Paul Kedrosky's Infectious Greed
Finance & The Money Culture
From VC Ratings:
Interesting list, although I don’t like the part about rich customers. I think a critical attribute of astoundingly successful companies is mass appeal, and the masses don’t often swing toward the premium and expensive. In many new markets (especially in high tech) there will inevitably be an “early adopter” phase of adoption – which may only include those willing to shell out $800 for the new HD Tivo, for example – but that doesn’t necessarily lead to long term success or even short term profit. Sure, there are companies that can ride out the luxury market long term (e.g. Apple, Rolls Royce, Neiman Marcus) but they tend to only own but a fraction of their respective markets. The Dells, Hondas, and Wal-Marts of the world almost always dwarf them by a long shot.
I can get through this list better if I read it as “the folks to whom Sequoia wants to allocate capital” than “criteria for maximizing risk-adjusted VC returns”.
Much as your previous post: http://paul.kedrosky.com/archives/001242.html
“All team members are the smartest or most clever in their domain”!?! Those reads more as the folks who are fantastic to meet with, not necessarily the folks who are going to max-out the returns to VC money.
I think the reason that the venture capitals look for companies that target rich customers is that this is usually the best way to get off the ground especially with somewhat limited resources. I’m sure there are tons of products that would have broad market appeal (and be cheap) but getting everyone in the world to buy into these products is a very difficult task. On the other hand, if you develop a potentially broadly appealing product but start with a focus on rich customers who will pay a premium for a unique offering, then you are increasing your chances of surviving the infancy of your business. You have a defined group of people to allocate your marketing resources to, those people are likely the kinds of connectors and mavens that are necessary for the popularization of your product, and you are at least partially guaranteeing that you will be able to sell your product for an acceptable price. Many new technologies (like an $800 Tivo) are expensive for a reason and it would be impossible to target a more “normal” demographic because the infrastructure just isn’t there to manufacture or distribute at a less than premium price.
We also look for Companies that will not fail. Period. I mean, for Sequoia to hire an idiot like me and have them pay me what they pay for what litte I know…I’m just an idiot with a silver spoon that gets passes from everyone…
Uh … yea right…. and then there is YouTube.
What exactly is the difference between “clarity of purpose” and “focus”? Or for that matter, “pain killers”, which appears to mean “focused products?” How is “frugality” different from what they call, nonsensically, “inferno?” When did “DNA” become a synonym for “ability”? When did grammatical parallelism go out of style among those who think differently?
Paul Kedrosky‘s Infectious Greed
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