Power Law And The Long Tail

If you look at the distribution of outcomes in a venture fund, you will see that it is a classic power law curve, with the best investment in each fund towering over the rest, followed by a few other strong investments, followed by a few other decent ones, and then a long tail of investments that don’t move the needle for the VC fund.

But that long tail is comprised of entrepreneurs and their teams. People who have given years of their lives to a dream that was ultimately not realized.

And as I have written many times over the years on this blog, I spent the majority of my time on that long tail. This is irrational behavior if you think about fund economics, but I believe it is rational behavior if you think about firm reputation.

The best thing you can do for this long tail is find a good home for the portfolio company. That could be everything from a modest acquisition to an acqui-hire. If you have to do a shutdown, then I like to see it done on terms the entrepreneur can live with.

All of these actions require irrational economic behavior from the investor(s). The goal is to get an exit that everyone can feel good about. The goal is not to maximize the VC’s returns from a failed investment. Because it doesn’t matter to the fund economics one bit but it can matter a lot to the entrepreneur and his or her team.

#VC & Technology

Comments (Archived):

  1. LIAD

    Makes sense.What’s important to you is important to me.Yet, only comes into play if the VC is looking to raise another fund or cares about rep of his firm ones he’s gone.Else a cent today is more important than no cents tomorrow.

    1. fredwilson

      Reputation is portable and has a long half life

      1. LIAD

        Awesome quote.

        1. fredwilson

          I’m working on being pithy

          1. Rohan

            It is working well.

          2. Donna Brewington White


      2. LIAD

        Remember learning in yeshiva that the only real things you leave behind once you’re gone are your children, the ramifications of your good deeds and your reputation.QED: they’re the things you should spend your life working on.

        1. iggyfanlo

          I think all 3 of the things you mention are highly correlated

      3. pointsnfigures

        Reputation isn’t controlled by you, it’s controlled by the people that talk about you.—Professor Ron Burt

        1. jason wright

          but it starts with you and it can be ended by you too. that’s a strong measure of control, but it has to be managed (human nature being what it can be at times).

          1. jason wright

            i’ll read it.

          2. LE

            That looks like an interesting study I hope I can find the time to read it.Along those lines I was wondering about Trump and his reputation with people that he has done business deals with or even people that work for people that he has done business deals with.He comes in contact with a great deal of people (dating since the 70’s) and I am sure nobody has forgotten if they came in proximity with Donald Trump. Now we all know what he has said and how the media portrays him but what we don’t know is what people think of him that have actually done business deals with him (or employees of same). Now notice that we are well along in his campaign and there is plenty of opportunity for people to spill the beans and tell a disparaging story (to get their 15 minutes even if anonymously) and we hear nothing at all negative on a topic that would for sure be very interesting in today’s news cycle. So it will be interesting (fat lady hasn’t sung yet) to see if this remains the case. My take so far is that he has a tough but honest and fair reputation or we would, by now, have heard some juicy tidbit or complaint or major flaw. His ex wives seem to sing his praise and I suspect it doesn’t entirely have to do with “the welfare of the kids”.

          3. Dave Pinsen

            The best advertisement for Trump’s character is his kids. A lot of wealthy kids grow up to have drug problems or gravitate to leftwing causes. His adult kids have all turned out well.

          4. LE

            Agree (and something that I’ve said actually and have admired). But more incredible is the fact that (and I love this) we know Trump wasn’t a go to the baseball field kind of Dad you know “never miss a game”. He is busy and all over the place and I don’t think he even lived a long time with his kids because of his divorces. (Just a guess no backup for that). Yet but force of character and persistence he was able to mold them to his liking. His last daughter Tiffany (Marla Maples) appears to be more of a free spirit and has the potential to end up in the wrong place will be interesting to see what happens there.Trump is doing with the nation what always worked for him in “beta” testing. In other words his shtick worked on much smaller groups and now he is the same person (stretching the truth) with a larger group and viola it works just the same which is pretty incredible.All people can seem to do that don’t like him is make fun of him and call him out and feel as if they support anything he says they will be laughed at and will be outcasts. But really it’s all very high school same as nerds being laughed at way back or people who spent a great deal of time studying.In the end he may say and think ridiculous things however his actions in the past in business point to that in the end he comes up with good decisions. I think people just aren’t used to a business person who can say anything he wants and change his mind if he wants and end up in a good place.

