindsets of each are polar opposites… But in some cases one needs the other, although a VC needs an entrepreneur more. Without the entrepreneur all the VC has is a cheque book.Having said that I think that entrepreneurs who have been in the trenches have a better chance of identifying an opportunity, team, founder etc than a VC who hasn’t or who isn’t at all technical.I found this post really interesting because I’ve just been in this situation. I boot strapped my first startup from $500 in 2007 and it was acquired in 2010. I did it without any outside funding and reinvested everything until it was profitable. I learn’t so much during that time I can’t even explain. After the acquisition I thought I’d turn to VC and I did.I spent a month working for a large VC fund in Australia and was completely bored out of my brain doing VC work. I was spending time writing investment memo’s, having coffee with other entrepreneurs and listening to ideas that were interesting but on the inside I knew the entire time that I was mean’t to be on the other side of the table and had the skills that the VC’s were looking for.I’ve since started another company and I haven’t been this excited for a long while. This is why I didn’t want to stay in VC:a) I love starting things – there is nothing more exciting than creating something in technology and I have a talent for it.b) Being a strong entrepreneur is a rare skill – VC’s are looking for people like this so its a personal opportunity cost being a VC if you are a proven entrepreneur and are prepared to work hard.c) I was not creating value – I was building spreadsheets and writing word documents when I could have been designing, coding, leading, building, hiring, and producing something of actual value. This was my biggest dilema. I was not creating value in my mind. I think many entrepreneurs become VC’s for lack of new ideas or inspiration or lack of drive to do it again, or they’ve done it 5 times and are financially secure and want to help others grow their businesses, however I bet they still have an urge to build and create and view investment as a less meaningful existence to the shoes they used to fill as founders. I also think VC is something that you should do later in your life. There is an aura associated with “VC” however I think its overrated and that the most meaningful, fulfilling and exciting position you can take on is that of a founder.
Patton arrives in Heaven and is visiting w/ St Peter and asks: “Who is the greatest General ever?”St Peter points over at an unassuming chap and says — “That guy!”Patton: “My God, he was a freakin’ janitor!”St Peter: “Well, if he had ever gotten the chance, he would have been the greatest General ever.”Character and entrepreneurial success are both revealed by the application of a bit of friction. You never know what someone has until they are given the chance and tested.We all have a hell of a lot more than we think. We all just need to take the risk to expose it or get the chance to be tested.
JLM, read this Patton quote for the first time yesterday that I enjoyed. Thought I’d pass it along in the context of your comment… “I don’t measure a man’s success by how high he climbs, but how high he bounces when he hits the bottom.”
Read “Brothers, Rivals, Victors” about the relationship among Eisenhower, Bradley and Patton sourced from their diaries and other docs which have gone unused for years. Those diary entries are priceless.A lot about leadership to be learned there.I had no idea that Bradley had been the chief US planner for the N Africa, Sicily, Italy and Normandy landings. Easily the best amphibious planner in the history of the world — an American.It is fascinating to see this dynamic — add in Marshall and MacArthur, Nimitz and you have the brainpower that saved the world — relationship.I particularly love the fact that Patton was reading Rommel’s “Attack” while he was engaged in combat against Rommel in N Africa.As cadets, we had to read Attack and it was the best small unit tactics book ever written.
I love me a good JLM book recommendation. A purebred peacenik from the Northeast yet here I trot to Amazon to read about war! JLM, are we going to see you at the NYC Meetup next week?
Unfortunately, no. I am however in NYC the following week all week.Remember something about peace — it is the steady state that is guaranteed and sought by soldiers. All those icy cold dark mornings sitting on freezing runways pay for the peace we enjoy from time to time.Soldiers — with just a thimble of seasoning — hate war because they see the waste and depravity of it all. The waste of good men. The obscenity of taking any human life.That is why when you have a defense establishment like we have now, it is important to divide the “business” of defense from the art of making war.I could cut the Pentagon budget by 60% in 90 minutes without ever impacting our ability to make war even 1%. I would delay the entire “business” of defense for 5 years while sharpening bayonets.
I am replying to this comment to get the attention of @tgodin:disqus who emailed me to tell me he that he got a lot out of this book. He discovered it in an AVC comments discussion that I was part of and gave me credit. I told him that I thought you were the one who suggested it and this is confirmation. Of course you were.
real life is better than any novel every writtenwho could have concocted our founding fathers?who could have concocted our military leaders in WWII?who could have concocted Abe Lincoln?
You are absolutely right.What would you give to be in the presence of the FF for a day?To see from whence our Nation came?I wonder if we still produce such men?I marvel at the transformation from “amiable dunce” to candidate for Mt Rushmore that Ronald Reagan became.
we still produce such men but they go into other pursuits
The book was great! Borrowed it from the library shortly after the original post, and I hunted down Donna to thank her for the recommendation, and she rightly gave you credit for it.My uncle served with Patton in WWII and I actually played trumpet one year in an elementary school band with his grandson when my family was stationed over in Germany.
Read “Partners in Command: Marshall and Eisenhower”.While I loved Brothers, Rivals, Victors — this book is very interesting to see how cold bloodedly Marshall was able to assess and develop talent.Truly the Architect of Victory as stated by Churchill. The scene in which Churchill — no young man at that time — comes to the US to pay homage to a dying Marshall at Walter Reed in a coma is so moving knowing that these two men who saved the world had a fealty and respect for each other that is beyond description.It describes Churchill standing in the doorway of Marshall’s room crying.These guys saved the world.Marshall put together the team which drove America forward after taking the decision to relieve every Division commander in the US over the age of 45. Could be wrong on the age.What a ballsy move.Hope you will read it.
