On Corporate VCs
Every once in a while I display some emotion publicly that I regret. That happened last Thursday night on the subject of coporate venture capital.
I have written here before on the subject of corporate venture capital. I am not a fan of it.
But I do feel compelled to be more precise than I was last thursday.
There are two kinds of corporate investments in startups; passive corporate VC arms and active strategic investments.
The former is made by well established investment groups like Google Ventures, Intel Ventures, SAP Ventures, Comcast Ventures, and many many more. For the most part, they don't "suck". They can be a good source of capital for your company, they can be supportive investors who follow on when the rest of the syndicate does, and they generally have good reputations, including with me.
The latter is when a company sees a business they want to get closer to, they take a big stake, a board seat, and they make a ton of promises about how much they are going to help the company. These type of investments and relationships have almost universally "sucked" for our portfolio companies. The corporate strategic investor's objectives are generally at odds with the objectives of the entrepreneur, the company, and the financial investors. I strongly advise against entering into these kinds of relationships.
I apologize to all of the corporate venture firms that I insulted on Thursday night. I've got a lot of scars, deep and painful, on this topic and I let that come out in a way that was not right. I'm sorry about that.
Thank god for emotions, Fred! Life would be SO boring if we were all left brained, logical, diplomatic, and agreeable.Luckily, evolution took no chances with the lymbic system meaning our emotions rule us and will continue to do so. The joys of being human..
very true, but showing them publicly has its issues
Just saw it, is epic. In my playlist.
It was immediate. Honest. Not a crafted message/ response. That resonates.
Did you get some nasty phone calls or something?
did they make priority inbox?
🙁 Well, maybe you’ll be a wakeup call for them to be a little more helpful?
Waaaaaah (baby crying) If you are confident you would think who cares.
“if you are confident”.Probably because it spreads a stereotype and hits a sore point which could be proved valid..We all have these vulnerabilities.They just aren’t the same for everyone they are different. I’m not in competition with 6’5 Quarterbacks so if one made a comment about my height and physical abilities it wouldn’t bother me a bit!Other stuff, other things, it would. Different for everyone. If you told me the football team at my stepkids school sucks I would give three shits. Who cares? Not me. Take as an example a high school teacher hearing a comment by a college professor regarding high school teachers. Or an Ivy League college professor making comments about community college adjuncts. Would hit a nerve don’t you think? I care about other things but tend not to reveal them lest you give people your “hot buttons” and they know what to press to get a rise out of you.
sometimes people saying something to ou in the only way to make people realize
nothing to worry aboutthe knock at the door would change that
so NOW you choose to read your email…
you should post them so we can all make fun of the people that sent them
Refer my response to @FakeGrimlock:disqus above 🙂
I can’t comment on what you said as it flies right over my non-corporate math failing head. However being a self-help book author I can say, we all make mistakes. We all say things we regret. It takes a big man to own it and apologize publicly. And to me that is the most impressive thing about you – your transparency and humanity.
EMOTION MAIN DIFFERENCE BETWEEN YOU AND TOASTER.HAVE MORE OF THEM.
So, toasters have at least some emotion you say?
You haven’t heard them say ‘TA-DA’ once the bread is toasted…I have…whattoaster you have? 🙂
I rarely eat toast – though if my toaster was a magician, I certainly would eat more.
+1 and yesssssssssssss
But I already have three toasters – I found the marginal return diminished :)Emotions – British people don’t have them – I mean look at Roger Moore who said regards acting as James Bond…. (source wiki)”(I) “only had three expressions as Bond: right eyebrow raised, left eyebrow raised and eyebrows crossed when grabbed by Jaws.”
what about in your case – do robot dinosaurs have emotions the way humans do?
GRIMLOCK IS EMOTION.
toasters or emotions?
Pando loved it.
saw it over the weekend on youtube. http://www.youtube.com/user/pandod...
do you have a link other thn youtube?
not that I know of but hey you never know
thanks. it’s smooth and stable. Pando’s keeps freezing.
This post is ample evidence of your humility and contriteness, but having watched the video a couple of times I think anyone who is in the least offended by your remarks has a glass jaw.
I always knew they were tough to deal with but I didn’t know it was that bad. After that statement i’m sure you’re gonna be in some uncomfortable conversation in the board meetings you share with corporate VC’s
already am. thus the public apology.
I knew I shouldn’t question your blunt honesty no matter what you say 🙂
Personally, I don’t think you have anything to apologise for Fred. But it is a measure of the man who can say sorry. But regardless, what you said resonates true with a lot of Entrepreneurs who have had similar experiences.So thank you in this instance for being the voice of the Entrepreneur 🙂
Diplomacy aside, putting the topic upfront and ruffling some feathers may move some of those VCs to reconsider their approach.I almost forgot: Go Spurs, win it on the road tonight.
.They had the champagne on ice on Tuesday night and blew it. You have to be able to close. They will get the job done tonight.I was in San Antone on business yesterday and the city is just buzzing with excitement.Go, Spurs.What a great series.JLM.
Spurs 99-97 is my prediction or close to it.
agreed. they blew it last night but i think they will wrap it up tonight. i’m confident coach pop has a few adjustments up his sleeve that will enable a victory.
.Hope so. I love the elegant irony of old school v new school.Those old San Antonio farts are teaching those Miami metrosexuals a thing or two.JLM.
Yes, Pop is key here. New tricks please
Nothing better than a Game 7!
No OT please. Win it going away. Be back in San Antonio by dawn
Yes! I’m not rooting for the Bruins. They eliminated Toronto by a fluke. It could have been Leafs vs. Blackhawks
I wish I was not just realizing how frigging awesome hockey is. What fun last night!