        2. Jess Bachman

          I’ve heard that Ron Burt is a bit of a quack.

          1. LE

            How so? Never heard of him before today but a search doesn’t reveal anything remarkable that I can (easily) find.

          2. Jess Bachman

            I never heard of him either, just testing his theory. Personally, I never trust a person with two first names.

          3. PhilipSugar

            Ok, that is funny.

          4. LE

            There is a danger to doing that type of humor when the person isn’t particularly well know which certainly applies to Burt. I am sure if academics setup a study they would find that people’s opinions were colored greatly by saying “a bit of a quack” of an unknown vs. a well known person. Not the same as saying “Warren Buffet is a bit of a quack”.

          5. Kirsten Lambertsen

            You are on fire today. ๐Ÿ˜‰

          6. pointsnfigures

            Burt actually did a lot of the seminal academic research on internal corporate networks, closed vs open, brokerage vs closure. It’s totally fascinating and applicable to a lot of companies we are seeing today-“network beats hierarchy”; “everyone a node on a network”-how that company thinks about and structures to take on a market is in Burt’s research. Fred’s absolutely correct when he says that his reputation is enhanced by spending time on the bad deals-because in the long run, Fred will be sought after to be in a deal. Recall yesterday’s post. Do you think that USV was the only VC firm interested in Quizlet? USV has to compete for deals and being transparent about principles–and more importantly following through, makes entrepreneurs gossip favorably about their reputation.

      4. LE

        Reputation is portable and has a long half lifeI have a relative. Let’s just call him “raised by wolves”.When my Dad sold his business a long long time ago (early 80’s) he was still owed money by various creditors. This relative (who was young at the time) asked my Dad “why would they pay you money owed if you have gone out of business?” (meaning they don’t need you anymore so they might stiff you).Not sure what my Dad said but the event stuck out in my mind to this day.What happened? Everyone, all almost everyone, paid my Dad even though “they didn’t need him or his merchandise anymore”. Well recently this relative had given me a small amount of business (over the years) and he went out of business himself. (Liquidated the business, he had money and was doing well.) Business just ran out of steam. And you know what happened? He didn’t pay his bill of the (small) amount of money that he owed me.

      5. WA

        Reputation is like the Titanic; Character, an Iceberg

        1. JaredMermey

          I always liked this John Wooden quote,”Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think you are.”

          1. Jess Bachman

            “If you ever catch on fire, try to avoid seeing yourself in the mirror, because I bet that’s what *really* throws you into a panic.”-Jack Handey

          2. Kirsten Lambertsen


      6. PhilipSugar

        I like the quote that it is portable, that is true. I am not sure about the long half life. You can squander your reputation in a minute. I see the point however given you don’t do that.

    2. dan_malven

      Unless he cares about how he feels about himself. Psychic income is more valuable than economic income

  2. JimHirshfield

    Thanks for being there. It’s made a difference.

    1. fredwilson


  3. jason wright

    why is it called ‘power’ law?

    1. Stephen Voris

      It’s from math – 2^x can be read as “two to the power of x”, for instance.

      1. jason wright

        thanks ๐Ÿ™‚

  4. William Mougayar

    So, this distribution is still 1/3 1/3/ 1/3, roughly?