Yup. I agree with your disagreement. The VC will want to be a VC, and the entrepreneur will want to be an entrepreneur from their own motivation, not via a program that is planned for them.
You got it!
Why didn’t you disrupt the way VCs work instead? Create a startup accelerator program, an angel list, tools for startups in your portfolio, events, etc… All of these are pure product management with risk of failure.
Because those models don’t scale like a killer internet product can.
Actually Xi, I’ve set this up:http://www.lindventures.com… It’s a proprietary accelerator / incubator.
I’m not so sure I agree with the notion that to become a VC you should become an entrepreneur. Although it doesn’t sound like a bad idea to have VC’s understand just exactly what it takes to start and grow a company from scratch, I believe a VC and an entrepreneur are cut from different cloths. Of course there are VC’s out there who have been entrepreneurs and vice versa but I’m sure neither had that career path predetermined. I think in order to be a truly successful VC (I have no experience and I admit to that) you need the mind of an investor but the heart of an entrepreneur. By heart I mean the passion and drive to nurture and develop a startup. VC’s without heart aim to solely make a big profit; those with heart believe in what they are investing and aim to make a big impact in their industry.
Doesn’t it seem somewhat insane to say that, as a VC, you search for the right kind of founders to give money to, yet to turn around and hand $500k to one of your VCs in training to go found a company? I have the utmost respect for Steve Blank and for you Fred, but this seems a bizarre dichotomy. The corollary might be, let’s fill the VC ranks with former startup CEOs – which i don’t think would be a good idea, or lets fill the startup CEO ranks with budding VCs.I think the point that is being made is that it is difficult for a VC to empathise with a CEO and thus to provide personal guidance or to really understand the challenges of the business (short- or long-term). This is certainly a drawback. To send a budding VC into the “wilderness” as a coming of age just doesn’t seem to be the right use of $500k.I think it is a different matter to accept into the VC firm those that have, on their own, survived the wilderness. These might be the candidates you seek for the role.
yup. but i agree with steve that we need to find a way to empathize. and there is no better way to do that other than to walk in the shoes.
You shouldn’t start a company because you want to be a VC. You should start a company because you’re passionate about solving a real problem.
I love your honesty and how you admit your weakness. You have obviously overcome it. What a great example. A couple years ago I attended my first entrepreneurship class. I raised my hand and asked the teacher what businesses he had built. He hadn’t. I dropped the class and shortly after dropped school all together. I also love the “devil is in the details” quote. Just like the intangibles-chemistry, passion, unity, common values and beliefs to accomplish a goal-will make or break the Jets or the Heat, it will make or break a startup. Having a solid founding team is everything. And I’m sure the experience of building a biz from the ground up would very much help an aspiring VC.
“those who can’t….teach”
There is a great article on the General Assembly blog called “A Founder’s Guide to Starting in 6 Weeks”: http://www.generalassemb.ly…The more experience the better, of course, but there is a paradigm shift moment when you go “oh, so this is entrepreneurship.” I think even a short exercise like the one above can get someone to that place.
“Horses for courses.”Why would anyone who has the fire in his soul (not his belly, his freakin’ soul, I have sushi in my belly) to be an entrepreneur want to be a VC?Why would anyone who has the guile in his heart to be a VC (tin cup and all) want to be an entrepreneur?Both are great gigs for different reasons. But they do not both feed that special spot in the psyche of a man or woman. They pay in different psychic currencies.While I wholeheartedly embrace the notion of “apprenticeship” programs for the handcrafting of successful professionals, this is a bit like saying that a trauma physician should go get shot a couple of times to appreciate how to run the Emergency Room.Fred Wilson and most of the folks on this blog would be good at ANYTHING they ever put their minds to because they are “exceptional” people. They have just gravitated to what they are doing by the happenstance of opening and closing doors.The big variables in life are attitude (the most overlooked measurable trait in any person), natural talent, undiscovered talent, empathy, experience, curiosity, diligence and leadership (certainly not an exhaustive list).Give me the guy who has run a small business for 25 years if you want to talk about creating jobs better still if he happens to have a degree in engineering and an MBA in finance.As a guy with a degree in engineering, an MBA in finance, a forced indentured servitude in the leadership business and a third of a century running “stuff” with a few trips to the pay window in between, I can just say there are a myriad of ways to find YOUR niche but you will have to spend the 10K hours to become a master of it.And, then, you really are a master.Side note: look carefully at persons’ avocations — give me sailors of boats 30′ and greater who understand navigation, pilots, farmers, builders (guys who think nothing of putting a room on the house or building cabinets) and people who practice any religion, well, religiously.
“Why would anyone who has the fire in his soul to be an entrepreneur want to be a VC?”To get some rest between starting companies.
Brilliant answer, really! Well played.Of course, you could also work on your golf game. I was always a mediocre golfer. I had just been to the pay window with a big non-compete looming in my face. I was tired and spent. Ridden hard, etcI spent two years crushing balls for 2 hours daily, taking a lesson a week and playing 18-36 every single day. Dave Pelz short game course. A couple of courses in Florida. I could hit a draw on command.I was on 16 at 4 under coming down the easiest stretch of the course, my then 10-year old son says: “Wow, Dad, you are really playing good today.” Jinx!I finish bogey, bogey, bogey — one under and then I was ready to get back into business.I was refreshed. So your observation is a life I have lived and I chuckle. Thanks.
