Nivi · June 24th, 2008
I’m reading Randy Komisar‘s book, The Monk and the Riddle.
He wrote it before he became a partner at Kleiner Perkins and I like his description of the Rocket Ship model of investing (emphasis added):
“Over the last several years… a new investment model has taken hold. Fill each startup with rocket fuel as fast as possible and blast it into space. The ones that fly, fly, and if the rest of them blow up, c’est la vie.
“In fact, the Rocket Ship Model of startup investment has recently produced many of the most prominent Valley successes. But for every one of them, there are many potentially viable companies that might have eventually prospered if they had been incubated longer.
When too much money is pumped too fast into a startup, there’s no room for mistakes. The initial product and the initial fix on the market have to be right. There’s no way these companies can stop and reconsider what they’re doing with out a great deal of pain.
“You have to be able to survive mistakes in order to learn, and you have to learn in order to create sustainable success. Once the market is understood and the product is fully developed, then move fast and hard.”
Some more snippets from the book:
“[Angels] pay for the privilege of helping the company.”
“If I invest, I am prone to think like an investor, favoring my return over what’s best for the team and often its long-term business.”
“In a privately held startup I don’t favor the investors over the founders. This is probably the crucial way my thinking differs from a VC’s.”
“Business is one of the last remaining social institutions to help us manage and cope with change.”
“The rules of business are like the laws of physics, neither inherently good nor evil, to be applied as you may. You decide whether your business is constructive or destructive.”
Topics Books · Customer Development · Quotes
hola!
Please clarify these two quotes from Randy, they seem to be in opposition:
“If I invest, I am prone to think like an investor, favoring my return over what’s best for the team and often its long-term business.”
“In a privately held startup I don’t favor the investors over the founders. This is probably the crucial way my thinking differs from a VC’s.”
How can he tend to think like and investor but, not favor the investors while favoring his return over what’s best for the team.
Hopefully, I am missing something here.
Thank you!
Aronado
I think he is making the case for not investing.
Really. Hmmmm well, shouldn’t that be clarified somewhere in the post, since this is a blog for “hacking venture capital” ?
respectfully,
Aronado
Randy came on Venture Voice a couple years ago just after he joined KPCB: http://www.venturevoice.com/2005/12/vv_show_23_randy_komisar_of_kl.html
Here’s what he said about becoming a VC:
“The opportunities to make a difference were happening so fast and furiously, that I was loath to be committed and stuck in any single one of them. I wanted to be able to work across a portfolio of ideas.”
Looking at the glass half full is my take-away from what I’ve read. Here are my additional thoughts:
1) If investor invest in a company with sound potental, let it incubate and have a chance to grow and flourish, there may be more companies surviving and prospering instead of becoming a casualty to the filling full of rocket fuel and blasting into space etc…
2) Investors should consider investing in the business as a “team” (investors, founders, board, employees etc.) as oppose to adopting the “I’m only interested in what’s in it for me”mentality. With that being said, businesses succumb to missing growth opportunity BECAUSE it’s focus on growing, learning, tweaking to market changes is misdirected due to becoming more focused on keeping the investors happy NOW instead of reaping future benefits.
The hypersensity of “pleasing” investors who have short term expectations (which may have been used to sell them), makes it difficult for start-ups to make calculated decisions that are in the best interest of the company long term.
3) This is the problem as I see it… Some of us have to whore ourseleves out with the “pie in the ski projections”
initially to capture investor attention which create problem #1… meeting those unrealistic expectations or the “blasting off” probability. When started my company, I didn’t do this and as a result was only able to attract F&F investors with limited resources. Additionally, the monthly challenge of raising operating capital sucks the energy out of me and cost many hours of productivity.
In summary: As I’ve learned… it is important to pick investors that are nurturers and mentors and have the ability to continue to assist in funding and growing your operation if the expected unexpected occurs. 😉
Oh, and pick mentors investors instead of silent investors. Mentor investors with a ‘dog in the fight’ can be counted on for business introductions… which can be HUGE for start-ups. 😉