I’ve raised both VC and strategic money. Overall, I’ve had good experiences with both. Good smart people who are very mentschy through thick and thin (and I’ve seen both). A couple of specific comments on the challenges with strategic money that might be helpful (and maybe leaven some of the emotion):1) People change – the people you do the deal with will likely not be the ones you’re dealing with a year or years down the road. 2) The deal makers are not the operators – The deal makers get the check cut and the docs drafted but they are not the ones who will do the qualitative stuff promised. At best, they are influencers. And it can be very hard – if not impossible – to know how much influence they carry because that would mean understanding the corporate politics and human interactions of the company. I think that is, at best, very difficult to figure out from the outside. 3) Strategic agendas change. Startups pivot, big companies reorg and change strategies. Your startup might have been on-strategy when the deal was done and the promises were made. But the company now has new needs. 4) The people doing your deal are people so they are self interested. This is not a bad thing – it is the normal thing. We are all self-interested. (Even the most missionary of entrepreneurs are not working their butts off purely for society) They want to get promoted. They want to get ahead. etc.. They did the deal with some level of self interest in mind. They would not be human if that were not a factor. A year down the road, they will still be self interested and you will need to understand what that self interest is. That is normal. See #1 – the people you are dealing with may well change.Proposed solutions1) Good VCs specialize in making investments. It is rare that specialization does not bring benefits, especially among the most specialized. We all believe in Adam Smith, right?2) People change so get it in writing – the people will change and the new ones were not there when the deal was done. They’re not malicious but they won’t know what you were promised or what the spirit of the deal was. At that point, there is no choice but to pull out the docs. How often does a VC partner on your board change? Hopefully very rarely. 3) If you need the qualitative things they are promising, get it in writing. *Qualitative things are easy to promise but are hard things for a big company to deliver*. Not just for you but for themselves as well. Running a big company is hard enough. Add in the needs of your startup and its that much harder. If the qualitative things promised are completely critical to why you’re taking the money, it needs to be deeply legally binding and you want as many constituents on their side to buy into it. Otherwise, assume it won’t happen and be pleasantly surprised if it does. 4) Preferred stock creates problems down the road – A typical preferred stock structure with blocking rights and all the other bells and whistles that are standard for a VC can be really problematic with a corporate investor who has strategic needs that might not be as purely financially driven as a VC. Legal solutions to fundamental problems is curing symptoms, not root causes. Better to avoid the fundamental problem in the first place. But if you’re going to go down that road, invest in thinking about the ways that the preferred rights might not be good for the corporation to have. 4) Do not sign a ROFR. Ever. At worst, sign a right of negotiation.
Possibly its works better in lifesciences, where the strategic investment also includes important joint R&D projects that make clear whether there is a long term match, and a possibility of a solid acquisition.But you are right, people change and strategic agendas change and that can be deadly. Also, as noted elsewhere, the dealmakers are sometimes not the ‘collaborators’ and that can be a problem, too.
Your challenge #2 “The deal makers are not the operators” is spot on. Seen it so many times….
who often is the operator – maybe it needs buyin
that’s good advice
.I can feel the scar tissue and callouses in your comment. Well played.We too quickly forget the benefit of actual knowledge and allow ourselves to wander into the soft world of theory thereby blunting the benefit of real earthy operating experience.Yesterday I had to go to San Antone to put up a For Sale sign on some lots I was selling at the Dominion Country Club.A guy had offered to put them up for me for $100 each. Seemed like a lot of money. I am frugal.I took a big steel stone chipping bar, a sledge, a pointed shovel and in the 95F heat on a hillside overlooking the 5th green, I chipped down through the stone a foot to install the sign.I broke a sweat.I took my wife along on the pretext of eating at Barrio’s on Blanco, a fabulous old school San Antone TexMex joint. She’s easy that way.It took me about an hour to do.My wife asked me — “How do you feel?”I said: “Alive.”We sometimes forget the value of a bit of hard work and callouses. It makes us feel alive.BTW, I took the back way from NW San Antonio to Blanco and saw a part of the Texas Hill Country I had not traveled through for about a quarter of a century — as pretty as ever. Green, lush, alive and historic.On Earth as it is in Texas!JLM.
Lots of scar tissue.
Thanks for the tossing this to me.A guy had offered to put them up for me for $100 each. Seemed like a lot of money. I am frugal.You think $100 is “a lot of money” because your set point for value is distorted by what was “a lot of money” when you didn’t have money. Or when you were younger. Or both.I’ve seen this happen fairly often. We are all subject to it. If you told your (96?) year old dad that your daughter was making $35,000 per year his immediate gut reaction might be that was a fine living!!!! Since when he was her age $35,000 could buy a huge house.Now of course both you and your father know that pricing has changed. But you can’t get away from this baseline floating in your head as far as “a dollar” and it’s value. It’s very difficult. It’s hard to unlearn. Probably one the reasons Fred doesn’t want to use a private jet, jet card, or even first class. (He should).This also is why sometimes it’s the case where someone who works for a company for a long time ends up being totally out of touch with how underpaid they are. They base the number they get is based upon what they thought was “a lot” when they were hired 20 years ago. My dad had a guy working for him when I was a kid that was making $200 per week I remember. He would also tell me he made “good money”. That’s when I started to develop this theory.Now the hard work part of this I totally buy into. It describes me perfectly and how I operate. It feels good. Otoh, I am always trying to offload anything I can, value or not, to someone else if it’s not my thing to do or if, and this is important, it can save me time in some way, aggravation or having to (and this is important) learn something I will almost never have to do again.  Otoh, I had some wood in the back yard and got an axe and some other tools and split the wood myself. Because I wanted to do it. Not because of what it would cost to have someone do it for me. Or because I wanted to do it again.My guess is of course that if an employee had said he was driving to San Antone in order to save $100 you would have immediately thought that was not the best use of his time.By the way I remember playing the “frugal” ideal when I was getting bank loans back in the day during the dog and pony show. Never said it, just gave all sorts of hints that we were frugal so the banker could think he discovered something. I once was routinely criticized for having an idea to pay someone else to shuttle my kids back and forth over state lines (lack of social proof as to the practicality) I felt that spending two hours in the car was really unproductive, boring etc.
.Well played. I agree more with you than you do with yourself.JLM.