I took five year off and sailed solo across the pacific ocean 4 times.We won’t discuss my golfing.
So, I love the sailor ethos, it is a leading indicator in my view of an orderly and realistic and thoughtful mind.Particularly when out of sight of land.I would love to hear that story in great detail as it is literally a death defying story of heroic proportions.Fred — guest post, please.What boat, what route, why?Code words: vintage Hinckley 43
Next time you’re in the Bay Area let’s have a beer and I will tell you all about it.PSI am fond of Hinckleys. I used to sail regularly on a Hicnkley 38 off the coast of Maine.
@ErikSchwartz:disqus Consider that done. I will be out there raising money in the next 6 months.A Hinckley off the coast of Maine — that’s what the Holy Ghost does for recreation, right?That is a truly religious experience.
two of my partners are top notch sailors. i am entertained by watching them sail. but not tempted to try it myself.
I didn’t know that. Sailing is good.I crossed the Mediteranean (diagonal) on a 30-ft sailboat when I was 17 with a crew of 5. I still remember it almost day by day.
I agree with the guest post idea. What an amazing analogy. I am certain that a lot of entrepreneurs can relate to “out of sight of land.”
I second that request (well third it after Donna).Please make it happen Fred
i don’t think i knew that about you erik. that’s surprising since we reveal a lot about ourselves here at AVC. i’m super impressed with that.
Singlehanded Transpac Race in 2002 and 2004. All told about 10,000 solo offshore ocean miles. Being alone in the middle of the ocean is a life changing experience.
@ErikSchwartz:disqus “Being alone in the middle of the ocean is a life changing experience.”Hell, even when you are in a boat! What a story you must have to tell.
Robert Stone’s Outerbridge Reach.http://www.amazon.com/Outer…
Also read Moitessier http://www.amazon.com/Long-…
oy. golf is something i took up in my teens. no idea why. nobody in my immediate family played the sport. it has been torturing me since. i hate it. i would quit it if i could.
Fred I will send you some golf balls that might help! As soon as the next shipment comes in…a dozen will be on its way!
I tell people all the time…..don’t! don’t!But they do and then they are done.It is at the top of the list for mental training in life.
nah… you wouldn’t 😉
JLM I think you might enjoy my company OnCore Golf. We are launching a new golf ball. Check us out here; http://www.kickstarter.com/…email me personally if you want to know more- [email protected]
To help others succeed. Giving is twice receiving.
That to me would be one of the most satisfying aspects of being a VC — helping entrepreneurs to succeed. However, it seems that balancing that responsibility with maximizing ROI for LPs is what makes it especially thrilling. I have a friend who runs a private equity and he receives as much personal fulfillment in providing strong returns for his investors as some might receive from helping a company to succeed.
In Japan the belly is considered the source of all emotion. If your belly stands up it means you are angry. To speak with your belly means to speak frankly.
What an interesting factoid, showing the disappointing limits of my cultural knowledge. Thanks.
You mentioned sushi in your belly so it seemed particularly apropos.
“Why would anyone who has the fire in his soul (not his belly, his freakin’ soul, I have sushi in my belly) to be an entrepreneur want to be a VC?”Nice work if you can find it. VC’s get to work with many smart people and ultimately don’t have to deal with the day to day issues of running a business or managing people.And you make money.Notice how Steve Blank isn’t starting companies anymore?
I agree w/ you completely don’t get me wrong. If you have that breadth and depth of talent and inclination.Some entrepreneurs — myself amongst them — are ruined for all time to be part of a collaboration.I would command a rowboat before I would be Second Mate on the QEII. I am being paid in a different currency. One I value and others may not.But in my personal circumstances — all guided by luck and lagniappe, mind you — the money part of the equation is meaningless. I have fully funded my life’s supply of tacos or as #1 son says — Dad, you are the damn 1%.I am comfortable in my own skin, know I am nothing in the greater scheme of things, know that everything I have was the result of luck, know that once upon a time I could fashion people to do my bidding, made it to the pay window a few times and still I want that thrill, that currency, that blaze of running the damn show in the face of people trying to piss on my fire, telling me it cannot be done and running into the headwinds of life.And, even more importantly, speaking witih you. That is my currency.
“I would command a rowboat before I would be Second Mate on the QEII.”My wife is a Physician and I tried to set her up in her own practice in a piece of real estate that I bought from a retiring doctor. She went along with it for a bit and then bailed out at the last minute to accept a new job offer (7×12 shifts week on/week off). Even with my help she was totally freaked out by running her own practice. (Her parents were teachers and originally she was teaching at the Medical School as well). I ended up renting the office to a doctor who makes approx. 1.5 million per year. He had no interest in buying it he wanted to be a renter. I’m glad there are people like that in the world!Edit: These are people that I call “single function machines”. They do one thing well and that’s it. Should they lose their job (which won’t happen in medicine luckily) they are like fish out of water. A true entrepreneur can and will do many different types of businesses and be able to survive in any environment.
Yes, I think we all have 5-8 careers in each of us. I am on career #5 and looking forward to the rest.
