Summer saturday evening. It’s hot outside, around 35 °C (95 F), my air-conditioning system is literally dying on me. Fortunately, the Internet is working and I had some free time so, as I mostly do at those time, I google about the VC and startup world.
Among the thing I came across was the article from the Wall Street Journal from last week. It was about 500 Startups, the startup accelerator and seed fund, and the milestone they just passed - reaching their 500th investment. Congrats Dave, George, Sheila, Max and the whole crew btw!
But, as it often goes, the article was linked to a blog post about scaling Venture capital. He debated about how VC business is currently not scalable enough, how VCs are very proud of themselves and think they’re doing fine while in fact they ought to be doing much better and invest more. Dave insists on searching for a “Google of VC”. Buuuut, and this may well be one of the last “but-s” in this post, even though there’s certainly food for thought there, Dave linked a “Something Ventured” documentary to it. And that’s what my late Saturday evening was spent on.
“Something Ventured” is a documentary made almost two years ago about the sole evolution of a venture capital way of financing business endevours. Even though one might think that VC business started soooooo long ago that most of the initiators must certainly be long gone, one is certainly wrong - there’re mostly all alive! Believe it or not, the beginning of VC was in the late 1950s when the “Traitorous eight” (yeah, the guys that eventually founded Intel and a number of other great companies!) left Shockley Semiconductor Laboratory to start their own business and, in need of financing, they turned to a junior broker called Arthur Rock from Wall Street who solved their problem.
From todays point of view, can you imagine how seeking funding looked like back then? They sent a mail letter by post to the person they’ve never seen before, heard from before, to the other part of the country (West coast - East coast), the letter itself had a number of days to come. Imagine the response, imagine how lucky one had to be in order to find funding when there literally one didn’t exist - you could only get bank loans. Well, not to spoil the documentary, I’ll stop right here with the storytelling - go! Watch the documentary!
The documentary goes through the stories of all the well known founders, from Intel and Atari to Apple and Cisco and through the stories of their investors. In my view, the documentary clearly shows how the VC business works and how it evolved, what events led to the development of both amazing companies and some excellent VCs. It shows how they know a risk when they see it, how they try to put it to a minimum while lowering costs and (micro)managing the companies they invested in, but how they aren’t afraid to tempt the wrath from high atop the thing.
Of course, once in a while, luck has its saying in all. But, after the investor has identified the opportunity (acceptable return in a moderate time frame etc etc.), the main question is always - are the founders able to pull off everything they plan to do. And the key to that answer are the relationships, trust and patience that form between the founders and the investors.
Apart from that, the documentary would be somewhat better if it depicted and told the whole truth. Both sides. The failed investments, the opportunities that were missed, the companies that were mislead, the founders that that were given money for products that never launched or didn’t find their customers. It didn’t and, in my point of view, it should’ve. If nothing else, then just for the sake of the argument how there are always two sides and how nothing is ever perfect and beautiful.
Of course, as the VCs from the documentary clearly state - it was all the entrepreneur’s fault. Without the entrepreneurs, there wouldn’t be a need for financing hence there wouldn’t be VCs. Without the entrepreneurs, there wouldn’t be so many great companies, such breakthroughs in all fields and such achievements. And, without the VC financing as a catalyst in the process, we would probably be a couple of years (if not decades) behind.
Anyway, make a pause from your “2.5 men” and go and watch “Something ventured”!
–Written on August 6th, 2013 by Marko Srsan