Actually, 98% Of VCs Aren't Dumb. ~Mark Suster
Adam Rifkin stashed this in Venture Capital!
By now you will likely have read Andy Dunn’s scathing post about Venture Capitalists in which he decries the industry’s masses.
I read Andy’s post with a knowing smile on my face. After all, I am no stranger to publicly expressing the frustrations of dealing with the downside of this industry as I wrote about in 2006 when I was an entrepreneur.
Suster provides a fine defense of most venture capitalists here:
Definitely worth reading.
The biggest problem I see with dumb VCs--and I have no claim how many of them are out there--is that they think they know what the customer wants more than the entrepreneur does. They are solid in their knowledge, their cup being full, based on a pretty good awareness of news and articles in the space, which typically is a trailing consensus of information, aka conventional wisdom. A good entrepreneur worth their salt will have a unique product concept and go and talk to three or four dozen customers about "if they had this widget, what would they be able to do with it". This will result in an understanding of what will succeed months or years ahead of anything you'll ever read anywhere.
Thinking differently, understanding a problem better than anyone else and coming up with a unique and defensible solution is how you get to be a smart entrepreneur. The only way to prove to yourself and others that you are one of the smart ones is through multiple projects with a building level of impact or success (or one or two failures and one really big success). That's part of the reason VCs put so much emphasis on team and previous companies.
I love this quote too:
You never tried the productI had a company once that I got all sorts of advice on what the product should or shouldn't do and spent months going around and around trying to educate the VCs about it. They were fine with coming up with theoretical ideas why the product wouldn't work, but never actually tried it all the way through--or more importantly doing it side-by-side with how things were done now all the way through and then with the product the easy way all the way through. I finally built a powerpoint that showed how many steps in one using screen shots pasted into powerpoint and how many in the other using screen shots pasted in powerpoint, and the effect in terms of results and costs and benefits for the difference. Even flipping through the powerpoint was too long.
Well said. Jeremy Liew scored bonus points with Bonobos simply by becoming a customer.
Here's a good rule of thumb:
No Venture Capitalist can make a business successful, but an investor *can* make a business fail if s/he distracts management too much.