A doctor that makes 1.5 million / year. No wonder the US healthcare system is so expensive.
He’s an outlier. Publishes, teaches and with his partner is quite well known in a particular specialty. He also has two offices, does surgery and when he has office hours will often see 60 patients a day. Obviously the majority of doctors don’t make that kind of money or anywhere near that.
LE – and he would want the hassle of owning because…….he has so much free time???;-)
Owning doesn’t really take that more time. Instead of calling the landlord you call the repair people directly if needed. In his case he has office staff to handle this. You pay the tax bills and condo fees. In return you get tremendous flexibility to make changes and not have to meet deadlines on lease renewal dates. There are of course many situation where it is better to lease but his situation is not one of them. My father is in great shape now because he bought real estate along with his business that he is living off of now. My guess is that JLM owns real estate as well.
“this is a bit like saying that a trauma physician should go get shot a couple of times to appreciate how to run the Emergency Room”added to the litany of JLMisms that i collect. well played!
there’s always airsoft 🙂
Not just true for VC’s but ideal for Lawyers, Accountants,etc… Empathy is so important when you are providing counsel of any kind. And there is no better way to deliver the right advice (and be as open as possible to receiving it) than when you have been through the battles yourself, have some scars and lived to tell the tale.But, I would imagine that you have been so involved with so many businesses over the years that you picked up the same experience by association.
empathy is the keyword here. “two sides of the table” is indicating the necessity of the “Startup VCness”
yup. very perceptive.
Good thoughts. As someone else said (maybe it was you?) said, one of the big challenges is that the newest entrepreneurs often get saddled with the newest and least experienced VCs. A potentially volatile combination for a lot of reasons, especially if the young VC is insecure, has a chip on their shoulder, or is dead set on trying to prove how smart and talented they are. I think there should be two requirements to be a VC: at least 35 years old and has had a very serious entrepreneurial experience. Being a great entrepreneur and being a great VC require different skills, or at least it seems so to me. But for a VC, being able to understand what the entrepreneur is going through and what the reality of entrepreneurship is, is a critical perspective to have. The age requirement? because age usually brings maturity and wisdom but most importantly a perspective on time and a better understanding of patience and persistence. I know my perspective on time has changed dramatically since I started out as an entrepreneur. My sense of urgency, I hope, remains as strong as it ever was but it is now tempered with the understanding that these things tend to be marathons, not sprints. (with rare exception). Having a VC who understands that as well is critical to an effective partnership and I believe that that understanding is most typically found in people who are a bit older.
focusing on maturity is the right ideagreat comment, as usual, elie
I read that somewhere once. I don’t know if it was from a blog post here or on the internet that in order to get your foot in the door as a VC, you have to have at least created or failed at creating a company.
I re-read Steve’s post, and I disagree when he says that becoming a VC is a grooming process by the VC firm. It sounded like a company-mandated grooming process. The VC wannabe needs to want to be a VC on their own, whether that route is via operational experience or startups scars is only a starting point. There is a big difference between becoming a VC, becoming a good VC and becoming a great VC. To become a VC, yes read Steve’s post. To become a good VC, you have to do a lot deals, good and bad ones. To become a great VC…well…, you don’t do anything. Others will tell you when you are a Great VC.
Outlier observation — I continue to be amazed how VCs who will routinely call upon the very best professionals — lawyers, accountants, research — to assist them will allow themselves to be drawn into the trap of being their own Boardmembers.The world is filled with successful business guys with gray hair who could play this role at a world class level while most VCs are neither good at or or particularly interested.Being a good Boardmember is in many ways like being a symphony conductor, you don’t really have to be able to actually play the trombone but you do have to know if it is on time and the notes right.In addition, this could provide enormous leverage — time leverage for a VC.
I think what you are describing probably applies to more mature companies boards,- if I’m not mistaken. Typically, VCs that are on startup boards do not stay as soon as there is the proverbial trigger event that gets their money back. Being on the Board of a young company vs. a more mature or hyper-growing one are very different. Most VCs are ideally suited for the former, not the later.
I agree with all of your observations completely but even so the issues are quite predictable and formulaic.The gray hair brings good decision-making regardless of the point in time.A modest sized VC firm could groom and have its own Boardmember in Residence who could soothe CEOs through the birthing process like a midwife.
I agree with your agreement.
Experience, specific to the task, is best.I disagree with Steve Blank on this – $30 M of losses is basically what happens when you manage $100M fund (successfully).I like the apprentice / run a fund model better.Not that listening to entrepreneurs is a bad idea…..
being a great board member is something i think you can never perfect. but it is also something thing that drives me to get better every day. i am driven to the role for some reason. i like it very much. as long as the company is not traded on the public markets.
Hi FredGood post, as usual, and it resonates with me. I agree, and also invert it. I teach ENT at a the University of Dayton (we’re ranked by Princeton review as a top 2 ENT program, sorry fo the shameless plug). In 2009 a donor gave us $1 million to launch a student run venture fund, private equity deals. We work with local Business Angel networks for deal flow, but the students do due diligence, value the firms, and agree whether to fund them or not. This is our first full year of really doing it. It’s been a lot of fun.We’re not trying to create future VCs as much as we’re trying to teach our ENT students how to think like an investor. If being an ENT makes you a better VC, I think doing some VC work can help you become a better ENT. That’s our goal wth our program, anyway. I think if you understand how the Founder/investor perspectives differ, it is easier to reframe what you’re doing in ways that matter to them. When investors pitch at our investment meetings, some have no clue what will appeal to investors, others know it very well.thanks!
