Great. @SethGRosenberg - I love digging in with smart people. Responding to a several different of your thoughts here in 1 place:
1/ I think a few VCs have been successful over time because of brand and a few key star investors. not because of data.
1/ I think a few VCs have been successful over time because of brand and a few key star investors. not because of data.
2/ If it were a data advantage alone, I would think majority of VCs would get better over time. But I think the opposite is true. I would argue the reputation is what enables the data advantage.
3/ I do agree that brand in VC matters a ton. I think that brand helps about 5-10 VCs -i.e. The best (@GreylockVC being one). But importantly I think it’s that, and not data, that is the primary differentiator v. other VCs. I could be wrong.
4/ When VC talks to co. there is often data to look at when the co. supplies. Key though is VC needs to a) know which co. to engage w/, b) convince that co. to engage, c) “win the deal.” NONAME VC reaches out to a great co. against @rebeccak46, she wins deal 10x out of 10.
5/ Those pts here are important for a few reasons. 4a takes skill & training to know who to reach out to. I would argue that takes often 10 yrs of experience but not 50. An amazing business, but not scalable (?).
6/ 4b and 4c likely take skill but also a great Brand name. Greylock has that but JoeSchmo VC doesn’t.
7/ So when co gives data, yes I think it is helpful to have data to compare against. Given how fast categories in tech change, diff biz models, I’m not sure that 50 yrs of exp is meaningfully more valuable than 10. I.e. does Greylock have better data than USV (founded 2004)?
8/ Both are phenomenal firms, just not longevity helps much on data in tech? Other than experience through market cycles (which is a diff pt I think than what we’re talking about). I do think experience through a market cycle makes them a better investor.
9/ I think longevity might help a little on network but given the asset is people even then I’m skeptical. A16Z I think has shown that a great network & brand can be built in <10 yrs.
10/ So I go back to brand. I absolutely believe brand helps in VC. But brand is only as good as the last few deals and partners that stay (as Kleiner has been finding out over the last few years). Sorry KP but true.
11/ In VC I think there is repeatable (through brand- i.e. win good deals consistently) or scalable (w/ lower returns, larger deals) but I dont think there is both repeatable and scalable. Data shows that -as funds get larger, returns go down.
12/ My answer to scalable and repeatable is systematic VC in specific sectors. I don’t think this works in tech. I do think it works well in consumer.
13/ Really interesting thoughts, thanks Seth. Just my reactions here and clearly I could be wrong about all.