Funny, my whole life when people ask me how I am doing in casual chat, I always have retorted, “alive”. They laugh. I started saying it in my twenties. But, now that I am older and people my age are dying, it takes on a new meaning. better than the alternative I tell them if they stare at me funny. When I used to leave customers when I sold, I’d tell them, “Don’t work too hard.”. I would get a laugh. But, had deeper meaning I guess. Sometimes we work too hard when we shouldn’t be working.
“how do you feel?””alive”classic
why are ROFR’s used in the first place
Hugely powerful. Nobody is going to make you an offer only to know that somebody else can just match it and they lose.
It’s used to limit the desire of others to bid for the company and drives the price down – possibly way down.
Good points. Also, they will try to manage you to a spreadsheet with strict budgets and line items. That works for mature businesses, but not for a startup.
This I feel would cripple me.
be caref then.
I can’t grasp how they couldn’t undersand what effects this would have? I guess this is why they are numbers-focused and not creatively focused..
Seems like there could be a balance, in general, if the disciplines and rigors of mature businesses could be adjusted to the agility of startups — within reason of course. But that requires not being locked into the tools but rather what the tools accomplish and sometimes the formulae and tools become ends vs. means.I find this in recruiting — there are some corporate types who have a lot to offer to a startup environment but it takes such a special persona and mind to make that transition. When it works, though, it can be brilliant.You and @Tereza:disqus come to mind.
I think these disciplines become increasingly important as the startup matures, grows and scales, but initially the default state is almost zero importance.
It may not, but I would suggest building budgetary discipline into your startup culture asap. It will help with sticking to goals and not getting sideswiped by miscalculated spends(proportionate to the complexity of your cost model)
Of course, that’s assumed. But I’m cautioning against a tendency to micro-manage their investments. I have seen it.
It is ironic that these same corporate groups could also be those that sometimes acquire startups.What is typically at odd that makes their co-existence untenable?
dracula and the blood bankis that a labradoodle?
It gives a new meaning to the expression “you can’t suck & blow”.Bichon Frise
Another comment that is great fun when taken out of context 🙂
reach out and touch somebody’s handmake this world a better place…if you cangotta have fun
all i know is I kind of want to hug that dog. so cute
You look different today, William ;)Very cute dog.
he’s better looking than me…and a sweetheart. thx
That was fun. You definitely made your point.Are you taking back what you said? Sounds like you meant it and it deserved to make an impact.Sometimes some of the best things you say are when you are a bit heated. For instance, “Be your own bitch!” That’s a classic Fred Wilson-ism and one of my favorites.
Not taking it backClarifying it
+100 on that.
You showed you cared enough to say something. That’s important.It’s like when someone invites you to a party and you don’t want to go you don’t say “why would I want to go to your party!” you say “oh I wish I could but we are already booked that evening…”.What you have done is show you care at least enough to bullshit them. That way they get the bone and can walk away with their pride.
Be your own bitch is a keeper 🙂 For you and I, maybe it takes on additional meaning, eh?http://www.avc.com/a_vc/201…
;)Fred repeated this phrase in a post on Mother’s Day last year — although the post was not meant to be a Mother’s Day post per se. One of the guys (perhaps chivalrously) protested that “BYOB” was not an appropriate thing to say on Mother’s Day. I replied that I thought it was perfect.
Provoking another public statement here with this question :-)Are the corporate VCs that do not suck in fact closer in model to a regular VC, i.e., sufficiently far away from the parent?
I think so
In the same vain – there are plenty of “financial” vc’s who believe they add value and have never run a company and dont understand much about reality. All they are focused on is “n”x returns. I guess – there are exceptions in both camps.
Yes. I have been that person
Perhaps these other VCs need a little TLC and teaching.
From what I have heard about you (having never worked or collaborated with you), it seems you do add value to the companies by being honest and staying out of their execution path and guiding when needed; being a micro-vc myself, I have seen many a vc’s that I have to work with that claim to have business experience and claim to make introductions etc. only to show up at the board-meeting and nothing else. I say – just be honest – there is no harm in saying – I am a financial vc with no biz-dev experience but I think I gamble pretty well .. thats fine and there are some great folks! and as for me – I believe I add value early with product development and team management (who to hire, how to let go of someone etc.). When it comes to haggling with a PE on the EBITDA (proforma or otherwise)… I would rather go and play halo 🙂
At the end it’s a people business…no matter what is at stake…so if one gets a bit carried away because it’s normal, because it happens…well thanks Rohan for saying it:)
But Fred- you set high standards for the VC industry and many VCs look-up to you and learn from you. There must be some truth to what you said, and you were reflecting on your own experience. It is what it is.You said something maybe as provocative 3 years ago on this TechCrunch interview with Sarah Lacy when asked what your wish for the VC industry was (it was a question I emailed actually), and you rightfully answered:”That there were no assholes in it.” http://www.tubechop.com/wat…
not possible. too many MBAs and ex-investment bankers.
“MASTER OF BEING ASSHOLE” DEGREE SURPRISINGLY POPULAR.
I thought it was a prerequisite?
MBAs, like everyone in start-up and VC world, fall into 2 major buckets: those who want to create value (products, services, innovation) and those who simply want to grease the wheels of value creation (financing). Not all MBAs are in the 2nd category; too many in VC are.
If you sell you run into plenty of assholes.Nothing wrong with that.The people that are easy to get the order from are also (as a generality) the people that it’s easiest to lose the order from.The people who are assholes and “a tough nut to crack” usually act as a barrier to entry to others scared off by the hard work and the high hanging fruit.
🙂 I think what’s more aggravating is a VC without (or with little) operating experience (except for Fred’s case) and who pretends they know everything and dispense advice arrogantly.
ONLY THING NEED ASSHOLE IS YOUR BUTT.
Quote of the day!
I remember a guy from a long time ago  who said in response to something undesirable “I need that like I need a third rectum”.(Welcome back, see what you’ve been missing…) John Bisbing. Apparently this is original because when I google it I can’t find it appearing anywhere. It can now be attributed to me. The use of “three” vs. “two” is key for the impact.
*sshole inflation? Just what we needed!