Jay,What does “ENT” stand for? Seeing your comment appear two below Kasi Viswanathan Agilandam’s mentioning heart attacks and viruses, my first thought was that you were talking about Ear Nose & Throat medicine. That medicine usage comes up in the first page of Bing results for “ENT” (not before another usage: a race of beings from Tolkien’s Middle Earth), but your usage doesn’t. Is “ENT” supposed to stand for “entrepreneurship”? If so, for clarity, it might be better to just write “entrepreneurship”.
The lists are missing practically all the top shelf schools.http://www.entrepreneur.com…http://www.entrepreneur.com…Data is from Princeton Review. Here is the methodology circa 2004:http://www.forbes.com/lists…One of the more interesting criteria was: “How many of the school’s alumni rank on The Forbes 400 list of richest Americans?”
What about a post about your 30 million of losses?
i’ve done that mostly. there are still a few scars that i can’t bring myself to bare.
Funny… Want to be a Cardiologist be a cardiac patient first. Get your first heart attack .. then we will talk. Trying hard to find a medicine for AIDS … get your virus first.Vision and passion is what matters. U don’t have to know about puter to build a ple.
But…, but… if they need to have run a successful startup there would be LOTS fewer VCs….
I think it’s natural for Steve, who is on a mission from God to teach everybody who’s interested how to be a better entrepreneur, to want to teach VCs how to be better entrepreneurs.And there can be no doubt that VCs with more entrepreneurship experience would be better advisors to CEOs on operational, human resources, competitive strategy, and a host of other issues.But that’s not the only thing that a CEO wants out of a VC, and maybe not even the most important thing. Maybe I want a VC who knows nothing about any of that, but can call in $10 million in two weeks if there is an emergency. Maybe I want a VC who is a first-name basis with everybody doing corporate development deals for major tech companies in the valley. Maybe I want a VC who knows the IPO market inside-and-out.What I’m sure nobody wants is a VC who doesn’t know what they don’t know.
“What I’m sure nobody wants is a VC who doesn’t know what they don’t know.”Brilliant.This is the story of life in every profession. We are often cursed to be lead by people who will neither acknowledge that they don’t know something or who will pretend it is not important.Even if you DID stay at a Holiday Inn Express last night.
It’s a problem for every profession, and gets worse as one moves up through the ranks, but VCs might have it harder than most because they spend such a large chunk of their time hearing from supplicants.Is their an antidote? Whatever you believe or don’t believe, one can see that religious traditions often help keep people moored. Friends and family who have known you since before you were all that will let you know when you’re out of line.I have come to find irony in the exhortation (of the Oracle of Apollo at Delphi) “Know Thyself”: the best way to do that is to shut up and listen to others.
CURE IS GO OUTSIDE. LISTEN TO NORMAL HUMANS THAT NOT GIVE DAMN WHO YOU ARE.
MOST IMPORTANT THING TO KNOW IS WHAT NOT KNOW.
Donald Rumsfeld testifying “it was the unknown unknowns” in Iraq that caused the problems (not the known knowns; not the known unknowns).It would be funnier to watch if it did not cost human lives and trillions of US Treasury.
His book is a good read.Every letter I have ever written to that particular Donald, was replied to with several being handwritten.I may just go out to Taos to meet that SOB.There is absolutely nothing funny or fun about war and having to bury young men because old men disagree about things.
True…but naivety is what makes some startups great! If most of them really knew what they were in for…the startup world would be a smaller place.
START UP REQUIRE PASSION TO IGNORE RISK. TOO IGNORANT TO UNDERSTAND RISK NOT GOOD SUBSTITUTE.
Risk is subjective and in this day in age you never know whats around the corner…but I completely agree with you…keeping your eyes as wide as you can is important. I’ll take my odds on passion over risk almost every time…
“Maybe I want a VC who is a first-name basis with everybody doing corporate development deals for major tech companies in the valley”Sounds like you need a good VP of Bus Dev!”Maybe I want a VC who knows the IPO market inside-and-out.”Wouldn’t you be more in the PE market than the VC market if you’re concerned with an upcoming IPO?
My point is that at least some CEOs (such as those who already have a lot of operating experience) might be more interested in having a VC with the connections and experience necessary to smooth the path to IPO or acquisition.I would hope that my VP of Bus Dev was busy with finding new customers for my existing products. And I know that most startup CEOs are interested in understanding the opportunities and risks associated with an IPO exit.
last line is killer. well played
I call that DK squared. There’s 1000’s of ways to skin cats.
I agree but with a twist. I learned from Paul Goodrich at Madrona Venture Group here in Seattle that the two things that make a great VC are technical ability/specialty (that could be business or engineering) and a large network. I think that starting and running a company will definitely provide both of those. But as Paul also pointed out to me, being the player (entrepreneur) and the coach (VC) require totally different skill sets.
isn’t there a ton of data that shows on average operators don’t make good VC’s?
i haven’t seen it. i’d like to.
definitely not a complete or accurate way to calculate it, but should be directionally correct. take a look at a list of the top venture partners. one that comes to mind is the 2011 Midas list, but not an expert on what this is based on so use whatever. http://www.forbes.com/lists… then take a look at what % have started a company and/or were operators. I count 6 in the top 20 which is better than I thought, but certainly not a majority. i also think if you were to count the top 100, less than 30% would fit into that category. I wish I had better data to point to, but I have heard that from multiple LP’s and senior VC’s that have been in the industry for 20+ years. With that said, I think previously successful CEO’s or senior management team members make great Venture development / venture consultants in their areas of focus and that is a great resource for VC’s during diligence and portfolio companies post investment.
the midas list is bullshit. always has been. always will be. avoid the VCs on that list if you can.
