Renowed VC Alan Patricof leaves Apax to start a new — and small — fund: $50 million vs. Apax’ $20 billion that will be invested in only 12-14 early-stage companies. I’m among those who’ve been speculating about a restructuring of the VC biz in a world where companies need less money. I’d say this is evidence of the transformation.
Posts about vc
Tom Evslin contributes to the discussion about advisory capital with a suggestion — give ACs equity, not options — and a question: How will startups meet the right ACs? Should there be AC firms? Good question.
I think that VC shops would be wise to set up — and arrange compensation for! — networks of advisory capitalists, who could aid the startups with advice and expertise and the VC firms with deal flow and with help managing a far greater number of far smaller investments. These relationships should not be exclusive, otherwise you won’t get the maximum deal flow and introductions and the best deals for you. As with the rest of life online today, you should think networks: The more and better connections you make, the better.
Now the problem for the VCs remains: Startups need less money and thus it’s hard to invest enough for your real clients — your investors — without stretching your real resources — your time and attention. That’s why ACs are needed: to help you reach and invest in more companies by finding them and advising them. As I said the other day, the relative value of expertise and experience grows in relation to money, so the smart VCs will compensate for the reduced need for money with increased use of targeted expertise.
Should there be AC firms? Maybe. But I think not: The value is in flexible networks, in knowing people who know people who know stuff. I fear a firm would just act like an old consultance: Hire us and buy our bullshit and take your chances. Advisory capital is about personal relationships. VCs bring other people’s money. ACs bring their own knowledge.
So I think the thing to do is to old the first ACcon: a Demo without cash, in which startups meet experts with experience and they get to know each other and test each other and see whether they want to date. It’s not much different from other networking events, like Web 2.0 and Nick Denton’s old First Tuesday, except that money isn’t the draw and the currency, smarts are.
Stowe Boyd has a smashing post today suggesting a shift form venture capital to advice capital. As VCs find themselves unable to throw big buckets o’ money at ever-smaller, nimbler, quicker startups, it becomes impossible for them to manage their real assets: time, distraction, and knowledge. I think that this provides opportunties for strategic investors who have more than money to offer and also for smart, independent people (such as bloggers, Boyd suggests) who can offer advice, connections, and questions. The challenge is to make this more than a show advisory board but a real relationship and a longer-term commitment for both than old-style consulting (thanks to payoffs in long-term equity). I’ve started down that path with a few companies myself.
So VC Guy Kawasaki has a blog now. What amuses me is that it fits the mold of so many other VCs’ blogs — many of which I read and enjoy — for they are filled with abstracted rules of venture life, like these from Kawasaki: “missions vs. mantras,” “the art of intrapreneurship,” “top 10 lies of venture capitalists.” I wonder whether they are following a leader or whether this is just the way VCs think and talk. (Around the table at home: “As part of my continuing series about how to present better dinnertime conversation, let me list the top 10 cliched lies Dads tell their startups, er, I mean, kids.”) It’s time for a VC to break free of the form: VC gossip, catty VC valuation badmouthing, anonymous confessions of the top 10 ways VCs blow off venture beggars, sex tips of the nearly wealthy…. Or perhaps follow Tom Evslin’s lead and tell funny stories with deeper meaning.
: Doc says here are three blogging VCs who break the mold.
And a contrarian friend of mine said:
What i find weak about the VC blogs is they are like business books – generalizations, guidelines at best, about business. But in the end, it’s about evaluating what has to be done in a particular situation – and the conventional wisdom doesn’t always apply. I’d rather see VCs talk about situations where they *didn’t* follow the business cliches. That takes real skill.
It’s great news that Digg got venture funding: $2.8 million from Omidyar Network, Marc Andreessen, and Greylock partners. The wisdom-of-the-crowd news site is rivaling /. in buzz and traffic-spiking. They’ve redesigned smartly. And I’m a fan of their spin-off podcast, Diggnation (they’re soon to go to Japan to make a show). I told the Online News Association that they should have invited these guys to their confab to learn what the future of news is really about.
: And by the way, Digg cofounder Kevin Rose is a nice guy. I was supposed to meet up with him at Web 2.0 because I wanted to and because my son is a fan; he’s the one who turned me onto Digg (see Jake’s Diggs on his sidebar). My son couldn’t care less about any of the celebs I met during my career. He wanted me to meet Kevin and I blew it. So Kevin just sent Jake an autograph. Thanks, dude.
: While we’re digging, here’s one more relevant tidbit: The Diggnation guys said that as soon as iTunes started promoting vlogs, the video version of Diggnation immediately racked up more downloads than the audio version.
There is a ton of pent-up video demand out there online.