The venture business has a lot of folks who talk a good game…but this is because it is in fact a humbling game. The LPs who invest in venture funds want awesome returns but very few VCs deliver them. Most venture firms are lucky to have even one great investing partner…yet even these rare groups force the LPs who invest in them to buy “the bundle” of multiple partners rather than the true money-makers.
At the same time, the truly great firms understand VC is a team sport.
“VCs do not want to take risks” is an often-heard criticism expressed during start-up conferences or wherever VCs meet with entrepreneurs in more relaxed settings. There is however an inherent paradox in this statement since suggests that VCs have somehow managed to grow out of their risk-taking nature and found a magic formula on how to make a good living on risk-free investment decisions.
VC’s get put on pedestals all the time, called legendary at the first sight of a decent exit whilst they glide around town deciding which entrepreneurs deserve their funding. Pretty much everyone who’s been into the venture game long enough got involved in some notable success that allows him or her to seduce the press and maintain a perception of greatness, warranted or not. Entrepreneurs for their part are either amused or annoyed at the giant exit numbers that VC’s drop like calling cards.
But the reality is often very different. It’s REALLY challenging to make the venture model work.