Operators is the key. They don’t make good VCs because they are internally focused.Take an externally focused / analytical type, make them start a company.They quickly learn that models that are not grounded in reality don’t get off the ground.
I agree 100%. I was a VC for 20 years. I started right after my graduate degree in finance. My first deal was a flop, the second one also, the third one I was able to double my money in 18 months, same with the fourth one but over 5 years and finally I hit a home run on my fifth deal.I am now an entrepreneur running my own business and I am starting to understand why the deals I have made did not produce the expected results.BTW, it is much more fun to be an entrepreneur than a VC.
Cool story. I thought it was the other way around. I guess the grass is always greener on the other side.
It seems reasonable that someone with experience starting a company might make a better VC. But if someone wants to get a job as a VC, is starting a company going to really increase his chances of that? Let’s assume that the company the aspiring VC starts was unsuccessful (as most start-ups are). What percentage of current VCs started an unsuccessful business before being hired as VCs? I guessing it’s a negligible number.Edit: Just read Steve Blank’s post and see he acknowledged that. In light of that, maybe a better title for Fred’s post here would have been, “Want to hire a better VC? Hire one who has started a company”.
i’m trying to emulate Business Insider with my headlines 🙂
Ringo Starr was the best drummer in The Beatles.
This is one of the main reasons I just quit my corporate job to co-found our new startup. I figured the best and cheapest way to find out how to win and/or fail is to simply do it.Shameless plug: http://www.getprivy.com
I think that you areover-complicating the Partner track process / assessment criteria for VCs.It should be all about the value you bring (right now and moving forward) tothe firm / LPs, and the GPs’ observations on your value/strategic fit. That’sit – a lot of it should be based on gut vs. a formal check-list. If everyoneuses the same check-list, it will be hard for firms to differentiate and theywill artificially limit their searches. For example, in 2020, if youhad to apply for a Partner role in a VC firm or USV was assessing your currentrole at USV, what should matter is what youoffer now and going forward. The fact that you were a successful VC guy at thebeginning of 2010s is nice – past success is often a predictor of futuresuccess – but shouldn’t be the only criteria. And it won’t always work to limit the search to top tier MBAs, Harvardand Stanford drop-outs, former successful entrepreneurs, etc. Note: If you are evenconsidering Steven’s approach or any other new approach in your currentinternal Partner track career plan, it sounds like your gut is telling you thatyour internal talent is not right or at least not ready yet. Do you need tohave a consistent formal criteria that justifies your decisions and is taken aspolicy or can you just make the decisions that seem right for you about yourcurrent team and partners you’d like to recruit? Disclosure note: I’m not a LPat USV J
I think sometimes we come up with these “roadmaps” to success and we truly want to believe that anyone can follow our roadmap and achieve the same results.Sorry Fred, you are an outlier! It might take “…$30 mm of losses to train a VC.” But, its overcoming that loss that made you a success. That amount has also put people in jail or drummed them out of promising careers.Why is it that we fear acknowledging that we are different? That we are weird? Jesus Fred, you have more money than God and yet you still religiously blog on the weekends (probably explains why you suck at golf!)Is it guilt that makes us continue to strive and to continue to believe in the concept that anyone could do what we do? Do we really believe that success has a “pattern” or a one size fits all? http://changespeakingout.bl…
do you have to play golf regularly to be good at it?
10,000 hours is 10,000 hours! That is why I never took up the game!
You don’t really need to be an expert to enjoy the game.
Try sailing. Next time you are on vacation go to a place where you can take out a small sailboat (sunfish or small hobie cat). It is a *tremendous* amount of fun.Doesn’t take much to learn either. The person at the hotel or rental place gives you your first lesson. Then you can solo in the local area.One lesson and you can take out a small sailboat. Sailing doesn’t only mean large boats where you need a crew (or solo like Erik (thought very impressive as well) and you are gone for days).Sailing, even on a small boat, ranks up there with challenging excitement complete with intermittent reinforcement and you get better at it as you go along. But you can start easily as well (like skiing but you don’t have to wait for the ski lift so it’s more constant enjoyment).I see golf as being good mainly for socializing and making deals. Both of which you have covered in other ways.$100 donated to your designated charity if you don’tlike sailing after trying it as described above.
So when you get advice from a VC (or anyone else really) who has not been a founder and they’re relatively new to this (<1 market cycle), do you just ignore what they have to say? I think most entrepreneurs (good and bad) tend to be stubborn, so how do you know if you’re being stubborn legitimately or you’re being stubborn because you just don’t like what you’re hearing?
i think it is best to ask a few other people to calibrate that advice
This reminds me of http://hackerangels.com/.
