Oh, maybe the sky is not falling. Maybe
it is not true that "We've got trouble,
right here in River City. Trouble starts
with a T and that rhymes with a V
and a C and they stand for venture
capital"!
Why? Well in information technology (IT)
venture capital, in recent years a
strong theme has developed: The
VCs want the founders to be technical,
e.g., design and write software. As
I recall, the firm A16Z is an especially
strong supporter of this theme.
Well, then: For my startup, I've read
a lot of VC bios: My conclusion is that
only a tiny fraction of VCs are in any
very significant sense technical
in anything in or very close to IT.
E.g., when was the last time they
designed and wrote 10,000 lines of code?
Invented a new algorithm? Did some
technical work prior to the software,
e.g., the applied math of machine
learning or data science, e.g.,
some applied math for ad targeting?
How about some applied math for
computer and network security via
anomaly detection? How many
VCs are qualified to direct a
major IT development project
with planning, hiring, training,
software project management,
server farm planning and implementation
including performance, reliability,
security, growth potential? Gee,
let's keep it simple: How many
VCs could step into to a
slot as database administrator of, say,
a major site of SQL Server, Oracle, DB/2?
So, in an IT startup at the seed or
Series A level, why would a
founder want to hire a VC, and why
would a VC want to invest in
a VC as a founder or a founder
who would hire a VC?
How 'bout they wouldn't?
Sure,
at the Series B, C, ..., maybe some VCs
could do business development,
marketing, setting up the sales
channels, running the sales
organization.
Net, bottom line-wise, the goal
of the VCs and their limited partners (LPs)
is to make money, and a VC firm
that doesn't make money will have
a tough time raising more. And,
LPs may look with surprise and
even concern at losing bets
on VCs within the firm. Or,
such a VC darned better make money!
Why? Well in information technology (IT) venture capital, in recent years a strong theme has developed: The VCs want the founders to be technical, e.g., design and write software. As I recall, the firm A16Z is an especially strong supporter of this theme.
Well, then: For my startup, I've read a lot of VC bios: My conclusion is that only a tiny fraction of VCs are in any very significant sense technical in anything in or very close to IT. E.g., when was the last time they designed and wrote 10,000 lines of code? Invented a new algorithm? Did some technical work prior to the software, e.g., the applied math of machine learning or data science, e.g., some applied math for ad targeting? How about some applied math for computer and network security via anomaly detection? How many VCs are qualified to direct a major IT development project with planning, hiring, training, software project management, server farm planning and implementation including performance, reliability, security, growth potential? Gee, let's keep it simple: How many VCs could step into to a slot as database administrator of, say, a major site of SQL Server, Oracle, DB/2?
So, in an IT startup at the seed or Series A level, why would a founder want to hire a VC, and why would a VC want to invest in a VC as a founder or a founder who would hire a VC? How 'bout they wouldn't?
Sure, at the Series B, C, ..., maybe some VCs could do business development, marketing, setting up the sales channels, running the sales organization.
Net, bottom line-wise, the goal of the VCs and their limited partners (LPs) is to make money, and a VC firm that doesn't make money will have a tough time raising more. And, LPs may look with surprise and even concern at losing bets on VCs within the firm. Or, such a VC darned better make money!