    1. fredwilson

      Yeah. But even the middle third barely matters to the fund economics

  5. awaldstein

    Bravo Fred!The startup culture is mature enough now to realize the human toll of its model.Touched on it earlier this week http://awe.sm/aN3og

  6. aminTorres

    “The biggest secret in venture capital is that the best investments in a successful fund equals or out performs the rest of the fund combined” – zero to oneThis seems to be a typical case of the Pareto Principle: http://www.investopedia.com… Peter Thiel talks about this and he goes on to imply that this principle seems to be a pattern, almost a natural law. He uses examples from earthquakes, biggest earthquakes make more damage than 80% of all small earthquakes combined. Studies have observed that in a milk production farm, 20% of the cows will outperform the milk production of the remaining 80%. In terms of population, biggest cities hold concentration of people bigger than all smaller towns combined.He goes on to describe that because VCs hate failure they spend 80% of their time in troubled investments vs 20% of their time in successful ones.

  7. AlexHammer

    Well stated. It IS rational behavior, because the reputation of the firm drives deal flow and all long term financial benefits.

  8. pointsnfigures

    Agree with this post a lot. David Rose did a good job breaking down angel math. Assume a 5 yr exit on every company–also assume $1M and $100k in 10 companies. In order to get a 27% IRR and 3x on your money; 1/10 of your portfolio has to return 30x. 50% of your portfolio will go to 0. You are losing money on the day you hand them the check. 4 will return something, but not what you need to be successful. At the beginning, there is an equal probability that every company you write a check for will return 30x. If a company exits, it has a high probability of exiting between $20M and $60M in valuation. That really sums up why angels should be hyper sensitive and disciplined about valuation. There is a massive difference between a $90M company and a $180M company.

    1. John Rhoads

      I agree that this is theoretically desirable, but short of having room for upside I think valuing the optionality is so hard that early on it better serves to be sensitive to opportunities rather than the numbers (assuming you leave room)

  9. Dave Kruse

    Great post. I wonder what percentage of VCs provide the same thoughtfulness to their entire portfolio. The percentage doesn’t always seem high.

  10. David Barnes

    I work for Packt. We publish a lot of tech books. Most of our profit comes from a few titles.But when I meet customers it’s rarely a bestseller that they pick as a favorite. Even titles that sold a few copies are important to those who write and read them. The effort we invest in those titles builds our reputation among customers and authors.They’re the platform our bestsellers are built on.

  11. Seth Godin

    And this is why Fred Wilson is Fred Wilson. Accept no substitutes.There will always be people in a hurry, always be people looking for a shortcut, a half measure, a selfish act masquerading as fiduciary responsibility.And then there are the giants, long-term players who establish the standard for everyone else.Thanks, Fred.

    1. fredwilson

      that’s very nice of you to say Sethif i have done my job correctly, you can replace “fred wilson” in that comment with “USV”

    2. PhilipSugar

      I love this quote “a selfish act masquerading as fiduciary responsibility”It sums up my post succinctly: http://justanentrepreneur.c

      1. LE

        Read your post. [1] Does that distinction really even matter? The reason that they give for what they do in other words? Who cares really? It’s business not helping a village of starving children.There are two sides to every transaction. Look at how Albert had to literally beg for the deal that was spoken about yesterday (Quizlet). Look at all of the entrepreneurs who are playing VC’s to get the best terms possible. It’s a sport and a game on both sides. It is not as if they are angels.. [2] What did Quizlet do? What was in their best interest. Who cares the reasons that they give.Everybody draws the line at a different place. Sure some people are nicer or not as nice as others. But this idea that people who take on money are always the aggrieved party (for the reasons that you give) doesn’t fly from my observation of business over the years. All the millenials whining about how unfair it is for them (ok not all are millenials).I once had a deal to sell something to a VC (think it was Benchmark) who led me along thinking they were going to purchase something that I owned. In the end they said “sorry deal is off IP issues” and that was that. Not sure if they even replied to emails after that. Well guess what? I was playing them as well and if someone else had come along I would have pulled the deal as well. [3] Maybe not for a small amount of money but certainly for a larger amount of money (no contract after all just email conversations). No hard feelings it’s business. Sure it sucks. Do enough deals and things like that happens. In another case it was Sequoia. New partner, made nice offers, I countered and all of the sudden they didn’t want it at all, price didn’t matter. Not the way the contact was made they were all in. Did return emails though but can’t take that to any bank.[1] What’s with the ransom note formatting?[2] As Trump put it about his business bankruptcy “these are no babies they will cut your balls off” (that’s my translation, not what he actually said).[3] Although I always positively return emails I am not someone who disappears when there is nothing to gain anymore. So their crime here (in a business sense) is being rude.

