Game of Thrones

A Game of Venture Loans

Game of thrones venture capital startups entrepreneurship investing

The premiere of the final season of Game of Thrones is tonight. I am sure it will not surprise you to learn that I am a massive fan. I have read the books and watched and rewatched the series. One of the major overarching themes of the show is the zero-sum competition all characters experience in Westeros.

In the game of thrones, you either win or you die.

At a much more benign level, we see this zero-sum phenomenon play out in our world too. One of the reasons I have never been particularly enamored with the public markets is that there is someone “on the other end” of every trade. What this means, is that if you are purchasing a stock, the person who is selling you that stock almost always expects it to go down. If the stock goes up, you win and they lose.

I love venture in part because it is not a zero-sum game. There isn’t anyone sitting on the other end of our “trade.” When done well, there is enough incentive alignment to ensure that no party is succeeding at the cost of anyone else. Investors in funds win when VCs win when entrepreneurs win (say that fast five times). Perfectly in balance, as all things should be <<insert Thanos meme here>> (speaking of Thanos, it’s kinda wild that GoT, Avengers, and Star Wars are all concluding in 2019. I am firmly aboard each respective hype train, but it will be a bit bummer when all is said and done).

The one area that this does not necessarily hold true is getting into a hot round. The dynamics are such that in venture, entrepreneurs are always trying to thread the needle between raising too little (short cash runway) and raising too much (dilution). This means that for a given company, at a given valuation, there is going to be a cap to the amount of money the entrepreneur is going to want to raise. For most entrepreneurs, the worry is getting enough dollars in the door to close out the round, but for the hottest deals with experienced entrepreneurs or in a sexy space, rounds can fill up quickly. This can lead to significant competition between investors trying to get into the round. While not as competitive as Stark vs Lannister, things can heat up pretty quickly.

I should note that I have only ever witnessed this competition second-hand. My experience so far has mostly been centered around investing in the Midwest where the focus is much more on getting enough money around the table than trying to elbow to the front of the line. The simple fact is that there are not nearly the same numbers of investors here as there are in a bay area or a New York. That is changing as more and more people start paying attention to the exciting things being built in cities like Columbus, Pittsburgh, Kansas City and more.

I am thrilled for this increased attention and I think that it will be hugely beneficial to the region as a whole.

My one hope is that midwestern investors can maintain the same collaborative nature that they have cultivated thus far.

Because zero-sum competition is not a ton of fun.

Just ask the Starks.