You make the comment that because of the investing strategy in an early small fund you needed to be very aggressive about getting other investors around the table and fighting hard for upticks in valuation. One very positive impact of that strategy is that it very closely aligns the early investor's and founder's interests. It is much easier to focus on solving the real problems of the business.
On the flip side, the first few times I pitched an idea to institutional investors I made a comment while defending the idea to the effect of "Well, that isn't an issue because we are a funded company" To which they replied "Not yet" Oops. Tack that up with things not to say to investors right along "These numbers are conservative"
fredwilson
· 8 months ago
oops is right. live and learn!
gregorylent
· 8 months ago
tell it to geithner :-)
GlennKelman
· 8 months ago
What struck me about this talk is how much more compelling it was because you didn't use slides. Not every speaker can do that, but sometimes I think that PowerPoint or Keynote encourages people to blast away with the artillery of argument rather than to relax and tell a story.
theflyingchange
· 8 months ago
Fred - This is inspiring and very helpful. I found the comment you made about specialization pretty interesting. That 'web services' at first seemed, to some, to be limiting, and quickly revealed itself to be an enormous category. For small funds, I wonder how you think about the tradeoff between specialization and diversification. You mentioned that the size of the funds at Euclid created situations where you weren't able to participate in follow-on rounds and were diluted down to small stakes. Would you, in retrospect, have been willing to whittle down the size of the portfolio to preserve that ability? One other observation. As the camera pans around ... very few women in the audience. Kind of striking actually. I don't have a particular point-of-view about it, although it would seem that more diversity of gender might be helpful, but it was just just something I noticed. Thanks for posting.
fredwilson
· 8 months ago
There were only two women in the group that night
Way too few but typical of the world I work in
It's not good
Michael Fidler
· 8 months ago
I am so glad I took the time to watch this. Other than being VC related, I had no idea what this would be. I also had no idea I was about to watch an hour-long video. Now that I’ve seen it, I wish it had been longer. I never really knew any of your background, but I was curious about it. You’re so candid, and generous with the stories and knowledge, which you shares here. Now, I really understand why many of the people I’ve come to respect hold you in such high regard. Thank you for sharing this! BTW, I live in L.A., and would love to check out the the taco tweeting guys. How do I find them?
fredwilson
· 8 months ago
You went through all nine videos?
Michael Fidler
· 8 months ago
I found this on ff, and started on the second one. I enjoyed it so much, that I went back to see if I missed anything in the first one. It's the video, which makes this so special. I get a better sense for someone when I can see and hear him or her. I also added a question on the end of my last comment in case you missed it.
Fred: Watching on Boxee while making easter dinner!
Michael Fidler
· 8 months ago
The personal touch. Thanks! I'm look forward to trying your food and meeting you! Have a wonderful Easter Dinner. I need to set up my feeds in Boxee later too.
daryn
· 8 months ago
I'm not @kogibbq (i wish!), but hear great things from my L.A. friends!
Michael Fidler
· 8 months ago
Sorry, but thanks for the link. It was very thoughtful of you to post it for me. I still hope you have or had a wonderful Easter dinner. Take care!
fredwilson
· 8 months ago
Sweet. What was for dinner?
Steven Kane
· 8 months ago
Bless you, brother Fred.
Tommy
· 8 months ago
So you spoke to the next generation of white collar criminals, hedge fund loving douchebags and Madoff wannabes. They are aspiring to be like those who have turned your country into liquid shit.
BIG FREAKING DEAL.!
fredwilson
· 8 months ago
Oh c'mon. These were nice decent young people. What could possibly be up your ass that you would write shit like that?
loupaglia
· 8 months ago
classic response Fred. LOL i'm surprised you didn't just delete the comment. so unproductive.
fredwilson
· 8 months ago
I don't delete comments unless they are hate speech or porn or comment spam
Tommy
· 8 months ago
Madoff and Friedman were nice decent young men at some point in their lives. So what? you preached bunch of rookies to be exactly what? a freaking VC? or another gaggles of investor advisers known as the ULTIMATE DOUCHEBAGS.
Read the news. Capitalism is over no matter how YOUR kind cling into it criminal tenets.
fredwilson
· 8 months ago
I am glad you think I am a douchebag. And the feeling is mutual.
.V.
· 8 months ago
I'm not even sure why I am responding to Tommy's statement.
It has nothing to do with Capitalism. If some jerk decides to drink and drive we don't blame the car for the accident.
It is the combination of capital and innovation that is the ultimate driving force in bringing new products and services to market.
Madoff on his own could not have pulled this off. The first people to invest in a ponzi scheme are sometimes aware of their actions but want to get that quick pay out. Everyone should be responsible for their money and know exactly where it is going. If you are not diligent it's your fault.
The government should not intervene and bail anyone out. The market should be left to correct itself. Then investors will think twice about CDO's and complex investment vehicles. The individuals involved should bail themselves out and revive their own companies.
Anyhow, the point is the responsibility resides with the individual.
