A VC - Latest Comments in Don't Shoot The Messenger

Re: Don't Shoot The Messenger

fredwilson — Sat, 11 Apr 2009 08:33:11 -0000

Mistakes are the best way to learn

Re: Don't Shoot The Messenger

Dan T — Fri, 10 Apr 2009 17:28:16 -0000

Many seem to be ignoring the title of your post. At least you have a free-thinking / free-speaking audience:)
You and others are simply trying to provide what you feel is some practical advice about surviving through tough times and you get crap for it? I don't get it. I founded a company that survived the 2000/2001 bubbleburst and it taught me this: if it feels bad, it's probably worse.
Many of your readers seem to be optimistic, failure-is-not-an-option type entrepreneurs that have not had the chance to learn these lessons yet. Hopefully they will learn something in spite of all the arrows flying.

Re: Don't Shoot The Messenger

Damon — Tue, 14 Oct 2008 11:14:46 -0000

I don't know about conspiracy, but Sequoia certainly gets the Captain Obvious Award for this. If you didn't see this coming, you deserve what you get.

Re: Don't Shoot The Messenger

fredwilson — Mon, 13 Oct 2008 12:25:15 -0000

Well I wanted to remind everyone that capitalism is darwinian

I am not sure everyone realizes that

Re: Don't Shoot The Messenger

stillabanker — Mon, 13 Oct 2008 12:10:47 -0000

Fred,

You are a good writer, but isn't the term "darwinian capitalism" redundant? Apologies if someone else already aseked the question among the 70+ comments...

Re: Don't Shoot The Messenger

fredwilson — Mon, 13 Oct 2008 06:40:07 -0000

You start by giving all asset managers a compensation system that is based
on results

Most of the people who allocate pension funds to private equity, hedge
funds, and venture capital are paid a salary and possibly a small bonus

They do not share in the upside of the investments they make

That's why stupid stuff happens

Re: Don't Shoot The Messenger

fredwilson — Mon, 13 Oct 2008 06:05:08 -0000

I think Obama is better for our country in many many ways and I think what's
good for our country is ultimately good for entrepreneurs

Re: Don't Shoot The Messenger

fredwilson — Mon, 13 Oct 2008 05:56:08 -0000

I thought I did that in the post itself.

Moritz was saying to be cautious back in the summer of 2007

I could go find numerous posts on this blog over the past 18 months that
said the same

The idea that VCs were saying ³step on the gas² last week and then ³hit the
brakes² this week is just plain wrong

Re: Don't Shoot The Messenger

fredwilson — Mon, 13 Oct 2008 05:53:08 -0000

All of this is true, as I said in a comment on this business week article [
http://www.businessweek.com...
] last week

³all of this may come to pass, but it will take a while. venture capital has
a very long lag time because the funds we raise are ten year funds and
partners have to stick around and manage them. that's why Vinod still
carries a KP business card. nothing happens fast in the world of venture
capital. that's both good and bad.²

Re: Don't Shoot The Messenger

fredwilson — Mon, 13 Oct 2008 05:49:08 -0000

Not all of these firms are in NYC

There are new firms who are doing it differently all over the country

Re: Don't Shoot The Messenger

bernardlunn — Sun, 12 Oct 2008 20:31:05 -0000

I don't share that level of cynicism, but I do think it is a big, big problem if the vast majority of people start to feel that equity markets are not for them because they perceive them as rigged. We may see that as a major fall out of this crisis. That leaves equity back in the province only of the rich and connected.

Re: Don't Shoot The Messenger

Guest — Sun, 12 Oct 2008 19:38:57 -0000

Bernard, thanks!
I have a somewhat more cynical view and it has to do with human nature. If you are a pension fund manager and have an established relationship with certain people - people who always suck up to you, people who wine you and dine you at their annual meetings, and in some cases people who are friends or close associates - there is a level of discomfort in having to say "no" to them. The sad reality is that the financial management class is too intertwined and incestuous to be productive. I have seen a case in Oregon where the VC had invested in a startup run by one of the board members of the pension fund. The VC fund is a perennial loser, yet when they asked for $40mil they got $50mil... This is not capitalism, where the owners can exercise active control over their assets. You have millions and millions of "owners" who only get a monthly or a quarterly statement that they hardly understand; their interest is supposed to be looked after by these fiduciaries that are members of the same "management class" that has wrecked America.

Once all the dusts settles with this financial shake-up you will see that the biggest losers will be the pension funds and retirement savings of an entire generation of Americans. Of course, it's not only the private equity that is the problem, but the system just does not work.

This has to be a major priority for Obama, since ultimately all these retirees will flock back to the government system, after their pension/retirement assets have been robbed. How do you get capitalism to work in a system with such widely distributed ownership of assets?

Re: Don't Shoot The Messenger

Scott — Sun, 12 Oct 2008 17:57:50 -0000

You're right. But then, who's better for entrepreneurs? Obama or McCain? And why?

Re: Don't Shoot The Messenger

baeight — Sun, 12 Oct 2008 15:39:27 -0000

Great post and references to others. There is a general feeling of panic but I agree the VC and entrepreneurs who seize the opportunity by continuing to drive innovation and new thinking by staying involved will come out the winners over those who clamp down and quit investing.