I will never forget my first encounter with an asshole VC. It was breathtaking. I didn’t know arrogance of that magnitude was possible. And he was dressed like an idiot, to boot.
I’m thinking about posting a blog post I have as a draft with something like a title of “The Creative VC” – of which it sounds like that wouldn’t fit; Creatives usually dress better.
This guy looked like Pee Wee Herman if he’d let Perez Hilton dress him. Of course, the thing is, if he’d been really awesome and cool, I would have found his style charming.
Wow. Women like to be friends with gay guys but they don’t like dweebs! (Could be because they aren’t in competition for scarce resources which the gay guy controls.)”if he’d been really awesome and cool”Anytime a salesman tells you that a customer that he sells to is “a great guy/gal” it usually means either a) they have respect for them for some reason and/or b) they had an easy time getting the order, the customer doesn’t give them a hard time or make extra work for them.More often than not it’s “b”. People like people who give them what they want with little work.In the case of the VC had he (as Suster would say) grin fucked you you might have felt better but in the end you’d still walk away with nothing (like getting rejected from a college you want to go to).
Clarification: He wasn’t a dweeb. He was clearly making a fashion statement. This guy did not embody anything that I would consider “dweeby.”I didn’t want anything from him. He was a speaker at an event I attended. I did not ask anything from him and was not refused anything by him.Your statement painting all women as doing one thing and not another, and therefore bringing my gender into this discussion as somehow relevant, (and bringing “gay guys” into it – why?) is regrettable. Let’s pretend you didn’t do it.Look, I don’t call many people assholes. I like most people. This guy was an asshole, and so, therefore, I get to make fun of his fashion sense.
“and bringing “gay guys” into it – why?”Why not? Gays are off limits or something? I have to walk on egg shells?You made a statement that was disparaging imo (which is fine by me btw I was just adding the thoughts that it triggered) your statement was:”And he was dressed like an idiot, to boot.””This guy looked like Pee Wee Herman”So you made a comment on his appearance (which to repeat I take no issue with I do the same as does everyone). Pee Wee Herman is dweeby. That’s my thought. So you “made fun” of his appearance. Would you like if some young entrepreneur made a comment about your age? Probably not. But that might happen.”Your statement painting all women as doing one thing”I said “Women like to be friends with gay guys”.Google “why do women like to be friends with gay guys” the numerous responses indicate at least a grain of truth in that. Like saying “Why do Texans talk big” about things. No statement like that ever implies “everyone” or even “most”.People speak disparaging about VC’s all the time. But there is also Fred. Same with lawyers etc.”and therefore bringing my gender”To make my point your gender was relevant.”I will never forget my first encounter with an asshole VC.”It was easy to assume from this statement that your encounter with this person was not just because he was “was a speaker at an event I attended”. It seemed that he was someone you were dealing with on a personal level and that your reaction to him was more personal. (Like with crimes they sometimes say the level of attack “was personal and up close”.) I absolutely assumed something by what you wrote.I’ll fully understand of course if you think I’m an asshole! I didn’t give you what you wanted. Which was to simply apologize and say “oh I’m sorry you felt that way I really apologize”.
I think we might be at cross purposes a little bit here.If you and I were sitting around having a beer and you said “women like to be friends with gay guys and not dweebs” I wouldn’t get bent out of shape. It’s shorthand, and I get it.And, I think I missed the spirit of your comment (mostly in fun, yes?).So, I apologize for coming back a little strongly.On the other hand I still think (in a friendly way – picture the beers) you deserve a little ribbing for bringing up gay guys just because we were talking about how a man was dressed :)I definitely don’t think you’re an asshole (from your deleted comment). And I genuinely hope you don’t that of me!
We will have to sit around and have a glass of wine. Next time I am where ever you are (Santa Monica?) or if you’re between Philly PA and Princeton NJI also like the way you practice what you preach:”Truly smart people usually enjoy being challenged, as long as it’s in an intelligent way.”(By the way I removed the “strike” (what you call deleted) tag that I used that was more or less trying to be funny but the tag was to severe I didn’t like the way it worked.)
That’s a date! I’m right down the road in Red Bank, NJ 🙂
You get the class act award.
From you, that will float me through my weekend 🙂 Thanks!
It’s kinda like Phil just stated. It oozed from every pore. He was the speaker at an event I attended. Any challenge to his point of view was met with extreme disdain and dismissal.It was probably amplified by the fact that these kinds of gatherings (of startupy people) usually encourage challenge and discourse, no matter who’s talking. Truly smart people usually enjoy being challenged, as long as it’s in an intelligent way.
I think its because you are used to getting your ass kissed.Even if you suck as a VC you could take meetings all day long with Entrepreneurs that are willing to kiss your ass.Not that they are good entrepreneurs, frankly that’s why you only get the bad dealflow. Somebody who has choices will tell you to fuck off. Somebody who desperately wants money will say, gosh what a great insight, while somebody who has confidence will say you are an ass.The other trait which I find even more annoying is the concept that associating with somebody “beneath” you lowers your status. What a shitty way to go about living, and its usually because you perceive yourself as the low status person among your peers.This is a trait that angers me more than I can express. This weekend I was having a grand talk with a mechanic in the marina. I really like the guy. I went to my boat, a guy who I said hello to and wouldn’t even acknowledge me, stared as I started up and left (my boat was much nicer than his). My slipmate said he asked who was that guy?? Then he wanted to talk to me when I came back….I see the same when I jump in my car wearing shorts. I seem to notice it more these days. Maybe because I’m more successful, maybe because I notice it.
“I didn’t know arrogance of that magnitude was possible”So well said. Literally you can tell in 10 seconds, it seems to ooze from every pore.
You have to sit and talk with them still though, right?
How do you respectfully say you’re not interested, and that they give you a strange / bad vibe?
You don’t have to. They don’t even see you.
Confused now.. you’re hiding in the bushes or watching them before a meeting ?
Good energy in the interviewer.
No Asshole rule!
