Venture-Less Capitalists Chase Their Tails

Through a series of comments this week the Venture Capital industry has proven once again to be a highly fragmented group of independent thinkers who will likely never play nicely with each other. A great article in the NY Times on the state of the Venture Capital market shows contending visions for the path back to glory… from removing firms from the market to adding firms to increasing investment and fund size to lowering it. And as you might imagine, they all think they’re right. Don’t we all?

What ever happened to raising money and investing the right amount in the right companies? It seems like all of the current debate is regarding the sweet spot of investment size and the sweet spot of fund sizes . In an industry that thrives on the ability to find a unique diamond in the rough and the savvy to understand and catalyze the creative class I’m surprised that they think it should be so simple. Really though, since the industry is broken, and they broke it, should they really be listening to their own advice as they try to piece together a solution? This all quite circular if you ask me.

Venture Capitalists are used to giving lots of advice. I think maybe it’s time that they sat down and asked some entrepreneurs (one of their customer bases) what they need. Oh… I think I’ve heard that exact advice in the VC boardroom before 🙂

Entrepreneurs need:

  • Financial partners who think operationally
  • The right amount of capital at the right time
  • Patient, level-headed board members
  • VC firms made up of former company operators (up to a maximum of one Wall Street financial numbers guy among the partners)
  • A clear understanding of the mutual expectations of the relationship
    • What is currently the biggest opportunity in our market?
    • How often will we talk about the business (daily, weekly, quarterly, annually)?
    • How often will we receive advice from you?
    • Are you providing money or leadership or both?
    • Who exactly will you be introducing and promoting us to?