Playing the Long Game in Venture Capital

Silicon Valley and the media industry that surrounds it values youth. The culture is driven by the 20-something irreverent founder with huge technical chops who in a “David vs. Goliath” mythology take on the titans of industry and wins. It has historically been the case that VCs would rather fund the promise of 100x in a company with almost no revenue than the reality of a company growing at 50% but doing $20+ million in sales.

The Valley has obsessed with a quick up-and-to-right momentum story because we were thought to live in “winner take most” markets. Since funds were driven by extreme successes in their portfolios where just one deal could return 5x the entire fund while 95% of the fund may have done well but not amazing, not missing out on deals was critical. It literally drove FOMO.

But markets have changed and I think investors, founders and experienced executives who want to join later-stage startups can all benefit from playing the long game. Think about how much more value was created for all these constituencies (and society) by Snap staying independent vs. Instagram selling to Facebook.

This is true in consumer but it’s also true in enterprise software. Case in point, Procore just went public and is trading at an $11 billion valuation. This “overnight success” was first financed in 2004. Imagine if, say, Autodesk had purchased it in 2009 for $100 million?

As Jason Lemkin notes, there are many more companies worth $10 billion+ these days and some up (Read more...)