        1. LE

          To my point, WSJ story today:https://www.google.com/url?…Marissa Mayer has repeatedly said reviving growth at Yahoo Inc.would take multiple years. But many insiders have lost patience, saying the embattled chief executive has no clear sense of direction and has misled investors and advertisers about the companyโ€™s progress.Ms. Mayer called a meeting with senior executives in August and asked them to sign a written agreement to stay with the company for at least three more years, according to two people familiar with the meeting. ie “Do what is good for me and I will say what I need to to make it happen”.I was right about this one (her hiring), never thought she could do much at this particular ship. Her success at Google was as a result of a rising tide in addition to her efforts and intelligence. The former being the more important factor.

        2. PhilipSugar

          Formatting doesn’t mean to much to me I should fix. My point is when somebody says this to you they are ready to screw you. Does that happen?? Sure, but just say it. I like to call people out instead of letting them give some flowery answer. Its ok, lets call it like it is. I have had to make a ton of tough calls in my life, I just tell people, yup, this is going to suck, too bad. Just did it at lunch.

          1. LE

            Well you know speaking like that is the “new boss” right? Every sentence needs to be handled with kid gloves and walking on eggshells lest you set people off.I don’t think that people can help themselves trying to spin things the way that they do. This is as a result of being raised in a culture (their homes) where nobody ever called them out on bullshit and also the current PC storm which is overtaking the country. They parrot what they think you are supposed to say (just like on 48 Hours or Dateline everyone lights up a room when they walk in and is the most generous person that ever walked the planet).I get how it grates on you like it grates on me when some big corporation call center person tells me they are sorry and that they appreciate my business. But then again I get annoyed when a cashier asks me how I am doing at the register. Just leave me alone I know you don’t and can’t hear any answers.Attached is a screen grab of what appears in Firefox in case you aren’t seeing what I am seeing it looks like a ransom note….

          2. PhilipSugar

            That does look bad. I need to work on that. I think there are lots of squishy phrases that people use like “best practices”In any case I can tell you if Fred just ignored the companies that were doing poorly he would be in the top quintile of VCs.

          3. LE

            And if Fred were doing poorly he most likely would have to change his thinking it would be more “everyman for himself”, right?I have noticed how I act differently than when I was younger. Not that I am super successful for I certainly am not. But I don’t need or think of money like I did when I was in my 20’s. As a result I am for sure more generous and nice than I was back then. Why? Because I can be and I couldn’t be back then.Lot’s of time people really are nice people (in which case they get the short end of the stick in life because they care more about others than they do themselves). But many times people are really nice, and this is important, because they can be nice. Or generous. The only problem with that that I have is when they don’t realize this themselves. Or when the press trumps them up as being god like.Exhibit A for this is Bill Gates. What a self centered bastard he was. Most people don’t think of him this way because they are either to young or because his bastard days were pre-internet. Now he is all caring and giving away his robin hood money.

          4. awaldstein

            Congrats on getting the blog up. Realized that mine has been for 6 years now.

    3. conorop

      One of the many reasons why entrepreneurs would love to work with Fred and USV.Having read and engaged with Albert on Continuations recently, I’ve gathered that he’s every bit as stand-up as a human as Fred.

    4. jason wright

      nice words Seth, but there’s a more precise empirical metric i will offer as testament to his reputation.after all these years the domain name fredwilsonsucks dot com has still not been registered.i’ve yet to come across any meaningful dissent from the cult of Fred from an entrepreneur.

