Ho Nam Profile picture
25 Nov, 7 tweets, 2 min read
The entire thread is great. This particular point is worth highlighting - a VC is more likely to be focused on the next fund rather than the current or last. Not focused on you (the entrepreneur).
There’s is a conflict of interest between the VC (same applies to PE) and the entrepreneurs and LPs. Most prioritize the fund management business over all else. But don’t blame the GP. They are delivering what LPs want.
LPs want a model. A formulae for success. Predictability, repeatability, consistency. Unfortunately the world doesn’t work that way. But that’s what they want (and need) so there will be people willing to try to deliver (for a hefty fee).
The larger the fund management business the more the consistency becomes possible. So money flows to larger and larger funds with more formulaic approaches to investing which thinks of companies as deals as widgets being cracked out of a deal machine or factory.
This will stomp out any potential for uniqueness or greatness. But people will settle for mediocrity all day for consistency and the LP and GP are both in on it. The loser is the founder who has a life’s mission that will span across many fund lives. Doesn’t fit the fund mandate.
I’ve talked about this before and some people agree with my observations.
What a great thread riffing off of mine. Worth reading. This problem spans far beyond the fund management world into corporate and elsewhere. I see this sort of problem in the world of education. It’s a shame.

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More from @honam

23 Nov
What an amazing founder. I was at 3D computing leader SGI from ‘94-96 when $NVDA was tiny. We were all talking about the metaverse even before the Web/Internet became the next big thing. Jensen is still going long after others gave up or moved on. venturebeat.com/2021/11/18/jen…
Yes, I did notice the title of the article is wrong. It’s been 28 years (rather than 38) since NVidia was founded. Geez I’m not THAT old.
It’s quite remarkable that two of the original VC board members (from Sutter Hill and Sequoia) are still on the board. That’s quite a legacy. Would love to be part of a 28 year journey that still has a long way to go. How fun would that be? At least, that’s my idea of fun.
Read 5 tweets
26 Oct
It’s laughable to think that Sequoia just blew up the VC fund model. The vast majority of VC funds don’t have tens of billions of profits tied up in public stocks (and they never have), so what Sequoia does here is not that relevant to the rest of the VC industry.
Don’t get me wrong. I love the long their term approach. But VCs have a special role in the financial system - it’s to help create companies by partnering with founders. Some will endure for decades. But most of the hard work of a VC is not with those exceptional companies.
The exceptional great companies pay off in such a huge way that it helps subsidize the work to help the little companies that don’t make it to tens of billions in market value. We (the VCs) still need to help all of those little guys. The hedge fund and PE guys won’t/can’t do it.
Read 13 tweets
20 Oct
Heard from multiple LPs and GPs that people are looking to follow the “Altos model” in VC. What the heck is that?? We didn’t know there was such a thing. Apparently it has two elements. Concentration capital on winners (to an extreme degree) and extending hold periods. Hmmm…
That can work great if you happen to be right. But it can be disastrous if you’re wrong. Proceed with caution, especially when doubling down on winners. The tide can turn quickly. It can get ugly fast. What looked like massive home runs can turn into smoking craters.
Also, the concept of holding onto companies longer or being extremely patient can seem great IF it all works out in the end. More often than not, it can be used as a convenient excuse for poor performance for even longer periods. LPs will get burned if they trust the wrong GPs.
Read 7 tweets
13 Oct
Loved a line from this podcast by Carl where he talks about “the failure of imagination” as his biggest mistakes. I’ve made the same mistakes (which leads to not buying or selling way too soon). A thread…
To be clear, these mistakes have far greater impact to a long term track record than losing money. You can only lose 1x in VC and make 1,000x on your best companies (even if only one in a career, you will be rich).
Whenever I see a later stage investor start to talk about DCF and show me their fancy models, I start to think there is no hope for them winning the deal. They inevitable bid too low and we go with another investor. And they missed out on our best companies. That said…
Read 14 tweets
11 Oct
In VC world, so much advice about storytelling these days (usually about a lofty mission). But real mission driven companies are different. The results will manifest over time. Plenty of little signs along the way but after a while it becomes clear. That’s when we get conviction.
Sure signal is time horizon. They may say one thing but actions will reveal (and may betray). Will show up in each and every action. Another sign is in directness. Do they hire PR agents or does the CEO speak directly and frankly, and off the cuff, with anyone and everyone?
I’ve seen CEOs move from company to company with their entourages. Key member is a trusted PR person (who becomes a senior exec). Identify such CEOs and avoid. Or just observe carefully to learn what not to do.
Read 5 tweets
6 Aug
Some people look to win and that’s ok (I love sports). But when it comes to relationships, win-lose doesn’t work. This goes for business as well as personal. Of course, most people eventually get it for personal, especially with family, but maybe not for business.
For some people even win-lose is not good enough. They want to absolutely pulverize the competition. Can you imagine if you had that attitude and approach with your spouse? Or your kids?
For more wise, they look to have more constructive win-win relationships. But it’s tricky. Some people will frustrate you. What they think is “fair” may not be. Win-win is in the eye of the beholder. How stressful would it be if you don’t trust the score keeper?
Read 14 tweets

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