A VC - Latest Comments in Making Something From Nothing

Re: Making Something From Nothing

benjie t — Thu, 08 Jan 2009 12:05:33 -0000

Fred, I was going to refer a friend to your post and I realized I should share an excerpt from a Fortune article. http://money.cnn.com/2008/0... It's not about BLANK canvases but it is highly relevant, and Buffett uses the same metaphor you do both in building his own business and in considering the motivations of people he buys businesses from. Take a look.

-benjie t

Warren Buffett:

"Why do I go to work in the morning?" I've got enough money. I've got Social Security now, even. [Laughter] I'll make it, you know? The kids won't get much, but that's their problem. So I say, "Why do I go to work in the morning?"

Well, there are two reasons. I love painting my own painting. I come down to the office, I get on my back, and I start painting. And I think I'm in the Sistine Chapel. It's my painting. Now, if somebody says, "Use more red paint instead of blue. Paint a seascape instead of a landscape," I would hand them the brush in five seconds and I'd say-I'd say a few other things, too - but I'd say, "Do your own painting. I'll go paint what I want to paint." I get to do my own painting. And then I get applause - if I deserve it. And I like that. I like having the painting admired, and I like to get to paint my own painting. That's so much more important to me than getting my golf score down three strokes or beating somebody at shuffleboard or something. I mean, it is the ultimate pleasure.

Now, if that turns me on, why won't it turn on these people who have built their own businesses? They have spent their life creating a wonderful painting. Now, for one reason or another, maybe tax reasons, maybe sibling reasons, who knows what, they need to sell it, they need to monetize it.

They come to me, and they know that at Berkshire they're going to keep the brush, they're going to keep doing the painting, and I have to look at them and decide whether they are people that really care about their painting or care about the money. [One giveaway is] if they auction the business. We've never bought a business at an auction. Never. Anybody that wants to auction off their family or auction off the creation of a lifetime, that's not what we want.

I tell people you've got two choices. You've spent a lifetime building this business. Or maybe your father built the business and you carried it on. Maybe your grandfather. You've given up vacations sometimes. You worked on weekends and all these things to create this really incredible painting that you're bringing to me. Now, if they want to auction it, they're not for me.

I tell them they have two choices. They can sell it to us, and it'll be in the Metropolitan Museum of Art. We'll have a wing for their painting. People will come and admire it, which they do. And they will say, "That's one hell of a painter." And you get to keep painting. Or you can take this marvelous painting and you can sell it to a porn shop. [Laughter] And he'll take the thing and he'll make the boobs a little bigger, something like that. And put it in the window. And a guy will come over in a raincoat a few years later, and he'll buy it, post it in his window, and it'll become a piece of meat, basically. We get the ones who care about having in it the Metropolitan Museum.

Re: Making Something From Nothing

fredwilson — Thu, 08 Jan 2009 11:26:18 -0000

That's great company to be in!

Re: Making Something From Nothing

marshal sandler — Mon, 05 Jan 2009 08:51:30 -0000

I am not a VC but your efforts are appreciated ! This is a portion of one of my posts , where I complement Adaptive Blue for filling in it's canvas with a universal appeal. Art gives us an insight into the human condition
this is important in any venture! Digital Media must learn to talk to people not just machines !
Since with a lot of time in grade I know there is no free lunch without work!

"You might read this blog and this article Helping FriendFeed? http://www.scripting.com/
Or better yet have the Executives at Friend Feed follow the folks at Adaptive Blue these people have developed an application for all of us and they will succeed. http://www.adaptiveblue.com/ -http://marshalsandler.com/2... !" Msandler

Re: Making Something From Nothing

fredwilson — Sun, 04 Jan 2009 13:59:12 -0000

I like the black swan but it didn¹t inspire me

Not sure why

Re: Making Something From Nothing

Nose — Sat, 03 Jan 2009 21:06:59 -0000

Are you sure that you have a wife?

Re: Making Something From Nothing

Lloyd Fassett — Sat, 03 Jan 2009 17:50:05 -0000

Ripple in still water,
When there is no pebble tossed,
Nor wind to blow.
- Ripple, The Greatful Dead

I really like this post because it's about the emotion of creation. It's about the person from a crowd who starts a thing..says that they can imagine a better way through the mountains. Huzzah's for the multiple commentors that call out the defiance of some artists.

