There is a lot of uncertainty about the state of the private, high-growth technology markets and the venture capital markets that underpin them. On the one hand innovation is clearly at an all time high unleashed by smart phones, fast telecom networks, social networks that spread commerce and the fact that we are all one click away from buying things on Amazon, Apple, Google or PayPal.
In 2012 I penned an article called “It’s Morning in VC” that highlighted many of these trends and in 2014 I published a series of data in this VC SlideShare presentation of “Why VC is Much More Compelling” now, which updated many of our earlier analysis.
Fast forward 3 years and looking out into the 2016 horizon, what do I see? Perhaps I would call it “Mourning in VC” as in mourning for the days of rational behavior. There is nobody to blame for this abandonment of common sense – it is simply the market being the market and we’re doomed to repeat history. Boom and bust. Great technology firms were built during the last dry period and we saw the huge wealth creation of Facebook, Twitter, Tesla and others. The cycle before that was Google, Salesforce and LinkedIn, amongst others.
Technology riches yield bumper crops in venture capital with new firms and new largesses – the rewards of LPs rediscovering our asset class. Are LPs to blame? Are VCs? Or the influx of massive new amounts of entrepreneurs and wantrepreneurs seeking fortune and fame? None of these. It’s just a market.
Today Twitter announced it had laid off around 336 jobs or 8% of its workforce. Nobody should celebrate, cheer or shout, “it’s about time.”
This is about 336 people whose lives are altered and need to begin looking for work, saying goodbye to friends & colleagues and go on that journey of transition that most people dread. I wish all of them well and feel confident that anybody employed at one of the most innovative companies of the past 10 years will land on his or her feet.
So what can we learn from this? Is it a bone headed move by Twitter? Is Twitter finally screwed as many have predicted? Is this a sign of weakness in which others can prey on the carcass of a rotting core?
None of these things. Here’s my take away. This will be seen as a watershed moment in the wake-up call and rationalization of our industry. I spoke at Michael Kim’s excellent annual Cendana VC/LP conference today. One of the points I tried to make is that as venture capital investors as an industry we seem to have an unhealthy disdain for public market investors.
A while back while I was reading the tech press I saw a quote from Randy Komisar, a partner at Kleiner Perkins that was simple, yet profound. He was quoted as saying,
“Being a great partner is as important as being smart or being right.”
I liked it so much I wrote it down and tried to think about what it meant to me and I promised myself I would write about that one day. What does it mean to be a great partner? In business? In life?
When I think about partners I think about: integrity, loyalty, commitment, trust and knowing that somebody will be there for me in good times and bad. I think of somebody who is non-judgmental even when they have reason to be. And while it’s not always easy to avoid saying “I told you so” or trying to persuade others that you have the “right” answer – it seems like a rational goal to avoid “knowing better.”
In a way it reminds me of a lesson my wife taught me. When she’s unhappy about a situation and is frustrated or near tears I immediately move into problem-solving mode. And she said to me long ago
“I’m not looking for better answers to my problem. I just want some sympathy. Just say you understand.
I have never met a person who loved their rental car company or the experience of turning up at an airport, waiting in line, paying a huge fee and then dealing with returns, airport shuttle buses and so forth not to mention half-washed and smelly cars. I think the closest parallel I have is the feeling I had for taxi cabs (inconvenient, smelly, expensive) before Uber. The rental car companies have a million scams to get more money out of you – mostly notably the gasoline scam. They either ask you to fill up your tank before returning the car (and gauge you if you don’t) or they pre-sell you “cheap” gas but when you factor in that you never return your car with a totally empty tank is also a scam.
And leave aside the fact that it’s very hard to rent cars if you’re below 25.
You simply can’t build a long-term great company by duping customers and with the top three rental car companies controlling 90+% of the market their behavior won’t change. It’s a classic “innovator’s dilemma,” making this market ripe for disruption.
Surely the startup can do better.
Like many of you I read the Is Web Summit a Scam article making the rounds this week. I have attended Web Summits three times – it is not a scam. Let me get that out of the way. It’s a big conference and all big conferences charge money, make money and serve a diverse set of needs.
I even wrote about my experiences attending Web Summit, something I rarely ever write about. I have absolutely no affiliation with the event, no economic interests and had no other reason for writing about Web Summit other than as a person who has to attend many events for my professional life I found it to be the most meticulously plan and run and intent upon serving its audience of any major event I had attended. There is simply no way that an event grows from 400 people to 22,000 in 4 years without doing some things right.
The founder of the event, Paddy Cosgrave, smartly responded to the critics in a post I just read this morning.