So I am back to work (never stopped, but mentally taking me time to recalibrate to current realities), and will start to regularly post again. In the wake of the revelations that the various Emperors have been running around naked, I have been giving a lot of thought to the business I have been in the past few year, the formal VC industry. In some sense, a continuation of the entrepreneurial path I have been on professionally since 1994, as the pitch to a potential investor remains the same in terms of potential retu
A company I am advising, and looking at as a potential investment for us, got this feedback from a well known Israeli VC (one of the franchise operations of a well known American VC):
Hi Jacob, apologies for the delay in getting back to you. This email seems to have gone to the wrong folder.
We are not going to pursue the XXXXX opportunity, though we thought it was extremely interesting. it was hard to justify VC returns on this type of investment so we passed. We do think it is an interesting project with a nice potential.
Ok, so we all know the "wrong folder" trick, just an excuse as to why we don't respond to emails when we should, but look at what they wrote---and explain to me the difference between "nice potential" and "VC returns." When T-bills are paying out less than 1% return, seems to me anything more than that should be considered VC return. After all, with the risk of VC comes reward. What reward justifies the risk? And should shouldn't the level of risk be partof the equation?
I don't have any clear answers to these questions, but everyone involved in start-ups need to think these questions through, whether as entrepreneur seeking investment capital or VC looking to make profits.
For those claiming the VC model is broken, I say the world is broken. We all need to figure out how to fix it, and make a living at the same time...