Hello VC, Here’s A Gentle Slap in your Face: Contemplation is no Action, Success is Earned.
Disclosure: Might Hurt☺
No, this is not a post about how hard entrepreneurs must work in order to have a chance to succeed. That’s a pretty obvious statement for which no one needs a reminder, hopefully.
This post is meant for European/French Venture Capitalists. Maybe a few Americans will relate to this, but I don’t know them well so I won’t dare. If you’re not lying to yourself, you’re gonna realize what you’re about to read and you’re not gonna like it. Truth hurts. But most VCs will probably identify themselves as not concerned by this post and therefore not deserving this gentle slap.
After having more or less 1,000 meetings with investors during the past few years, I am not assuming things here, I am telling them. And there is no anger or revenge, I’ve literally closed 100% of the deals I have fully worked on. Sorry for the good VCs that rock the place, I won’t give your names, you’re already on the right path. You’ve actually always been.
As for the rest… They are contemplating a16z and their agency model, their content strategy, their investment thesis, their software development… People call it disruptive, highly ambitious, crazy. It’s bold, brilliant, bullish. It’s an hymn to entrepreneurship. For the first time in Venture Capital history, an investment firm is working like a company, with a long term vision and a purpose that lasts longer than the average time required to deliver returns on investment. In the meantime, elsewhere, most investors are getting lost in their own agenda.
Remember that for most children, their first day of school every year is the same as the year before. Everything is clean and in order, they made themselves the promisse that they will work hard in order to rock that year. But eventually, their resolution vanishes and it’s rock’n roll again. For most VCs, it’s exactly the same. They raise money, they know how much they will earn the next 7 years or so, make a lot of assumptions and promises to themselves and their LPs, and then… Well then they get lost in their own agenda, they start looking through a window that does not exceed 6 months to a year and we know the rest… IRR talks. 0% talks.
I’ve told them, several times, that they should work on their discipline, in-house governance, proactivity, software, support… I’ve suggested it kindly. I even proposed some of them to help out. They did what they know best, say yes and then disappear in their own agenda in which they actually get lost. They don’t need to work on something highly disruptive or to spend millions in people infrastructure. It’s fine to not be a16z. But at least, they could work on improving their 5 biggest flaws:
- Inefficient Governance
- Poor Discipline
- No Proactivity
- Zero Software
- Low Support
Inefficient governance: You know the best deals don’t come from consensus and that spending time convincing partners is yet another way to screw your agenda. In a 15-people startup, politics kills you. The same rule applies to VCs. Build a governance that actually works.
Poor Discipline: you never try a product, I’m not even sure you have a culture of it. You don’t call back even though you love a deal. You’re late to meetings because you can’t keep up with your agenda (again). You have a hard time managing your inbox. You never learned to give a clear answer. You don’t even know what your investment thesis is.
No Proactivity: You don’t go searching for startups, but you do go to events where you know everybody, and you can shake hands and chitchat. Too bad, you could be running from universities to high schools, delivering a message, speaking in front of an audience with future entrepreneurs instead. You don’t have a content strategy, nor a twitter account.
Zero Software: You know the importance of software and data, but you keep using outlook or you’re slowly merging to google apps without taking advantage of it. You think you’re modern because you’ve switched from blackberry to iPhone, from PC to Mac. You have a CRM which is a collection of unused data. You’re building no intelligence within your network of companies and partners.
Low Support: You have no one dedicated to build support tools for your portfolio companies, you haven’t developed an organized network of trusted partners. Your only support is to show up at board meetings to lecture the entrepreneurs; give them opinion and advice.
How exactly do you think that you’re going to succeed as a Venture Capitalist just by being sometimes lucky, sometimes smarter than usual or just because you’ve built a brand that guarantees you that the best deals come on your table? Don’t you want to step-up and build the next generation of venture capital that will still be alive in 20 or 30 years with a serious reputation? And while we’re talking ambition, are you not tired of being happy with a $100M exit?!
Do you think that Criteo was unique and pure luck and that we can’t reproduce such a success?
Venture Capital is an asset class. It requires investments that imply returns. Not being able to invest in and support companies that create a large and lasting value means that basically you participate in building a scheme that will eventually collapse on you.
Time is now.