4 Key Insights from 20+ Years as a VC
Note: The full article on this topic first appeared on FastCompany. You can read it here.
I’ve been in a uniquely exciting position throughout my 20+ years as an operator and VC to help develop the future of technology and the teams that make that happen. From my early days at Phoenix Technology and the invention of the PC, to my involvement and investment in wearables and UAVs, I’m just as invigorated about the excitement and challenges of being in this business as I was on day one. Many define Avalon’s intuition in markets and technologies as prescience, but what it actually boils down to are a few core tenants for creating disruptive, category-defining companies and achieving capital efficiency.
1. Drive ownership
You don’t need a heroic outcome to define a successful investment. In contrast, the spray and pray approach used by many micro funds and angel investors is not capital efficient for the investors or beneficial to the startup. What this does is sends a soft message of commitment and limits the definitions of success. At Avalon, we believe that to be in the trenches with each other, you need to know your investors are truly committed. You will want the confidence that your investors are committed to your success, especially when the times get tough — and they will.
2. Success is driven by three things
We’ve found the statement, “Success is driven by three things: People, Product and Monday — and any two will get you the rest,” to be true. We can determine a great idea and team when we see them, but it’s rarely who other firms have their eyes on. That’s because we’re not interested in party rounds, who gets the most media coverage, or who has the “rockstar” founder. At Avalon, we invest in companies with technical CEOs, where an engineer or scientist is the founder driving innovation, not the media coverage. We’ve had many successful investments whose companies were not on the front page of VentureBeat or TechCrunch.
Longtime friends and firms Fred Wilson of USV Ventures and Brad Feld of The Foundry Group are a few firms we share these values with and we often find ourselves investing together. In fact, this is a tradition that goes back to 1996 in the Softbank Fund.
3. Unicorns happen when they happen
While some VC firms obsess over discovering the next billion-dollar company, we believe every company we invest in can become a billion-dollar idea. That’s why we invest in the companies that we do, but we don’t limit success to that definition because you cannot ultimately control the outcome.
Instead, we focus on leading investments in early stage companies to allow them to grow the business without worrying about burn rate. We’re in it for the long haul so we’re there when they company needs more money to scale.
4. Let the founder be the founder
Too often, VCs get too involved in a company’s process, advising them about things that are too far outside of their expertise or when it’s not needed or wanted. We’ve seen far too many hours wasted trying to appease that one thing your VC said rather than building the product your customers want.
This is all why the Hippocratic Oath applies well to the VC business. There are definite points where a VC is obligated and required to intervene, but only at strategic points of engagement focused on course-correction, not debating minute details.
Why now is the best time to start something
Over the last 20 years I’ve seen a lot of exciting changes happen. With more and more VCs entering the space, now is truly the best time to start something. Let these four strategic principles guide your investments and incredible things will happen.