  12. Tom Labus

    Investors usually run from anything that doesn’t look like immediate return, especially in public markets. It’s really difficult to backtrack on the trail. Congrats on doing this

  13. Dana Hoffer

    The 10% Rule Too.I agree with Fred on this. In addition to the Power Law and the Long Tail I think the 10% Rule should be practiced by more entrepreneurs and their investors. Similar in irrationality, 10% of pay should head into a “life after this startup” personal rainy day fund. This is of course a personal matter but often it is “shoestring-ed out” of the start up financial model and it is eliminated. Again it is irrational to think of think as an investor concern. But beyond the exit, people need the personal resources to move forward without moving back home with their now retired parents.Great post on a great topic Fred.

  14. Richard

    Does USV have Skin in game in size similar to PE / hedge funds?

    1. John Rhoads

      Would expect to see fees recycled into investment as a sign of true conviction

  15. Brandon Burns

    Often times, the best decision is the “irrational” one.I’ve been thinking a lot recently about how the most “rational” human reaction to anything is one that keeps the individual safe, yet society as a construct thrives when we do the “irrational” thing and put ourselves out on a limb to keep everyone around us safe, too.This core dichotomy is the base of the politics of everything, from finance (focus only on the most promising opportunities? or give each one an equal chance?) to gun control (let individuals have guns to protect themselves? or take everyone’s guns away to eliminate the threat in the first place?) to race relations (protect advantages for my people? or extend those protections to everyone?).The more popular opinion is almost always the “rational” individualistic one, as that’s human instinct. But the better choice is almost always the “irrational” communal one, since history has taught us that people have more strength in numbers, so we do better when we look out for everyone. And when you look at the results โ€” for example, failing USV investments having a good experience with the firm, and thus making the firm’s reputation better โ€” the “irrational” choice is actually the most “rational” one; it’s less instinctual in the beginning, but its wisdom can be learned by example over time.Mario Cuomo’s 1984 Democratic Convention speech touches on a lot of this, and really touched me (albeit in a bery politically charged way): https://www.youtube.com/wat…I’ll write / create something to support this thesis one day (I hope). But for now, I’d love to hear opinions and conversation!

    1. John Rhoads

      Is it really irrational or simply a rich understanding of risk and missed opportunity cost.The power law is hard to understand and appreciate in many contexts.

      1. Brandon Burns

        I think it’s easy to understand when you look at it from the angle of looking out for only the best individuals in the portfolio vs. looking out for the whole portfolio, and remembering that empowering the group vs. the individual makes you stronger.The perspective through which you look at it is your choice. While the power law is sound, I think looking at things from a human perspective always makes it easier to understand.

    2. Stephen Voris

      “Irrational”, or “counter-intuitive”? The two aren’t quite the same, at least in my head.As for the “better choice almost always being the irrational, communal one” – I disagree pretty strongly with the ‘irrational’ part of that (or possibly the ‘almost always’ part; either way…). The situations you describe as communal versus individual don’t seem to me to be so much a matter of rationality as they are of complexity and critical mass: if you need everyone to put money on the same decision in order to see the communal benefits, well – good luck; if you only need 5% of your audience to do the same, your odds are a lot better.It’s like flipping a bunch of biased coins and wanting them to come up heads (or tails) – if you want them all heads, they’d better be pretty strongly weighted that way to begin with. If you’re okay with 5 heads and 95 tails, you don’t have to worry nearly so much about the weighting.

      1. Brandon Burns

        I agree with you wholeheartedly. I just think, unfortunately, that most people disagree with both of us.

  16. Eliot Wadsworth

    What about the flip side? Would the strongest ideas/organizations not benefit materially from more of your time?

  17. Stephen Voris

    Thinking of this pseudo-mathematically:Reputation comes from honesty over time.Income comes from reputation over time.Wealth comes from income over time. So, in a(nother mathematical) sense, honesty is the fourth derivative of wealth.Granted, in the really long run compound interest is also pretty powerful – but it’s harder to collect on it without that whole ‘honesty’ thing.