"Some people see things as they are and ask, “why”? We dream of things that never were and ask, “why not?” - John F Kennedy

I also like it because startups usually create from scarce resources. In the end, the resources as hand don't usually have too much of an impact either. Both are environments where ideas and achievements seem to get etched out of air to most people.

And what a great day to to look at artistic achievements too and wonder back to the blank canvas at the beginning, like looking back on 2008 and the blank canvas that it was at the beginning. In a lot of ways art can save your life. I'm personally preferential to books and recommend a tiny, tiny book called The Tale of the Unkown Island by Jose Sarramago. It starts out "A man came to a door and said, 'Give me a boat'".

But, it's emotion. Emotion starts and keeps the ball rolling.

Fred, you haven't said anything about The Black Swan. You shouldn't give up on that book. It's a decent take on looking at an achievement and going back to the blank canvas learn.

"...The problem of Inductive Knowledge - certainly the mother of all problems in life. How can we logically go from specific instances to reach general conclusions? How do we know what we know? How do we know that what we have observed from given objets and events suffices to enable us to figure out their other properties?" - page 40

Thanks for the upbeat post to bring your readers into 2009. It's really great to read that creating value is the name of the game, more so than 5 or 30x EBITA. Creating is a wonderful way to spend one's career because it is emotional and it is defiant.

Re: Making Something From Nothing

fredwilson — Fri, 02 Jan 2009 23:57:13 -0000

Great quote. Thanks for sharing it

Re: Making Something From Nothing

fredwilson — Fri, 02 Jan 2009 23:56:08 -0000

I hope you are right

Re: Making Something From Nothing

patwoodward — Fri, 02 Jan 2009 21:12:12 -0000

This post reminds me of a Zappa quote.

"Art is making something out of nothing and selling it."- Frank Zappa

Re: Making Something From Nothing

Jason — Fri, 02 Jan 2009 20:38:00 -0000

Have to disagree. With all of the disruption in the venture/finance business people can participate in radical new ways on many different levels. 200MM is certainly one level, however 800k is indeed another. Each might yield the same returns too (~10x) and be thought of as a success in their own right. It seems the future will hold even more mixed/distributed/crowd-sourced/creative methods of financing which will become an eco system by and of itself. The smart players like yourself will most likely adapt and leverage these shifts while 20th century and me-too financial strategists will struggle to break even. The point is, the future says you don't need 200MM to play and it will be open to more people at more levels than ever before.

Re: Making Something From Nothing

David Saintloth — Fri, 02 Jan 2009 14:15:26 -0000

Fred, did I miss a metaphor or did you fail to point out where you were using one? Your latter point here (starting something/financing it) is quite obvious, I was just responding to the particular lines quoted which simply aren't true in any context that was presented in the original article as far as I can see. Whey you type:

"the entrepreneur doesn't have to pay for any of those things. The VC does pay for those things and gets a piece of the ride from nothing to something as a result."

It is just wrong. Not all entrepreneurs whip up an idea and try to sell it as the next big thing sans implementation to VC's. Some entrepreneurs actually build or try to build their vision first, expending lots of time and money before they consider talking to a VC, or are you referring only to the "I got a business plan and a dream." type of entrepreneurs? If so, I think you should qualify your position to make that clear.

Re: Making Something From Nothing

Flying Leap — Fri, 02 Jan 2009 13:32:21 -0000

Thanks for this, you inspired me to visit MoMA on New Years Day. Bad idea for New Years Day, however. Tourist invasion meant we had to settle for the MoMA design store instead :( Maybe next week...

Re: Making Something From Nothing

fredwilson — Fri, 02 Jan 2009 13:25:25 -0000

The metaphor is the blank canvas which costs almost nothing to buy and when
painted on by a master artist, can turn into millions of dollars of value

The same is true of the germ of an idea that gets the entrepreneur motivated
to drop everything and start a new company

I¹ve seen that exact behavior so many times and I think it¹s a very similar
phenomenon

You are getting caught up in the differences between the entrepreneur and
the VC in this market, which are all great points, but that¹s not really
what I was talking about

Re: Making Something From Nothing

lebousquet — Fri, 02 Jan 2009 12:37:58 -0000

Interestingly, the art and startup worlds have something in common these days--bubbleitis. The value of work by noted contemporary artists--Koons, Murakami, Hirst, et al--is falling, or at least not increasing, and the price pendulum is swinging back toward earlier artists.