“oh yeah, well the jerk-store called, they’re running out of you!””what’s the difference, you’re their all time best seller! “
My biggest beef with corporate VC is they overvalue companies. They aren’t as price sensitive as VCs or individual investors.That said, in startup ecosystems where there isn’t a lot of money, I’d rather see corporate VC investing than government program VC
OBJECTIVE OF GET VC IS MAKE YOU WIN.IF VC OBJECTIVE SOMETHING ELSE, NO DO IT.
Once they’re invested, anyway..
“To err is human. To forgive; divine.”Hopefully your comments didn’t cause any significant issues, but your perspective, experience, and passion is why you are what you are, correct?There is obviously a difference of opinion between how start ups should be handled, but as long as all parties can be professional I hope there can be a win-win for all parties involved.
Corporations are generally bad as venture investors but terrible–absolutely atrocious–as long term Limited Partners. There are quite a few tales of them not honoring their capital calls, let alone re-upping on the next fund. With the evolution of venture investing to platforms and with the decrease of interest from traditional LP’s, we are going to see more corporation in the role of VC’s and LP’s.
It feels as if investors who aren’t aligned with what you’re doing, even if they could be good strategic partners if they were aligned – would be the same as a relationship with a corporate VC.I have a blog post draft written up on Creative VCs (as I would consider yourself, Albert, etc), vs. “numbers-trained” VCs – though not sure I’ll publish it.
.Fred —I, for one, want to applaud your finally coming out of your shell and sharing your real thoughts with us all. For too long, you have shielded us from your most heartfelt and passionate thoughts.Great interview.You may want to look into a remote starting device for your car and scooter for a couple of months until this blows over.JLM.[For the record, this is a bit of a joke.].
Gave me a good chuckle
Ha – Looking to find a big enough drip tray to catch the irony slipping off that comment
You have a sense for diffusing any potential hot situation. Humor always works!
ha…what is wrong in callingA stupid …stupidA bullshit … bullshitAn Asshole … assholeNO YOU CAN’T because it is politically not right….bullshit.
Right on, Kasi.
My only problem with this is that you have to apologize for it.btw,this reminds me of how that #rethinkvc talk you gave at grind a year or so ago ended.
“… neva eva, eva evaEva eva, eva eva eva eva”- Neva Eva; Trillville
THAT’S the Fred Wilson I remember LOL!
still in there, just waiting for opportune moments to come outhow are you pat? coming to the big apple anytime soon?
Two great points on two destructive behavior:Don’t look at corporations as investors, look at them as exits.Board members that think they can do a better job than the CEO can be destructive.The problem with both is that you have a simmering conflict.If a corporation buys you and wants to do something stupid…..oh well they own you. When they are just an investor you have a simmering conflict.Same for the board member. I have found its much better to just understand “who is on top”. No different than why a dog wants to know where it stands. No different than why I think “matrix management” doesn’t work.
Still thought their Fred Wilson Godfather image was eye catching
What happens to the next company Fred makes an offer to?
It depends whether it’s an offer they can refuse.
i think it is a bit humorous
I like the Red Rose
The visual was supposed to be this Godfather walking around the West Village in a bathrobe, per Fred during that talk (I attended).I think he also said his kids might take a photo or make a drawing of it.
Wished I attended. The day Fred announced he was doing the talk – registration was not open…and I forgot to go back when it opened.
hahahaha this is great! needs to be put on a shirt #fredwear
I would buy this immediately
@JohnRevay:disqus – who owns the copyright to this image ?
Assuming some artist at Pando.Fred might know
Hopefully @fredwilson:disqus can look into this quickly?
whoever owns the godfather brand could try to cash in on part of the burgeoning fredwear empire
If we changed it to “The Godfunder” as someone else suggested, I think we’d avoid the copyright as it’s a parody / humour — at least in Canada, I believe that’s how the law works.
This could probably raise a lot of money. @fredwilson:disqus should do a Kickstarter campaign, donate profits to wherever.Maybe put a bunch of his quotes on the back of it – including his latest outburst;”Never ever ever ever ever ever … NEVER …””Be your own bitch!”What other gems are out there?
Add:They suck…they suck![edited]
@MsPseudolus:disqus I hope it is apparent that I was agreeing with you not correcting you.As this is “clarification Thursday”
@Donna Brewington White Yesssss it was 😉
Pre order please
fredwear could be silicon valley’s premiere fashion brand
probably easier to launch this fashion line in California… would play in Santa Monica — the future startup hotbed
it seems likely to me that fredwear will blossom into a brand with multiple sub-themes. i.e. fredwear santa monica could be about beach colors and summer attire; fredwear new york could be about grit and toughness.
I think so too. The AVC community can make it happen..
Would be good branding and exposure fo USV as well..
I haven’t seen this before! Ha ha! Should it be “The Godfunder?””Never let anyone outside the family know what you’re thinking, Fred.”
Ooohh – that might help get around copyright if there’s an issue, re: getting these on t-shirts..
There needs to be a disclaimer not to attempt to drink a hot beverage while reading the thread under this comment. John this makes my day. Thanks for sharing.
it’s not a flattering comparison. i don’t kill people.
Hey any thoughts on Corning’s investment in View?http://www.bloomberg.com/ne…
Fred, I invite you to learn more about your corporate cousins. Some are doing interesting things (we for instance make sure always to give entrepreneurs the choice to put an operator in place of “a deal guy/gal” on the board if we have the right to nominate) and strive to be entrepreneur-friendly. See more about our particular philosophy here: http://www.bothsidesoftheta…
yeah, but what happens when you leave Andrew?i’ve been through that too many times to want to go down that path again i am sure most VCs don’t feel the way i do and i am sorry that i feel that way but i do
“. . . they’re your exit, not your financial partner.” Great advice on how corporations and their VC arm should be viewed. I also can now totally see Fred walking around a boardroom with a bat in his hand.
I’ve watched that video three times. It’s getting better with each viewing.
I liked it when you said it, I like it still, and I agree with your clarification. Many entrepreneurs who are focused on raising money, especially first-timers, can overlook the fact that your investor is not (and shouldn’t be) just someone who hands you a check.
