Just over a week ago, I had the opportunity to attend the 44th annual Venture Capital Institute conference. For three days in Atlanta, we talked nothing but venture. It was an excellent opportunity to network and meet some amazing speakers from the industry. The highlight was getting to meet and learn from Dr. Mort Grosser and Pitch Johnson. Both men are absolute legends in the industry who have been involved in venture capital since the very earliest days of Silicon Valley. Mort was a partner with Kleiner Perkins for decades. Pitch Johnson founded one of the countries first venture capital firms with Bill Draper before forming Asset Management Company which is still in operation today. I had the incredible opportunity to listen to both of these men present their views on the past, present, and future of venture capital. Hearing the collective wisdom from these two men truly was career changing for me. I tried to think about how I could best share their insights with you, and I think the best way is to just let them speak for themselves. Here are some of my favorite quotes from their talks.
The motto of Silicon Valley is “Why not?” As an investor, you have to think about the potential if everything goes right. At the end of the day, you need to rely on your gut feeling.
The secret ingredient for Silicon Valley is it’s status as the world’s longest sustained meritocracy.
If you really want to be productive in meetings bring a shoe box. Write all the negative words and phrases you can think of such as can’t, wouldn’t, couldn’t, shouldn’t, it’s been done before, etc. Whenever someone says those words, make them put $5 in the shoe box.
Good ideas start flowing when people are tired, hungry, and little bit drunk. In this state they say what they think without a filter. The best ideas come at the end of the night when the paperboy can call bullshit on the CEO. You need an environment where everyone feels empowered to speak up. That is when the magic happens.
Everything in life is a craft. You succeed by practicing it over and over again. The goal in life is to do something so well that it becomes art.
90% of success in Venture Capital is forcing your left brain to work together with your right brain.
Creativity isn’t something you can force. Creativity is about tearing down the barriers to allow your inner creativity to come out.
Here are the assets you need to create the next Silicon Valley: access to excellent institutions of higher education, access to capital, high quality entrepreneurs, horizontal society/meritocracy, acceptance of new ideas/allowance for failure.
My thought on the current venture capital bull market is that we have seen this before. Booms are caused by “lemmings”. Lemmings are people that just follow what others have done to be succesful without any analysis of their own. Don’t ever compare yourself to others. Evaluate each deal seperately. Every deal is a new deal. Every person is a new person.
Venture Capital is a priviledge and you should never forget it.
In its truest form, Venture Capital is fundamentally about building companies. This is done by investing capital, providing advice and help, and coaching entrepreneurs. Coaching is about providing emotional support and encouragement.
Venture capital is half art and half science.
Always maintain your sense of integrity. If something doesn’t feel right, be very cautious. Develop your standards and then live up to them.
Here are the keys to venture capital. Much of the art of venture capital involves making decisions about people. Don’t fail to make a numbers based analysis. Cultivate judgement about the meaning behind those numbers. Listen to your gut. Base all of your actions on a high degree of personal integrity.
The biggest problem in venture capital is people trying to make money without doing anything. Both investors and entrepreneurs today are trying to get rich first and build something important second.
The way to strike a balance between too few and too many deals is to think about how often you can call/visit a company. If you aren’t calling/visiting every company you are working with every couple of weeks, you have too many deals. Each person should not have more than 4 or 5 deals that they are working on. Half of your time should be spend on working with existing companies, half of your time should be spend looking for new deals.
At the end of the day, the people that make the value in a startup are not the entrepreneurs, it is the employees, as a director, you owe something to the employees. You owe them integrity.
Here is a rule that will bring you success in both marriage and business. No lies. Including lies of omission.
As a director you have a responsibility to know as much as absolutely possible about the industry you are in. Put in the time!
When you walk into a board room, you owe knowledge and integrity to the company and its employees. You are limited in the number of companies that you can possibly work with at any given time by this paradigm. Max number of boards that anyone should sit on is 4-5 at a time.
The most important things about being a director are being knowledgeable about the space the company is in, always acting with integrity, and being willing to just show up (even when it is difficult or late in the night).
To be successful in venture capital, you have to be intentional about believing that one person can be right and the rest of the world can be wrong.
Venture capitalists hurt companies by not being honest, not knowing enough, being in too big of a hurry, only caring about the problem instead of focusing on the solution, and being too greedy.
Combining cultures after an acquisition is extremely difficult. The only way to successfully merge companies is person by person. It is like surgery and it will require all of your time and energy to make it work.
DON’T take a board seat unless you are willing to become OBSESSED with the space the company is in!