Which VCs are defensible?
- Capital is commoditized.
- Portfolio services are widespread.
- Experts are plentiful.
- Informational edges can be eroded.
Personality, or "referent power" may be the most enduring moat.
/Thread 👇👇
thegeneralist.substack.com/p/power-in-the…
1. Power
In 1959, two researchers proposed six bases of power.
The way these bases create compliance:
- Coercive uses *force*
- Reward uses *payment*
- Legitimate uses *status*
- Expert uses *knowledge*
- Info uses *proprietary access*
- Referent uses *character*
2. Old World VC Power
When options were scarce, VCs held real power.
In particular, they had *reward power.* They were the people that could give you the reward of money to build your company.
Bc of their rarity, they also had some *legitimate power*, aka status.
3. The Last Decade
The VC asset class has grown 3x. The number of startups have grown +2x.
Comparatively fewer startups and more money. More competition was inevitable. VCs have spent much of the last 10 years trying to differentiate a commodity product.
4. Attempts to Differentiate
A16z changed the game with their large platform team(reward power). But other funds have followed suit.
Some have taken a sectoral focus (expert power), or built proprietary tools (info power). These are great, but can still be eroded.
5. VC Guide
How can VCs differentiate themselves? Where is there power available?
Look at @vc_guide. Though deeply flawed, the reviews are illustrative. The vast majority focus on character traits. On personality.
In other words, referent power.
6. VCs as Empathy Athletes
Instead of prioritizing mental acuity, VCs will need to be athletic in their compassion over the next decade. They will need to create and draw from "referent power."
This is incredibly hard. It may require different processes and hiring.
7. Non-Exhaustive Group of Empath VCs
- @brett1211. Saw it every day.
- @nbt. Widely loved. V clear why when you know him.
- Courtney @SusaVentures. Real.
- @schlaf. Clear focus on this w/ coaching.
All subjective. Lots of other 💯 ppl worth s/o. These came to mind first.
If you're interested in a deeper look with a side of early 20th century Russian history, check out the full piece below.
👇👇
thegeneralist.substack.com/p/power-in-the…
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