I’m actually impressed with the fact that you are saying you’re sorry. VC strikes me as a industry full of stubborn people – and saying I’m sorry is not what people do. Just sort of impresses me and makes me proud
The biggest news from today isn’t that Fred called out the corporate VCs who suck. It’s that you can finally see who is upvoting posts in Disqus!Trying to find a bad comment to downvote in this string, just to see if you can see the downvoters too. 😉
Well as a corporate (though not VC) needless to say it’s a wee bit awkward. With DNA from both sides, I’m thinking hard how to create authentic, real value in the ecosystem.But, changing the subject…… Yesiree!!!! Love, LOVE the upvote visibility and was so very sad a while back when they disappeared. Honestly, that omission a lot of the Disqus joy for me — depersonalized it. As I told Ryan Valentin at @Disqusat last year’s BlogHer you can spend time commenting and feel like it’s actually building your tribe, because you can see who your supporters are. There are lots more quiet ones than just the active commenters. That’s valuable info. He tweeted me when they changed it back!Aaron, my dear friend, as a special favor, I just downvoted you. Can you tell it was me?
LOL. You are the best Tereza. BEST downvote ever. ;)No, I can’t see it. Only the upvotes.
Wait — did someone downvote that comment? Pfffft. The things I suffer through to help on Product.FYI — I’d upvoted you, then downvoted, without undoing the Upvote. For a moment I had both up- and downvotes hanging on the screen, and then my previous upvote got canceled out.
The strategic investments I put together are still market leaders years later, e.g.: http://www.rdc.com.Maybe the difference is that I had operational experience in a data startup and the chemical industry before I did SI so I understood product development, delivery schedules and product-market iterations in different ways from peers in other banks.I was 16 when I got my foot into the chem industry so that shaped me about product before Mgmt Sch and bank training on balance sheets.Theories (aka the plans which corporate VCs tend to be good at) count for 0 without product knowhow (which corp VCs don’t tend to be able to do because they, often, have no operational experience at the blistering furnaces).
What are the non-financial ways to partner with corporates you’ve seen work effectively? Technology, distribution….Would love to know what you see as the signs of solid startup<>corporate partnerships, and the red flags which signal low-value or even damaging ones.
they can be great customers
I’ve raised money from “top tier” VCs (would that be like the tallest midget? 😉 ) and from corporate “strategic” investors. I’ve had both good and bad experiences with both.Because in both cases you’re dealing with people, there are numerous cases where one option would suck or either option would be beneficial. It all comes down to the strength and political will and capabilities of the individual partner/exec involved.Corporates can bring important channels, access to technology and in some cases a longer term view (b/c VCs have other people’s money and must return it at some point) than a venture firm can. But they generally don’t have the pattern recognition that a VC has b/c they see more deals in more broad areas/stages and are “in the game.”in simple terms, a venture capitalist is a political animal trapped inside of a partnership. They can behave in both positive ways and destructive ways (intended or not) that are at odds with the entrepreneur as the VC is a fiduciary to LPs as well as the shareholders of his portfolio companies. At times, that conflcit puts a VC at odds with the entrepreneur.Because VCs are financially motivated to get the best return to both line their pockets and also the best returns to help them raise their next fund, I think VCs generally are more aligned with the entrepreneur. Corporates often times invest to lock out a competitor or a market which is often times bad for the entrepreneur. There are many other reasons corporates can add or destroy value.Suffice it to say, I’d prefer a superior partner in either a VC or a Corporate over a bad partner in the other type of firm and the bar for a bad partner in a VC firm is a lot lower for reasons stated above.Fred, the bottom line for me is no need to apologize. A lot of corproate venture arms do suck, just like a lot of venture firms suck and those are having troubles raising their next fund as the industry contracts. The irony, and sad part, of that is that corporates can continue their suckness, esp if they’re a private business, b/c they don’t need to raise outside capital.
Fred, let me present the opportunity to get you in more trouble :-)What is more annoying – corporate vcs or late stage/momentum investors?(http://www.avc.com/a_vc/201….I vote for the latter, like when they try to elbow in on taking the credit of a successful exit by a real VC and most importantly, the real entrepreneurs to bask in the sunlight. Compare to real vcs who give the credit where it belongs. See http://www.avc.com/a_vc/201…
they can’t hurt you as much
Hi Fred, point taken and apologies accepted. As always there are good and bad examples along the road. I hope my fellow corporate investors will produce even more positive examples in the future that we can change the overall impression in the market. At the end the entrepreneurs have to make the judgement call if there was beneficial contribution to the company a long the way. From our perspective we have a lot of positive feedback in our +190 portfolio companies over the last decade.
I hesitate to argue with a single data point, but things worked out extremely well for Citrix Systems when they received strategic investments from both Intel and Microsoft. These investments were the type that you say usually “suck” – both companies invested because they viewed development of a multi-user operating system for X86 architecture chips to be strategic.The interactions between the business and engineering teams of Intel and of Microsoft with the business and engineering team at Citrix was quite close, and resulted in the development of the technologies that continue to be at the core of that vibrant and successful company today.This is either “the exception that proves the rule” or evidence that the world is much more complex and nuanced than your broad statement about strategic investments. I believe that the latter is the actual situation.
Emotion and more so anger kills logic, and usually ends up resulting in statements that aren’t nuanced – that are general. There will always be edge cases, and it sounds like the one you mentioned would be one – at least based on Fred’s experiences so far.
