What I am saying is that some of these superangel funds may structurally resemble traditional VC funds, but they are something altogether different- and more akin to an angel group.My comment was that structure matters. If you set up the Red Cross just like a bank, with the same incentives, they would have caused the Panic of 2007.
Maybe it's just two different world-views. I've thought about this and written about it for a long time. My take is that if you want to create a better venture capital system, you need to change the system, not just the people. Calling yourself a super-angel and saying you are different does not change the investing world. Changing the processes and structures of the investing world will change the investing world. There are firms (and super-angels) doing this.
In the spirit of changing the game, some "old-style" and "new-style" comparisons:
| Old-Style | New Style |
|---|---|
| Money managers | Company builders |
| Organized like a law firm | Organized like a start-up |
| Generalists | 'T-shaped' |
| Managing $1bn | Managing $25mm |
| Living on management fees | Living on expected future carry |
| Scaling by hiring more partners | Scaling by being more efficient |
| "Loose lips sink ships" | "You should read my blog" |
| Going to NVCA meetings | Going to the R Meetup |
| Joining Angel Investor groups | Writing $25k checks |
| Starting an owned seed fund/ incubator/ hackathon | Supporting a grass roots effort |
| Sports jackets | Kicks |
| Networkers | Community builders |
| Lawyers | Series Seed |
| Participating preferred | Straight preferred |
| 51% | 15% |
| LPs measure success by: IRR | LPs measure success by: IRR |
Couldn't agree more about keeping a systems mentality. Donella Meadows wrote a great primer on systems thinking that I highly recommend: http://amzn.to/gGTRBI
ReplyDeleteNow that I think about, I'm wondering if you actually recommended it to me first. Hmm...
No, I haven't read it. I'm going to, though, thanks for the pointer!
ReplyDeleteI have to admit that, as a systems thinker, I am usually unable to see my own systems-thinking bias. Luckily I have loved ones who are decidedly NOT systems-thinkers and who (lovingly) chide me about it.
For instance, the networks vs. communities point is hard to jibe with systems-thinking. For me it was a pure leap of faith. But it turned out to make me insanely more effective. And I credit the amazing quality of my portfolio to that one change in style.
can you talk more about "T Shaped"?
ReplyDeleteMatt,
ReplyDeleteT-shaped, as in broad set of skills and interests, but deep in a specific area. Crucial for interdisciplinary teams, t-shaped people have the ability to learn new things quickly and can add value both from 50,000 feet and--in certain specific areas--at an extremely granular level. You're T-shaped, for certain.
Most entrepreneurs are t-shaped. VCs typically have not been, in my experience, but the ones that add the most value to early-stage companies are.
The more you elaborate on this, the more I get where you are coming from. You want to see real structural changes to accompany all the behavioral changes that we're already seeing. I am guessing that the current use of a fund structure for the superangel/microVC category is just a bridge to some entirely new structure (legal/corporate/business) that does not yet exist.
ReplyDeleteInteresting post Jerry; it will be fascinating to see how this plays out
ReplyDelete