Artists' reputations, and the value of their work, are subject to many of the same forces that govern any market. Remember Bouguereau? Superstar artist around the turn of the 20th; his canvasses sold for top dollar. Then, over a couple decades, pfffft. Picasso, Braque and others came along and rendered Monsieur Bouguereau's quaint nudes obsolete, the painterly equivalent of Yahoo. The world changed, and so did taste and artistic sensibilities.

Something is created--a painting, a string of code--and it changes things. How did we experience the Internet before Google and, perhaps more fundamentally, Twitter? Hard to pinpoint, but differently. How did we see the world before Cubism and Abstract Expressionism? Hard to say, but differently. The old aesthetic yields to the new. But only for a while. In the modern era, artists work by devouring the past. So do entrepreneurs (and VCs). Something springs from nothing, which springs from something.

Re: Making Something From Nothing

fredwilson — Fri, 02 Jan 2009 12:37:15 -0000

I¹m sorry to hear that

You should try the whitney. It¹s always less crowded and has great art

Or just head to chelsea and visit galleries

Re: Making Something From Nothing

fredwilson — Fri, 02 Jan 2009 12:29:17 -0000

Great thoughts

Re: Making Something From Nothing

Kevin Cimring — Fri, 02 Jan 2009 12:04:24 -0000

Hi Fred
Thanks for the post. Its particularly opportune for me to read this post now as we head into the final couple of months prior to our launch. Creating something from nothing is particualrly gratifying in these times, when start-ups have the potential to hire people and generally inject some positivity into the surrounding environment. Its a ripple effect that susatins the underbelly of economy, expecially in these recessionary times.

Kind regards
Kevin

Re: Making Something From Nothing

David Skinner — Fri, 02 Jan 2009 11:31:26 -0000

Fred, thanks for starting my year with some inspiration. The blank canvas is a powerful analogy... so easy to forget that even great things came from humble beginnings. Just came across your blog a few weeks ago but been enjoying your regular posts, all the best for 2009.

Re: Making Something From Nothing

Sameer — Fri, 02 Jan 2009 11:18:34 -0000

http://www.productification...

Re: Making Something From Nothing

Jose Paul Martin — Fri, 02 Jan 2009 09:23:52 -0000

Fred, great post - de-mystifies certain assumptions about VC. And just like valuing art - valuing companies, particularly early stage ones is difficult. The effort behind the masterpiece is more of skill, effort, or just brilliance of ideas. I hope people realize that.

Re: Making Something From Nothing

terra210 — Fri, 02 Jan 2009 05:20:19 -0000

On further reading it appears the initial 800K did not come from Bjork, and that the fund is hoping for 17 million. It will be interesting to watch, though I am now unsure what her role actually is, other than "icon".

"It is hoped that the fund will have close to ISK 2 billion (USD 17 million, EUR 12 million) in capital and that companies will be able to apply for grants from the fund next year. Audur Capital has already contributed ISK 100 million (USD 867,000, EUR 614,000) to the fund."

http://www.icelandreview.co...
http://audurcapital.is/engl...

Re: Making Something From Nothing

terra210 — Fri, 02 Jan 2009 05:12:40 -0000

On further reading, it looks like they are hoping for 17 million, and that the initial amount did not come from Bjork:
"
It is hoped that the fund will have close to ISK 2 billion (USD 17 million, EUR 12 million) in capital and that companies will be able to apply for grants from the fund next year. Audur Capital has already contributed ISK 100 million (USD 867,000, EUR 614,000) to the fund."

http://audurcapital.is/engl...

Re: Making Something From Nothing

Prakash — Fri, 02 Jan 2009 04:40:16 -0000

I wish all of us could work like artists. A lot of us have ideas but do not bring it to life. Success comes only to those who have dared to sketch on the empty canvas without fear of spoiling it.

Re: Making Something From Nothing

fredwilson — Fri, 02 Jan 2009 04:30:09 -0000

Maybe her role is like Bono's role at Elevation

Re: Making Something From Nothing

fredwilson — Fri, 02 Jan 2009 04:30:06 -0000

That's better and maybe its enough to have some impact in a small country like iceland. Its certainly better than nothing. But I still hope this attracts more capital