“corporate VCs still suck” 🙂
As a CVC, I can’t deny that, as an investor class, CVC suffers from many of the problems described in this post/thread, and more. However, I also think it’s slightly unfair to generalize good and bad CVCs solely based on being passive/active or size.The relative attractiveness of taking money from any VC should be based on their ability to help the portfolio company grow and become successful, which is, IMO, based on a set of factors (some of which already have been raised) that should be evaluated on a case-by-case basis.These factors include things like: the company’s need/desire for highly active, operator-type guidance; the company’s desire for assistance navigating complicated industry verticals; the ability of the VC to provide needed resources (human capital, network/connections, channel access, systems, etc.). CVCs can offer many of these things, but perhaps not all of them.From my perspective, if you can take money from Fred, or Brad Feld, or Chris Dixon, or Bill Gurley, or (insert awesome VC), do it. These are the kind of investors that are without question the best in the business, and are likely to only be involved in deals that allow them to add immense amounts of value. If you can’t raise from these super VCs (and not everyone can), then it’s important to think hard about your investor strategy. What do I need from an investor, and who canprovide me with that at the best price?That said, I agree, CVCs generally should be less active – we often lack the operational expertise required to participate heavily in startup management. To me, this means most CVCs shouldn’t lead (unless there is a particular and rational reason to), that a board observer seat is usually good enough, and that a CVC should make an effort not to get involved in decision-making, unless they are invited to. I also think CVCs should generally restrict investment focus to companies that stand to benefit from having a relationship with the corporate parent and that are relevant to what the corporate parent does/is doing.However, many of the challenges that are presented by raising money from CVCs aren’t unique to CVCs. There are some investors who should be highly active, engaged in driving company strategy, and generally take a much more visible role with the company, and there are some who should not. There are some investors who are great at making things happen for companies, and there are some who make lofty, unqualified promises and can’t deliver. There are some investors who put a great deal of thought into sector or thematic focus and portfolio construction and stick to that strategy for the fund life, and there are some who suffer from severe strategy drift, and lose focus on companies over time. The list goes on. These are not CVC vs. VC problems, they are just VC problems.Moreover, some of the classic challenges to raising money from a CVC are misunderstood or can be controlled for with little effort.People change: Sometimes. First, look at the makeup of the CVC – does the team live and breathe VC, or is it a side activity for the business? Also, think hard about if this matters to you. If your CVC contact changes in 3 years, is that likely to make a substantial difference in your company’s future?The deal makers are not the operators: This is often true. However, how is this different from a financial investor? As a CVC, we can’t make promises that a particular business unit will take you on as customer, or run a pilot of your product, but we can work hard to help you make this happen. We should promise any moreor offer any less. All VCs have to act as an influencer in this situation, and I’d say having a presence in the building is generally more helpful than not.Misalignment of objectives: I don’t really buy this one. Some (few) CVCs offer carry – this almost always cures the problem. However, even if there is no carry to the CVC team, I still think that if expectations are set appropriately with the parent company, objectives aren’t nearly as different as many claim. Think about when the CVC will really be recognized for success. If I were to make an investment in a company because I want to get closer to them and use their product at a discount, or use the tech in a company project, etc., and the parent sees incremental top or bottom line benefit from that, I’m not going to get much of the credit for that success. However, if I make an investment in a company that generates a significant exit event, and helps my parent company along the way, I get to own that. I’d argue that I benefit the most personally/politically/financially when a company I invest in is wildly successful, not when an internal business unit prospers.Slow/Heavy Handed: This definitely happens. I think you mitigate this by making sure, as a CVC, you are eyes open to the fact this is both a perception and reality, and take steps to establish an internal process that promotes speed and flexibility. When internal processes slow down CVCs, it’s frustrating for us too.Security Structure: If you feel like you need to create a separate, stripped-down class of security to offer your CVC because you’re worried they will block economically beneficial actions in favor of parent company strategy, don’t take money from that CVC. Again, I’d argue that a hard look at the real incentives in play and what those mean for the CVCs commitment and focus are much more important.In the end, I think a good VC, corporate or otherwise, should engage in similar behaviors, all of which are focused on creating success for the portfolio company. In my eyes, the ability of a VC to engage in behaviors which are most helpful and relevant to each individual portfolio company should determine “suck” or “don’t suck” – not where their office sits.
Corporate VC Managers Counter Fred Wilson’s ‘Patronizing’ Attackhttp://www.bloomberg.com/ne… via @bloombergnews
The article made a good defense for CVC but not against Fred’s concerns. Patronizing is not the word I would have used to describe Fred’s comments. Nor a word that describes Fred. Although I recognize that it was pulled from a quote for headline appeal. Yet, the quote too seemed disconnected,
Fred, in spite of our being an irreverent bunch who took your sincere apology and clarification all over the map and back — you knew we would right? — I can’t help but be impressed that you thought it was necessary to do this.Although I hope that from the comments you feel somewhat vindicated.#clarificationthursday
Admire the candor of your blog posts, Fred. I need to embrace some of this more in my own blogging.
haha! love that video – would not worry an eyota what others think – you clearly have an opinion based on experience – who is anyone to say thats wrong!
I was CTO of a startup some years back that had what appeared to be great corporate investors. Learned the lesson you just shared the hard way. All had Board seats, but all were suppliers to our networked services as well. That governance flaw sank us. I did the best technology work of my career (ready to launch in 5 months and a spend of $4M, despite AmEx — a seed investor — telling us we couldn’t build these systems for $100M) with nothing to show for it. Fred’s distinctions on types of corporate VCs is a great point for all who might swoon for a big name.
that rings so true it hurts
Fred, loved the story and respect the apology, even if I’m not sure it was required. You spoke from the heart and reflected the passion of the lessons you learned. That’s a gift to the community. Thanks.
