Great response by Umair Haque to Fred Wilson’s discussion about fixing the venture investment ecosystem.
Let’s revisit the spectre haunting venture capital. Why aren’t there more Googles?
The answer’s very simple. Because every company that had the potential to be economically revolutionary over the last five years sold out long before it ever had the chance to revolutionize anything economically.
Think about that for a second. Every single one: Myspace, Skype, Last.fm, del.icio.us, Right Media, the works. All sold out to behemoths who are destroying, with Kafkaesque precision, every ounce of radical innovation within them.
Let’s replay the Google story. Google, despite serious interest from Microsoft and Yahoo – what must have seemed like lucrative interest at the time – didn’t sell out. Google might simply have been nothing but Yahoo’s or MSN’s search box.
Why isn’t it? Because Google had a deeply felt sense of purpose: a conviction to change the world for the better. Because it did, it held on and revolutionized the advertising value chain – and, in turn, capital markets gave Google an exuberant welcome.
See the point? If all Larry, Sergey, and Google’s investors had wanted to do was to sell out fast to the highest bidder, they could have done so at any time. But they didn’t: they chose to revolutionize something that sucked – and so a tsunami of new value was unlocked. That’s how Google was made.
Now, I agree with Fred. Equity capital markets are myopic, beancounterly, and soulless. But it’s not venture’s job to fix those problems. The real problem is internal: structural inertia and risk-aversion. . . .
The dynamics of old boy’s clubs are almost deterministically predictable: they fight tooth and nail against risk, against the radical, against any kind of change to the status quo. They’re great at “monetization” – cutting deals – but the last thing old boy’s clubs are good at, unfortunately, is sticking up, come hell or high water, for innovation. From music, to publishing, to food, to autos, the outcome of locked-down boardrooms has been innovation stifled and suffocated. . . .