Tuesday, October 15, 2013

Deal-Flow : Value-addition :: Silicon-rapids : Organic back-waters

Reacting to the rather weird scenario wherein some VCs are trashing their own brotherhood, Bruce Booth wonders in his latest article if this is an outcome of a Lake Wobegon-like illusion or if it is the Dunning-Kruger effect in action.

In my comment against this post, I offered my own little suggestion for this apparent case self-deprecation (OR is it not) and more....

My comment:
---------------------------------------------------------------------------------------------
If I go by what Mahendra Ramsinghani said here on LPs bothering more about deal sourcing capability than value-add by VCs, Khosla’s indictment of ‘95% zero-value add VCs’ shouldn’t really rock the boat more than the supposed shake-up caused by the AngelLists’ & Kickstarters’ of the world – The ‘80% negative-value-add’ rhetoric though is way below the belt & confounding.
Perhaps these intriguing proclamations are a manifestation of nervous energy of the PE biggies that are ‘but-of-course rattled too’ by the progressive warming of the PE globe and thus eager to reaffirm their value-add alternate asset investor status to the larger LP universe.
Can’t help but note again that a lot of the above paradigms, shake-ups, prophesies & reactions are all still relevant mostly to the 'silicon-rapids' (IT et al) and much less to the 'organic-back-waters' (~biotech) – taking a cue from what you said about the CEO, I’d think the loneliest job in the world at present probably is that of a biotech venture capitalist :-)


Wednesday, October 9, 2013

Isn't 'Syndicate' a worrisome term on an online crowd-funding platform?

A recent article by Lora Kolodny on Venture Capital Dispatch raises some interesting aspects on how VCs perceive the impact of likes of AngelList (online crowd funding platforms) on VCs - all but the potentially most impactful feature of investment 'Syndicates'
Below's my comment on the above article;   
--------------------------------------------------------------------------------
I was waiting for something on this – a much needed & timely insight.
It’s good to see all four VCs cautiously optimistic & none too worried about the online equity participation platforms impacting the role of a VC – couldn’t agree more!
From what has been said by the VCs, my key takeaways are as follows;
  1. Fundamental changes to the proprietary-deal-flow showcase of the VCs ~Rory Eakin, CircleUp
  1. The additional costs of investing associated with online platforms ~Annie Kadavy, Charles River Venture
  1. ‘Tragedy of the commons’ Risk – to mean the relative disengagement of investors owing to a portfolio comprising of multiple small investments ~Jeremy Liew, Lightspeed Venture Partners
  1. The risk of misreading or missing a signal by investors – owing to low signal to noise ratio of all online leads ~Alfred Lin, Sequoia Capital

While all these pose some but varying levels of risk, I feel the evolving ecosystem (of online equity platforms) will soon equalize the same & make the impact minimal.
One aspect that hasn’t been discussed is the potential risk of ‘investment bias’ stemming from the syndicate approach – which may inadvertently shift focus from a few worthy signals that already suffer a low S/N ratio - What say Alfred Lin (& AngelList)?