Paul Kedrosky's Infectious Greed Musing about technology, finance, venture capital, & the money culture with Paul Kedrosky by Paul Kedrosky

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The Secret of (VC) Success

Truer words were ne'er said about venture capital success than these by Bessemer's David Cowan:

The first person I ever met from Bessemer was Neill Brownstein, one of Silicon Valley's pioneer venture capitalists (with investments like Ungermann Bass, Telenet, Maxim, Veritas and BusinessLand). At that interview, he asked me this question:

What do you think is the most common trait among successful venture capitalists?

I thought hard, trying to impress him. "Deep industry domain knowledge."

"No," he said.

"Um, analytical skills?"

"No."

Uh oh, I started grasping. "Rich network of contacts? Operating experience? Engineering background? Financial background? Skepticism? Patience? Sense of Urgency? Salesmanship? Decisiveness?" (the last of which I clearly didn't display)

"No."

"I give up. What is it?"

"Luck."

In a sense, when looking at the most successful venture capital investors you are looking at smart and savvy folks, but you are also looking at the other end of a lengthy succession of coin flips. All sorts of other smart and savvy investors were "randomized out" of the process, eliminated for no other reason than not being lucky at the right moment -- they missed that morning meeting in 1998 with the Google guys when a truck blocked a few lanes of the 101.

Of course, as Thomas Jefferson famously said, "I am a great believer in luck, and I find the harder I work, the more I have of it." The more smart at-bats you get, to move from coin flips to baseball, the higher the likelihood that you'll eventually whack something hard.

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