Re: Don't Shoot The Messenger

Still Though — Sun, 12 Oct 2008 15:23:02 -0000

You never really respond to Bernard's point that this advice is a tad late. Seriously, the real estate market hit a turning point July through August 2007. Since that time, there's been consistent news indicating a downward trend in other markets, especially lending and financial. So the way I see it, these powerpoints and tighten-your-belt speeches are all about reiterating the obvious. The super obvious.

Is it about wanting to be noticed (maybe later on) for sounding the beacon? It just doesn't make sense.

Re: Don't Shoot The Messenger

bernardlunn — Sun, 12 Oct 2008 14:07:47 -0000

Krassen, that is an interesting question. Generally, creative destruction does not work as well in VC land as it does in the companies they invest in. Which makes running a VC fund a great business. There are barriers to entry. Not insurmountable ones, but still tough. Here are the four big barriers I see:

1. Institutional LPs are conservative. They are not paid to take big risks. A big win is great, but they don't share in the upside. A big lose or two and they lose their job. That is a recipe for playing it safe. So new funds have to get cash from entrepreneurs, not institutions.

2. Entrepreneurs flock to the big brand name VCs. Stop it guys! It used to matter a lot more than it does now. In olden days, when the play was getting Fortune 500 to open up their budgets, the Big Brand VC's rolodex and brand were 100% critical. In the days of "click here to try and buy", this is irrelevant.

3. Like soldiers, Great Old VC Funds don't die, they just fade away. It takes years to wind down portfolios. The new GPs want to raise new funds and even if they are a shadow of the guys who built the Fund in its glory days....go back to point # 1.

4. It takes a long, long time for bad results to show up. In a software company you can track results quarterly. In a Fund, accurately seeing progress is tough till the Fund is nearly at end of lifecycle

Re: Don't Shoot The Messenger

bernardlunn — Sun, 12 Oct 2008 13:42:17 -0000

That is great to hear. Some I had heard about and some not. I am thinking that ReadWriteWeb review of early stage funds in the New York area would be a good idea.

Re: Don't Shoot The Messenger

fredwilson — Sun, 12 Oct 2008 12:28:14 -0000

I am not sure that can be done. Although we've got a few companies in our portfolio with dev/product teams of less than five people total

Re: Don't Shoot The Messenger

alain94040 — Sun, 12 Oct 2008 12:19:55 -0000

The key message from Sequoia's presentation is that getting more rounds of funding will be much, much harder.

That has an immediate impact on the strategy of all early-stage startups. You can't plan on a runway of 9 months anymore. Or one year. 18 months? Time to adapt the strategy and conserve cash if you were planning on raising additional rounds of funding.

That in itself is important advice. Of course, do the best with the cash you have, that has not changed. But don't count on the "easy way out", more cash through additional rounds.

Re: Don't Shoot The Messenger

jake — Sun, 12 Oct 2008 12:11:58 -0000

i'm missing a post about how to layoff 80% and keep a core technology+product team.

Re: Don't Shoot The Messenger

david bailey — Sun, 12 Oct 2008 09:36:40 -0000

actually it is all about the VCs having two concerns: first up their shadow banking partners have gone titsup and won't pass them huge piles of cash on demand any more, and secondly there is a real risk of a consumer slow down. BUT I find myself one of a few asking "where will the slow down hit, and why?" and not getting a serious answer. All tech stocks will not be hit equally, and it is not always the time to run for cover. For a few - perhaps a very few - this is the moment to go out and do something really brave in order to corner a market while your competitors run around like Chicken Licken shouting "the sky is falling" http://blog.david.bailey.ne...

Re: Don't Shoot The Messenger

Guest — Sun, 12 Oct 2008 09:19:09 -0000

Dear Bernard,
you seem to know a lot and maybe you can answer this for me: why are the institutional LPs so enamored with old funds, even if they have consistently been awful? This is terrible, I have seen minutes from some of the state pension systems. The fund managers come in and mumble some garbage about "lessons learned" and "new exciting dealflow" and boom! here's another 40-50 mil for your next fund. It's like performance does not matter at all for these people...

Re: Don't Shoot The Messenger

Guest — Sun, 12 Oct 2008 08:10:55 -0000

Correct. Meg Whitman was offered as a possible Treasury Secretary at the last debate by the GOP candidate (McCain).
The quote is from Jennifer Fonstad, a Managing Director at DFJ (old nemesis of mine), who were investors in Skype.
What not many people know is that Fonstad was a fundraiser and vice-chair of "women for Romney". The chairperson of "Women for Romney"? Meg Whitman.

If that does not spell all that is wrong with America, I don't know what does. A CEO overpays ridiculously for a startup backed by a fellow Republican activist, while the latter provides cover in the press. Then shareholders are stuck with billion-dollar write-offs, while the CEO is groomed as the next Treasury Secretary... Cronyism, enmeshment of politics and business, disregard for fiduciary duties...

I guess, as they say, "One's garbage is another's Treasur(y)..."

Re: Don't Shoot The Messenger

fredwilson — Sun, 12 Oct 2008 07:50:07 -0000

There's been a bunch of new firms created in the past four or five years and
we coinvest with many of them; spark, first round, OATV, betaworks, etc, etc

And most of this group is doing things a bit differently.

Re: Don't Shoot The Messenger

fredwilson — Sun, 12 Oct 2008 07:25:04 -0000

great comment

seriously, that rocks!