Last Wednesday I had coffee with an old friend and former colleague. We haven’t worked together in a while and were reminiscing about the old days. I miss the old days when we used to be locked in battle together on the issues affecting our company.
Seeing him again also reminded me of one of my first big lessons as a VC – knowing when giving in is more important than being right. So I Tweeted that the next morning:
“When the consequences of “being right” are not great enough sometimes graciousness & conceding is a better option”
Yes. Of course it’s a universal lesson and one that I’m doomed to learn over and over.
I wrote about it in this widely read post, “Be Gracious When it’s Time to Give In.”
But I started thinking more about the role of a VC and the founding team or CEO. There are simply times when you don’t agree. There are other times when your economic interests aren’t aligned. I think it’s healthy and ok to voice your opinion and stand up for what you believe. But there comes a time that even if you believe in your bones you’re right it is simply not worth enough economically speaking to fight.
I could give you a million little examples of where this comes up no matter whom you’re working with. Like inside bridge rounds where investors want to protect themselves from the company getting sold prior to the next financing and leaving the bridge funding without adequate returns.
I recently attended and presented at Dave McClure’s PreMoney conference in San Francisco. I go every year because I love events hosted & moderated by insiders involving discussions by insiders because it maximizes the amount of real discussions people have. What you’ll see if you watch the video is an unscripted and unfiltered look into how Scott Kupor & I see some of the changes and challenges of the venture industry.
Scott and I agree on nearly everything: The VC structure is changing and there appears to be a bifurcation into small & large VCs with an impact on “traditionally sized” VCs. I wrote my version here and Scott wrote an excellent write-up of his views here.
There has been much discussion in the past few years of the changing structure of the venture capital industry.
On the surface the narratives have been
The rise of “micro VCs” or seed-stage funds
The rise of alternative sources of capital (crowd funding and the like)
The poor performance of the asset class (this analysis has largely been wrong as I pointed out here –> most analyses were clumsy rear-view mirror looks at the data)
We are in a bubble (with so many private $1bn+ valuations)
15 years ago we were at the peak of Internet hype with the launch of many over-capitalized businesses with a market size & opportunity was limited.
Where are we today?
50x more Internet users (2.4 billion)
Online connections that are 180x faster (10.
Since 2009 we’ve been in an unequivocal bull market. Venture capitalists have raised increasing amounts of money from their investors (LPs) every year. An impressive number of new VCs have been created – most of them with new seed funds. We’ve had an explosion of alternate sources of financing from crowd-sourcing, angels, accelerators, incubators, corporates, corporate incubators. And importantly we’ve had revenue. Consumers buying through smart phones, travelers using the new, shared economy and businesses replacing old software with modern cloud-based solutions.
It has been a good run.
But it won’t last forever. It could last 6 more months or 6 more years for all I know. But the economy grows in cycles and always has: Expansion & contraction. For what ever reason we’re wired to have amnesia during the run up and prescient memories of how we ‘knew it all along’ as soon as the slide begins. I do believe that we are in structural change where technology will increasingly play a bigger role in all facets of life so the long run up for tech is promising through all of these cycles. Once you understand both sides of the cycle you start to recognize signs of behavior during each phase.
Update: Bothsides TV is now available on iTunes, Soundcloud, Stitcher, or any RSS podcast player you use, and don’t forget to subscribe on YouTube. I also added a little Soundcloud widget on the sidebar (if you’re viewing on web – not on mobile or RSS reader) that you can listen to each episode with.
In the most recent episode, I interviewed Joe Perez, Founder of Tastemade. If you don’t know Joe, you should. He has a long career in developing products and companies (such as Pogo, Excite@Home, Demand Media, The Daily Plate and now TasteMade) discussed much about his career choices and lessons.