Agree with Fred, from my own experience. For those interested, here is my story.I founded a company called OZ in the early nineties in Reykjavik. In 1995 I moved the business to Silicon Valley, where we demonstrated our platform vision on the future of the internet. In our minds as (complicated) immersive 3D multiuser worlds. Far too early and initially funded by visionary Japaneese VCs. These where the early days. Then later, in 1997 we had spun out several technologies from our platform, like our instant messaging engine with it’s integrated VoIP capabilities to an independent product. This was far more modular and more fun to play with IM & VoIP platform than ICQ at that time.During this time, Ericsson did notice us and they later invested over $20m for a valuation close to $150m. Great achievement we felt!They where being a corporate VC.After the investment, we went on the radar screen for several companies. Like during ’97/98 when Microsoft analysed our stuff during trade shows and such. It actually turned out that they released their MSN Messenger two years later. In about 2002 we spun out our 3D multiuser platform; OZ Virtual to a 3D company called SmartVR – that later emerged into the multi-user game Eve Online from CCP (you should give this game a spin). Also, during these same years from 2002 until 2003, the creators of Kazaa where in regular contact and gave OZ some visits, as they wanted to license our IM & VoIP stuff, as it was based on a similar vision. Just that OZ did have a totally wrong business model, trying to sell this stuff into legacy telcos rather than just operating it from our site at http://www.oz.com. So, they later just founded Skype and built their own tech. Good for them. ;-)The fact was that going disruptive, directly to the consumer did not fit with the vision of our strategic investor. Through its participation at the board, Ericsson wanted the management of the company to focus on selling our technology (called iPulse) to telecom operators. Ericsson’s core customers. And their requirement was that we should sell it through the Ericsson worldwide sales network. Sounded interesting at first, as they did have sales offices in 130 countries, but the Ericsson sales persons where driven by their big system sales bonus schemes, not free disruptive technologies!After years of trying to operate the business, this ride ended for me in 2003, as it was clear that the strategy with our (too) active strategic investor did not work out. So, I left my position and the business was later sold to the rest of the management team that however later successfully sold the company to Nokia in October 2008. Couple of years later Nokia went in bed with Microsoft and OZ became obsolete and last year I picked up oz.com, building an entirely new OZ with fresh new investors! ;-)Thinking back, this is all a valuable learning. Tons of good things happened during these early days, since founding OZ until leaving in 2003. I had the opportunity to travel around the world with Andy Grove then the CEO of Intel, taking lunches with most of the corporate America CEO’s like Bill Gates and the likes, all during my twenties. I also learned the power of the Erlang programming language.So, that’s my story. Active corp strategic corporate investments can be dangerous.
Thanks for sharing @gudjonmargudjonsson:disqus!Seems like in your case they were acting in really good faith and doing everything you were asking of them, but youre misunderstanding of the alignment caused the friction. If CVC’s were always as helpful as that I don’t think people would complain about them.
Hi Fred:Is there a good way to discern between the passive and the active corp VC actors. I have presented some work on market reactions to strategic vs. no strategic corporate investors–investors react much more favorably to the more active strategic corp vc types….
Hi Fred,as editor of a corporate venturing trade paper, Global Corporate Venturing, we would love to have you come along to one of our conferences to debate this topic with top corporate VCs. It might salve some of your wounds! We are presently considering a New York conference, and a head to head debate between you and a top tech sector corporate VC would be thought-provoking.We definitely think corporate VC has significant benefits for the start-up ecosystem (although we would say that!), and would love to have you give the dissenting voice, so at least corporate VCs can understand why some in the venture world do not like working with them. The reasons may be clear, valuation insensitivity, potential lack of alignment, and the like, but I think it would be very good for individuals at corporate VC to hear someone of your stature in the industry discuss why you have a problem with them. I also think you may come away convinced there is more to corporate VC these days, than when you ran into difficulties. People like 500 Startups’ Dave McClure are banging the drum for corporate VC, and given the level of interest from corporate VCs in start-ups at present, avoiding them in syndicates will become increasingly difficult as it may mean turning down some very good deal flow. http://www.globalcorporateventurin...
The week of the 15th sir…
july 15th? shit, i am in europe on a business trip that week
No worries… I’ve got your groom-to-be brother here this weekend, and he’s already signed me up for a trip or two into the area for band rehearsal for the event next spring. Can’t wait. Very excited for the both of them about EVERYTHING!
Fred,Have you seen this ‘Plain English Term Sheet’…by Passion Capital from U.K.Very interesting and encourage-ble … Am sure you will appreciate the effort.P.S. Since i cannot post a pdf…i just ‘jpeged’ the first page.
You do a great thing in openly sharing with us, your community, all the brutal lessons you’ve learned (*all* of them) so we can benefit/learn, whilst also being a highly professional investor. Tough juggle for sure, but there’s a reason why you have a loyal global community and why most investors do not. (And there’s also a reason why people get pissed off when the status quo they enjoy is challenged.)
I don’t comment regarding the articles I browse on-line, but this one is so attention-grabbing, I even have to say one issue. it’s terribly original and fully totally different. Your viewpoints ar merely understood.
Making a broad statement about Corporate VC is very problematic – it is a very broad generalization – almost as bad as making statements about the ‘VC industry’. And oftentimes it is about the individual, not the Company. Having said that…It is true Corporate VCs have a lot of downsides – they can be fickle as their priorities changes, they typically have more turnover than pure VCs, and at times their investment can drive misalignment of interest. It is also very difficult for Corporate VCs to make commitments on behalf of their business units.However, they can be tremendously helpful. Their understanding of the industry and the customer base can be incrementally more than the company executive team and board, especially when evaluating new business opportunities. They could be more helpful than ‘advisors’, as they have much better real-time visibility into industry shifts. Their portfolio is often filled with companies of adjacent spaces, which can help in striking positive partnerships, or sharing best practices. And they can actually help introduce to a customer or two, oftentimes of strategic value.So at the end of the day, we live in a world full of different shades of grey. Nothing is black or white. You have to choose ALL your partners carefully, not just Corporate VCs.Disclosure – I am a currently a Corporate VC at Cisco, and a former ‘pure’ VC at Genesis Partners.
Never apologize for showing feeling. When you do so, you apologize for truth.Benjamin Disraeli
I do think there should be more regulation on this.
It’s telling that you would endorse the “money” side of corporate VC – the big shops that put money into every startup they can find and add nothing in terms of joint technical development or go-to-market activity. These guys are passive investors, not strategic investors. They add nothing but money – just like VC firms.When we invest in a company we want to see a product take off and gain real market traction. We know what type of functionality is required to interest enterprise customers, and we know how to reach the decisionmakers. What is your area of expertise, besides writing a check?
none. i am an idiot who knows nothing.except almost thirty years of doing this and getting fucked over by big companies time and time again.i am not going to do that anymore.