Fred, keep up the good work.
fredwilson
· 8 months ago
I'm glad you responded. I don't delete comments from jerks. I prefer to let them stand and be revealed for what they are. And discussion about them is useful
Tommy
· 8 months ago
Sweetheart,
To be called a jerk by a VC is actually very flattering and for that I thank you.
Tommy
· 8 months ago
Puhleeeeeeeeeze!
Same kind of balderdash circulated before the collapse of the former soviet union.
Your problem is that you don't look for cause (capitalism). Instead you focus way too much on the symptoms (Madoff and "nice decent young men" aspiring to be little Madoffs).
You can't operate in a cesspool and not get filthy.
Leonid S. Knyshov
· 8 months ago
I watched the 9 segments.
I found your Twitter story fascinating, especially the reverse pitch aspect. That's part of the reason why I am not actively pitching but instead building my products. I want to have a sufficiently compelling business model that will make people like you call me. :)
I will tell you that it can get very frustrating to bootstrap and go through multiple business models. However, I recall that scaling a business model, which is what VCs do in a nutshell as I understand it, will also scale any fault that may be present in that model, which will be a lot more expensive to correct.
Thank you, enjoyed the session.
fredwilson
· 8 months ago
Great perspective. I love it
Jordan Mitchell
· 8 months ago
Fred, I'm on the board of a nonprofit called the Northwest Entrepreneur Network, and have been involved for almost 10 years now. The sole focus of the organization is to help entrepreneurs succeed. We started a blog last year (http://www.nwen.org/blog/) where we include guest/syndicated posts on topics helpful to entrepreneurs.
Here's the ask ... if I provide a by-line and link back to your blog, make I selectively include some of your posts?
fredwilson
· 8 months ago
Yes, everyone can do that
It's in my creative commons license
Prakash S
· 8 months ago
Fred,
In one of the videos you mention that you still get distribution checks from Euclid, could you explain more about this please?
Thanks, Prakash
fredwilson
· 8 months ago
Venture funds take a long time to wind down. As they wind down, they make distributions to their members. I said that to make the point that venture funds take a long time to wrap up.
Prakash S
· 8 months ago
got it. thanks.
Prokofy
· 8 months ago
It sounds sort of hard to manage the beast of money. At one level, it sounds like what you have to do is network a lot and have the right 10-12 friends to invest alongside you.
But what is the glue that holds you together? You don't get anything out of bringing those other investors to the table, do you? Or how does it work? Do you get a finder's fee?
Or is it just the confidence that you recruited someone to validate your own pick?
All Comments
On the flip side, the first few times I pitched an idea to institutional investors I made a comment while defending the idea to the effect of "Well, that isn't an issue because we are a funded company" To which they replied "Not yet" Oops. Tack that up with things not to say to investors right along "These numbers are conservative"
Way too few but typical of the world I work in
It's not good
Fred: Watching on Boxee while making easter dinner!
BIG FREAKING DEAL.!
Read the news. Capitalism is over no matter how YOUR kind cling into it criminal tenets.
http://www.youtube.com/watch?v=RWsx1X8PV_A
It has nothing to do with Capitalism. If some jerk decides to drink and drive we don't blame the car for the accident.
It is the combination of capital and innovation that is the ultimate driving force in bringing new products and services to market.
Madoff on his own could not have pulled this off. The first people to invest in a ponzi scheme are sometimes aware of their actions but want to get that quick pay out. Everyone should be responsible for their money and know exactly where it is going. If you are not diligent it's your fault.
The government should not intervene and bail anyone out. The market should be left to correct itself. Then investors will think twice about CDO's and complex investment vehicles. The individuals involved should bail themselves out and revive their own companies.
Anyhow, the point is the responsibility resides with the individual.
Fred, keep up the good work.
To be called a jerk by a VC is actually very flattering and for that I thank you.
Same kind of balderdash circulated before the collapse of the former soviet union.
Your problem is that you don't look for cause (capitalism). Instead you focus way too much on the symptoms (Madoff and "nice decent young men" aspiring to be little Madoffs).
You can't operate in a cesspool and not get filthy.
I found your Twitter story fascinating, especially the reverse pitch aspect. That's part of the reason why I am not actively pitching but instead building my products. I want to have a sufficiently compelling business model that will make people like you call me. :)
I will tell you that it can get very frustrating to bootstrap and go through multiple business models. However, I recall that scaling a business model, which is what VCs do in a nutshell as I understand it, will also scale any fault that may be present in that model, which will be a lot more expensive to correct.
Thank you, enjoyed the session.
Here's the ask ... if I provide a by-line and link back to your blog, make I selectively include some of your posts?
It's in my creative commons license
In one of the videos you mention that you still get distribution checks from Euclid, could you explain more about this please?
Thanks, Prakash
But what is the glue that holds you together? You don't get anything out of bringing those other investors to the table, do you? Or how does it work? Do you get a finder's fee?
Or is it just the confidence that you recruited someone to validate your own pick?