  18. Jess Bachman

    Almost invariably, the current head tail has been someones long tail at some point. What goes around…

  19. WA

    Sounds like those portfolio meetings are long, empathetic and not frequently in the eye of the public. The biggest take away from AVC for me has been the integrity espoused here in the things agreed upon or debated within this community. And herein stands the perfect example of that integrity again…of doing the right thing in situations when very few have probably been looking. Bravo.

  20. Boris Wertz

    Just last week another VC asked me about who stands by his portfolio companies no matter what and the first name that came to my mind was yours.

  21. iggyfanlo

    Thanks Fred.Having been on both sides of the power curve, I can tell you that the old cliche is true; Success has many fathers, but failure is an orphan.Thanks for taking care of your orphans

  22. Dan Moore

    As well as just being the right thing to do, it is playing the long game. VC’s who treat entrepreneurs right, even when the investment is not a big winner get a positive reputation and are more likely to see “repeat business” or referrals.It’s the same reason any golf real estate agent tries to maximize value for their client rather than get the quick sale.You state that your behavior isn’t rational in the economic sense, but I think it is eminently rational, when viewed over a career rather than a fund or a year.

    1. James Ferguson @kWIQly

      > You state that your behavior isn’t rational in the economic sense, but I think it is eminently rational, when viewed over a career rather than a fund or a year.Thanks – You saved me typing that out !

    2. PhilipSugar

      This post really got me thinking about the value of reputation. Because you are right long term it is rational because of the value of reputation.I have thought about this a bunch, because it applies everywhere.If you are a retailer short term you can buy cheaper quality stuff and make more money short term.If you are an automobile manufacturer you can use cheap plastic and make more money short term.The problem is it ends up costing you a ton in the long run, but that doesn’t show up in the financials.I’ve thought about ways to measure it but you really can’t. You have to have a passion for your business, and then let the financials reflect how you are doing not drive what you are doing.

      1. Dan Moore

        I think you can get a qualitative sense of reputation, but you are right, I don’t see an easy way to measure at scale. Part of the issue is that the reputation of party A in the eyes of party B depends to some extent on the needs and reality of party B, making it a more complicated problem.Would be really interesting/mind bending to work on, that is for sure.

      2. James Ferguson @kWIQly

        Watch what the informed nd financially secure do.In Switzerland fifteen years ago taxi drivers drove Mercedes (Mercedes made long life value cars that never broke, emerging markets made cheap stuff).The problem for Mercedes is that engineering is a knowledge industry and you cant “own” it for long. Asian markets were lean, when they hired great engineers and lifted their game. Mercedes got driven up towards the luxury market and new entrants followed (absorbing the volume market underneath)This is the kind of stuff Clay Christiansen excels at exposing.SO I think there is a metric – look at a volume frequency price distribution . It will have a long expensive tail (there are more cheap cars than very expensive cars – none are free, there is practically no upper limit)So it looks like the blue galton distribution below https://uploads.disquscdn.c…If an encumbent market position is moving right (towards a long tail ) they are selling increasingly fewer relatively more expensive items and may be pushed up and out. However those at the left are more marginal initially (they take risks and may have low quality), but there are more of them and if some succeed you see disruption.Voila – a relative price disruption metric (your mean distribution vs the market mean – rising means you are being pushed up and out (by someone)

  23. Rob Larson

    Love this post. What % of VC’s do you think behave the same way?(based on stories, I’d guess a relatively small %, but OTOH I also imagine those stories I hear have some selection bias…)

  24. Nicholas Osgood

    Fred, have you had investments that at first went for scale, but eventually turned, I hate to say it, “lifestyle” type businesses? What do you do with those? Dividends?

  25. Andrew Sutherland

    Speaking as someone who just did a deal with USV (see previous “Quizlet” post), this post highlights what’s special about them. > I spent the majority of my time on that long tail. This is irrational behavior if you think about fund economics, but I believe it is rational behavior if you think about firm reputationThe above is what makes USV different. When we were doing our deal, I talked to many, many entrepreneurs and got their opinions on which VCs are good to work with. USV’s reputation for playing fair and treating people well stood alone at the top of the list. I’m not kidding.It’s because of this reputation that they got our deal. I know this is going to be a long journey and having a trustworthy partner is just about the most important thing.P.S. First comment!