I agree with Pascal-Emmanuel, and I must add that I really hated trying to work with a self-proclaimed VC who was also an entrepreneur in a competing industry.Until he finally decided he wanted to wear his entrepreneur hat (a very prominent one right now) and work in a competing space.I don’t like VCs who wear entrepreneur hats. You, Fred have an entreprenurial approach to venture capital, and that’s great, you are probably one of the few financists who are also entrepreneurs.But you seem to have the right instincts in the right place because you would never compete against your entrepreneurs (or worse, use information from your entrepreneurs to compete against them)It’s just too easy for entrepreneur-vcs to fall for the temptation of pursuing huge opportunities they love.And I hate that, I would never work with an entrepreneur-vc again, unless he/she formally and absolutely quits the entrepreneurial activity.
Starting your own business can be an exciting and rewarding experience that offers numerous advantages, such as the ability to be your own boss, set your own schedule and make a living doing something you enjoy.
The short strokes are that bad to ho-hum VC is knowing the numbers and backing theories.Great VCs win on knowing people and tracking reality.
Over the summer I participated on a due diligence team with a regional angel group. We were meeting for the first time with a company. The company had already partially filled a $1.5m round and the group was considering investing. As a little background I am fortunate to be a founder that achieved a meaningful successful exit. Prior to our meeting we were sent the DD package put together by the founder/CEO that we were meeting. It was so meticulously voluminous (The contents and organization has been a model that I’ve since shared with other startups) that my investment was the company’s to lose. We met with the team and came away suitably impressed with the business, model, yada, yada, yada. I later called the CEO and remarked, from one founder to another, how impressed I was that he had assembled that package and had grown the business significantly at the same time. His response: “Thank you, finally someone appreciates how hard that was. A lot of the investors have never been in the position of having to do both.” They ended up increasing and filling the round due to demand. I think his comment says it all.
Fabulous anecdote. Brilliant. Real damn experience which the world is lacking.Well played!
Dear JLM.. I had an experience yesterday with ‘pissers’ that led to me remembering you again..http://www.alearningaday.co…Just thought I’d share. 🙂
great comment. board packages, for example, seem to VCs like something that is easy to prepare. and i’ve seen VCs get so angry at entrepreneurs who can’t seem to get them out on time. but they forget that board packages, while important, are not as important as that key hire, that key product release, etc, etc
There is a caveat to my comment, which is, I’m not a professional VC. I don’t have a fund nor LP’s. As an individual angel my expected ROI is part economic and part getting to meet smart people doing cool things. I don’t doubt Howler’s comment above. I certainly don’t begrudge successful VC’s who haven’t started a company.
I have to agree wholeheartedly with Steve Blank. I am the entrepreneur of a start-up and am currently trying to raise capital. What I have found out is that most investors that we have talked to truly don’t understand what building a start-up is about. They seem to all be looking for the next “Groupon” rags to riches company. Two things, Groupon is not making any money as of yet, and their meteoric scaling might be the thing that ruins them. The question I hear the most is, how are you going to scale without using a sales staff? The problem is that it takes salespeople to sell something in most cases. We tried the “shortcut” stuff and it didn’t work. Once we put feet on the street we started to get traction, but everyone “with money” says their must be an easier way to do it. We have a hyper local product and were able to attract advertisers such as Sam’s Club, Robeks, Batteries Plus, Domino’s and others by selling on a hyper-local basis with a sales rep. Sometimes there just isn’t any shortcuts. But what do I know, I am just the broke entrepreneur. It makes a whole lot of sense for the guy spending the money to have experienced the process in real life.
Steve – I believe this is your site?http://www.pinpointadagency…The first thing I would strongly suggest is to invest some money in some sharp graphics and a web 2.0 design. You might be getting penalized for what you have now. Here’s a resource: http://sortfolio.com/Some random site examples:http://www.10gen.com/http://vowsjs.org/http://www.stickermule.com/As far as salespeople though I think Groupon is a clear case that VC’s will invest in putting feet on the street although I agree that is not typical.
We are currently in the process of having our site completely redone. Thanks for your comments.
AVC community doing peer review!i love it
Steve, I actually think the sales staff is one of the critical flaws in the Groupon story. When you have sales staff that work for commission, they are independent contractors and they work for themselves. In apparel we have independent sales reps who work for commission; they have no loyalty to anyone.I think if you could develop a Groupon product with a sales force modeled something like Mary Kay Cosmetics, Amway, or Fuller Brush you could actually devise something that has loyalty.With 25 years of experience dealing with sales reps I can count on two fingers the number of reps who did not talk out of both ends of their mouth and believe that their greatest attribute was playing the manufacturer and the retailer.Success in the Groupon industry is going to go to the company that comes up with a totally unique way to develop and reward their sales staff.
Carl,I agree with your comments. I think that Groupon started with the right idea. The problem was that their model did not allow for the incredible growth and marketing expenses that they would incur. But, without the sales team which now numbers over 4800 they would not have achieved the level of success that they currently have. Why did Google want to buy Groupon so badly; because of the sales team.
As an investor in VC funds I can tell you that some of the best performing VCs have no start-up or company founding experience. The reverse is also true. Some of the worst VCs have great entrepreneurial histories.
yup. i’ve seen it too. i’m just wondering if we can help make VCs better. particularly younger VCs. having been one myself, i understand how tough that situation is.
