This is just a start. The highest level changes that should be made to correct some of the perverse incentives in venture capital today, providing adequate accountability for public capital. There’s much more to talk about in terms of diverging small AUM and large AUM managers, or standards for valuation and reporting marks, but that… Continue reading 6 Measures to Correct VC Incentives
The Rot of Short-Termism in VC
Venture capital is a seriously long-term game, with investments taking somewhere between 8 and 16 years to return liquidity. The distance to that horizon creates a lot of eccentricity. For example, VC does not reward following patterns or navigating market movements, neither of which is relevant to decade-long cycles. Consensus of pretty much any kind… Continue reading The Rot of Short-Termism in VC
Why venture capital should embrace divergence
In the last post, I talked about the hunt for liquidity in VC and the role that transparency has in building a healthy secondary market. To take that further, we should look more carefully at the structure of venture capital, the direction the asset class is moving, and lay out a direction which can address… Continue reading Why venture capital should embrace divergence
VC has trust issues, not a liquidity problem
In a strange twist for an asset class built on patient capital and outsized returns, finding liquidity for investors has become a matter of urgency for VCs. On the surface, this is a story about venture capital’s evolution and fund managers adopting more sophisticated liquidity strategies. Pry a little deeper, and you’ll find LPs reneging… Continue reading VC has trust issues, not a liquidity problem
The failure of due diligence (in Fintech)
For as long as there has been business, there has been fraud, and ‘cooking the books’ is about as old as it gets. In recent years, the extreme focus on revenue has produced dangerous incentives for founders and investors to cut corners. Those chickens are now coming home to roost. Now a regular feature in tech… Continue reading The failure of due diligence (in Fintech)
Deus ex machina
for VC, the success of AI is existential Imagine entering VC in 2020, full of enthusiasm about a wave of technology that felt unstoppable. Your peers are impressed; it’s a prestigious industry that is perceived as commanding a lot of power (and capital). You have to put aside your personal thesis in favour of the… Continue reading Deus ex machina
Adverse selection and venture capital
There’s a weird phenomenon among VCs where the less successful they are, the more evil they become to founders to squeeze more money out of their best startups out of necessity which then becomes a vicious cycle of adverse selection. Garry Tan, President & CEO of Y Combinator Including the above, criticism of venture capital… Continue reading Adverse selection and venture capital
Larian’s unfair advantage
This post was inspired by two things I saw recently: The connection between these two items is not obvious, but it is interesting. The lemon problem WeFunder, for the uninitiated, is a crowdfunding platform for (primarily) technology companies. It allows community-oriented startups to sell a small % of ownership to their users and supporters. Unfortunately,… Continue reading Larian’s unfair advantage
“Why don’t VCs set marks with 409a valautions?”
This is a question I saw on Reddit’s often-comical /r/venturecapital, which I thought was interesting enough to write out a decent response to. It hits at the root of a few major problems in the asset class which are always worth addressing. A 409A valuation, named after Section 409A of the United States Internal Revenue… Continue reading “Why don’t VCs set marks with 409a valautions?”
It’s all about identifying outliers
What startup investors can learn from sports betting Early stage investing is a complex and relatively new practice, which makes it fertile ground for analogies which can help explain the more abstract concepts to both newcomers and veterans alike. In this particular case, grappling with the intrinsic value of pre-revenue startups, there’s an interesting parallel… Continue reading It’s all about identifying outliers