High Tech Investments - grow 'em rather than pick 'em

Some thoughts and speculations about VC Seed investments: does our common use of the term obscure rather than clarify the intent thereof?

 

A few days ago, I found myself giving free advice (worth what one pays for it?) to a pair of colleagues from one of the more conservative countries in Europe, on the subject on how to present seed and early stage high tech deals in palatable form to LPs whose digestive systems, as it were, equate such an arcane diet to, at best indigestible, and at worst, just plain poison.

 

And yet these same LPs, many of them Insurance companies, typically worship at the feet of the Gods of risk reduction. (Why else was the re-insurance industry born?) And how many of these metaphorically if not actually rotund burger/bankers would not leap, or at least waddle hastily, towards any financial equivalent of testing the waters with one finger before whole-body immersion in a costly investment, any and all varieties of which have inherent risk. (‘Come now, you surely exaggerate: a couple of years ago, how could one define an investment in Enron as risky?’ How indeed! The defense rests.)

 

So what is a seed investment in a high tech start-up if not a low $ cost way to test the waters? Of course, there’s lots of work involved, but us VCs are typically overpaid anyway, so we may as well try to earn our caviar-coated crusts of bread. And the eager beaver types amongst us simply do not subscribe to the VC gurus’ view that the return on any investment is inversely proportional to the time one needs to devote to it. True, I’d admit, of first investments in later stage companies – “C rounds” and beyond in VC parlance – but inapplicable to the process of growing companies from seeds, and being able to avoid putting in the big money until the seed has reached the seedling stage as a promising candidate for metamorphosis into a meaningfully large hunk of vegetation, metaphorically speaking, of course.  (Nonetheless, ‘lemon’ trees do not qualify…)

 

My free advice, then to you, dear risk-averse money men is: don’t eschew, but rather espouse experienced high tech ‘agronomists’ who grow your high returns by culling out the lemons before serious money is committed.

Comments

[taliaben]

Ah yes, the "farmers" story... so true. Although, not all farmers like caviar on their whole wheat.

[Debbie Loizides]

The art of listening unfortunately requires the ability to look in the mirror for reflection. Multi-Tasking in laymen’s terms. My fear is that even if "good old” Uncle Sam were listening somehow we the American public would be the happy recipients of a new tax. That would some how a spin to support the up-coming election have. :) It's not rocket science. It does however take reflection without the word "I" being the key driver.

[Hamed Elbarki]

Great advice and very true!

[zexni dpqxo]

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