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Fred you’ve written so many great posts and articles over the years but this one may be my favorite. Really wonderful.Personally I have trouble relating to some of the business school trained, by the numbers VC guys out there. They’re left brain and I’m right brain. They love certainty and want to know what revenue will be in five years. Meanwhile I’ve done this three times now and while I don’t know exactly how we’ll get there I know that we will. How do you quantify that?The part that a VC would really get from working at a startup as you suggest is that you can’t put magic, heart and a sixth sense for business into a spreadsheet.
Steve’s posts supports the growing trend towards mutual empathy between investors and founders, which enables a more pro-founder relationship. If you take a broad stroke look at the individual VCs on the rise it is not by chance that the majority of them were formerly startup founders. Here are a few names that come to mind:- Reed Hoffman, Greylock- Peter Thiel, Founders Fund- Naval Ravikant (AngelList)- Mike Maples (Floodgate)- Steve Anderson (Baseline)- Chris Dixon (Founder Collective)- Mitch Kapor (Kapor Capital)- Paul Graham (Y Combinator)- The list goes on…
yup. that’s what i am seeing in the VC business that makes me think Steve may be on to something. i do understand the critiques of his idea too.
Fred, great way of thinking, just a couple of touches to make it a very realistic plan. Fist, a startup starts with a great idea. If your new recruit doesn’t have a great idea, no point in faking it. Say you have a trainee with MBA and $500K to train her. Offer $100K and your trainee for 1 day/week to 5 very early stage startups, get some equity for that. Now your trainee, being an MBA, will get all the job you want her to experience, multiplied by 5 – talking to other investors from the startup position, hiring, establishing key relationships.
Some VCs have begun to realize to all things are irrelevant but people; this is one thing we must all learn to do right – even young CEOs
@fredwilson:disqus , I’d love to hear what you think weaknesses you have or have had to overcome in not having non-financial start up experience. Additionally, If empathy for entrepreneurs is a baseline, do you feel like not having previous operating experience can be an advantage or has given you an advantage in some sense, by allowing you to be more of a counselor of CEOs rather than micromanaging and open to businesses / business models outside of analogs to your previous start up?
Just stopped by the bar to say…guess all you technocommie haters were wrong about Groupon, eh?http://news.yahoo.com/group…What was it? You don’t like Chicago? Or you don’t like capitalism i.e. buying and selling a commodity online instead of making a California business model where you share-bear it.Yeah, I realize they had creative accounting. What Silicon Valley firm doesn’t! And their VCs *did* make a company. And they stuck with it despite all the ups and downs. P.S. I don’t like Groupon as a service and don’t use it, I like shopping alone, thanks, and using local coupons like at the CVS. I just got a $6.40 coupon there in real bucks plus all kinds of product coupons and the cat food cans are only 57 cents. I don’t like the idea of shopping in a group, and I can understand that it might mob small businesses.But there has been something suspicious about the way all the influencers from Arrington even to Hiro Pendragon were knocking this. I wasn’t buying it. Jeez, it has as much value or more as Facebook and Twitter.
Aside from sharing some operational experience…successful vc’s also need a good measure of visionary talent.
Another great discussion. I humbly agree that start-up experience is a must. We founded our firm on it. Its hard to have the discussion with the entrepreneur if you haven’t had to worry at 2 in the morning whether you were going to make payroll the next day. With that said, that doesn’t mean partner’s with little or no experience can’t be fantastic and very helpful. Empathy is underestimated. There are many examples of this.In our case, we have had to be 100% entrepreneurs again building the firm / fund. With little opportunity to raise institutional capital for a new fund, we have taken it a step further by changing our fee structure to be more back-ended. This is the ultimate test of risk management. Part of this comes from necessity, part strategy, but it works for us and our investors.
I’d add that startups shopping for venture capital should look to pair up with a VC who has startup experience, successful or otherwise. Startups should be looking for more than just a check in their VC. They should be looking for someone who understands them, can communicate with them, and help guide them through the startup struggle from a place of experience.
Yes, and hence I started working on a startup..and went to several projects to get one of the ground. I would say it’s for mere experience and see where most start-ups actually face difficulty.Thanks for reiterating on this point so I know I’m on track!
I am doing a roll-up that is a sequel meme to two concepts I did not start:Min Viable Entrepreneur Experience for VCsIt takes Eric Ries stuff. Steve Blank’s blog post and executes it allhttp://whattheydontteachyou…
thanksi will check it out
The imposters who have captured the Republican Party would toss TR out on his ear or worse.TR broke up Standard Oil. Can you imagine any of these guys saying that about Goldman?National Parks, protect forests oh yeah right.
consistent feedback in this thread. my kitchen cabinet is calling bullshit on this idea. that’s super helpful to me, as usual.
Great points, Charlie.Love that TR quote. All fired up now with no place to go. At least not tonight.
It is not the Republicans, it is everyone — the entire political class.Case in point, the Goldman crowd IS the government in both parties, in the W and O administrations and in the entire derivatives scandal.They are “long” on floor 6 while being “short” on floor 9.It is an obscene story of greed, dishonesty and lies cloaked in good blue suits whose occupants have hand picked their own inquisitors.They own the Congress and the WH. They own the Treasury.MSFT has a bit of a unwelcome and untidy little trust issue and hires a battalion of lobbyists and presto — no more problems.
“They are “long” on floor 6 while being “short” on floor 9.”i want what you had for breakfast today JLM
Lol. Save your energy for next week 🙂
http://www.amazon.com/Theod…Incredible read on TR and an amazing president.