    1. fredwilson

      welcome to the AVC community Andrew

    2. Donna Brewington White

      Congratulations, Andrew. On funding, and on your first comment on AVC. Reading and commenting here has been one of the best investments of my career. :)I wish you great success with Quizlet!

    3. Donna Brewington White

      Having a “duh” moment as I realize that my kids have been using quizlet for a few years now. Great product! For one son in particular, quizlet has pretty much saved him on a number of occasions.

  26. tobias peggs

    Is it fair to say there’s also a long term play in spending time with that tail? i.e. you’re getting to know how certain entrepreneurs and their teams deal with sub optimal situations, how hard they fight or whether they wilt under pressure, etc, etc… which are all good signals for whether to invest in them or not next time, potentially de-risking those future calls / funds.

  27. kerryritz

    a class act!

  28. James Ferguson @kWIQly

    A simple idea – Based on the idea that you can never know what I think to myselfdef : A ) You may have my worddef : B) You may see my actionsIf (A != B){ # my word and my actions do not tally Do not trust me } else { # my word has some value Trust me}It is always stupid to ignore freely available impiric evidence

  29. Stacey Wernick

    Your recommendation sounds like the optimal outcome for all parties concerned.

  30. Simone

    That’s one of the reasons I read your blog, because you have a heart. Plenty of Andreessen’s in the world who are focused on building Elysium.

  31. george

    Deep respect on your firm’s approach towards winding down/exits; there some brand loyalty and empathy for you!You never know, there may be a silver lining down the road, the positive network effect!

  32. Steve Goldstein

    Of course, what Seth said.

  33. bussgang

    Great points, Fred, although I would suggest that there is a third way. There are many companies where patience is a virtue. Rather than force an exit on a team that is happy and engaged and chugging along, I think investors can take the approach of remaining supportive and (perhaps, realistically, more reactively than proactively) engaged and helpful along the way. I have a few good teams operating in niche markets that will never be unicorns but will be solid outcomes if I just remain patient and helpful. Forcing exits just because I want to “free up my time” isn’t a good enough reason to force outcomes on the entrepreneurs.

  34. Adam Cole


  35. Paul Fifield

    Fed is quite simply the best VC in the business. So many don’t really care about the entrepenures and all the risk that’s taken. I have personal experience of that with supposedly tier one NY VCs.They will never get my business again. Fred will though.

  36. lostapiv

    Good thoughts!There are a lot of talk about how outstanding companies care not only about shareholders, but employees, supplies, environment etc. The same logic applied to VCs means not just maximizing returns…

  37. Paul Fifield

    Fred is quite simply the best VC in the business. So many don’t really care about the entrepenures and all the risk that’s taken. I have personal experience of that with supposedly tier one NY VCs.They will never get my business again. Fred will though!

    1. Donna Brewington White

      Is this the Paul I know? If so, “hi” and good to see you here!

  38. Alan Warms

    Great post Fred. It’s interesting in that the corollary for an entrepreneur is to keep going. In other words, it is theoretically irrational to keep going to get your investors back money after it is clear that the first or second pivot isn’t working. The conventional wisdom of course is fail fast and get on with something else asap. But the people I know I’ve enjoyed working with and respect and backed are all about you keep going until you can’t – someone wrote a check on your behalf and you need to do all you can to get the dough back.

  39. bmathes

    Let’s accept it’s ethically good to treat the long tail well. No argument there.In a reputation-based business like venture, treating people well gives you a good reputation, which gives you better networked dealflow and access.I love it when virtue and long-term returns coincide. It always confuses me when investors or founders behave poorly or selfishly. They’re also hurting themselves for the next go ’round.

  40. Raj Karamchedu

    Fred – First-time commenter on your blog. Touched by the humaneness in your post here. Thanks!Raj