Posts Tagged ‘Investment’
Venture capitalists, angel investors, and other seekers of opportunity are why we have a healthy culture of investing in innovation and embracing disruption. About 25 years ago, sitting at the San Jose airport, I met a man who turned out to be one of Silicon Valley’s pioneer VCs: Bill Draper. I was impressed with Bill, not because he flaunted how much he was investing (unlike today’s VCs) but because of his undying passion for the entrepreneurs and technologies he was investing in. When he spoke about his investments it did not feel like he was following the money and the herd, but like he was the engineer whose sweat was on the line.
I remember boarding my flight thinking how lucky this man was. Bill and VCs of his generation were not in the infinite cash, money-is-no-object, outrageous valuation betting game, but in the game of making innovation happen. They were active members of the Culture of Disruption. It takes more than money to help a startup company succeed and that is what the earlier generation of VC’s provided. I am happy to say that Bill is going strong and recently invited me to a meeting to discuss innovation. His book, The Startup Game, is a great read.
I yearn for more VCs like Bill today. Instead, we have a large number of VCs pursuing the same deals and building bubbles, spreading hype that defies reality, and investing vast amounts in companies that don’t begin to justify it but might one day…IF they were left alone to mature before being given $100 million!
We don’t need more people playing the numbers. My hedge fund does that. We need investors who truly care about innovation and disruption. Those kinds of people helped nanotechnology become reality, pushed to make biotech the next frontier, and brought about massive game changing technologies. Instead of pursuing game-changing ideas, most VCs are now in the business of placing blind bets. In the VC model, you don’t have to publish your financials. Once you raise the fund and collect the obscene management fees (which are not tied to performance—another obscenity) you can go silent. There is zero accountability.
My VC friends tell me they may invest in 20 things in the hopes of one big hit. That’s not investment; that’s roulette. To make matters worse, India, China and the BRIC nations are massive investors and we have aggressive global angel, super angel and micro VCs all jumping in. This adds up to panic to invest. Desperate to put their billions somewhere, investors dump tens of millions of completely unjustified dollars into companies, artificially inflating their valuations to absurd extremes while crippling their desire to take risks and innovate. It has gotten so bad that some VC’s are putting ‘blind’ money into groups who then identify opportunities. That’s like giving $10,000 to your buddy who’s going to Vegas and trusting him to increase it at the blackjack tables. The house always wins.
I have great respect for the principle of venture capital. But I have no respect for VCs who are all about cashing in and care nothing about real innovation. Investors should be deliberate, thoughtful, major players in the Culture of Disruption. Venture Capital is one of the main influencers of the Culture of Disruption, and we need to see much more deliberate thinking and focus from this group!