Picking Ventures: Part 1

 

Making educated guesses about which new ventures to invest in, truth be told, is a process prone to lots of error.  "A venture investor who never loses isn't risking enough," said a friend of mine recently.  We all can tell stories of investors who missed the big opportunities ("who really needs another search company?) and invested in, well, interesting ventures. ("We can ship pet food across the country via FedEx and make huge margins!!!")

Every entrepreneur who's ever talked to investors knows there are a couple of different things going on.  The one that's obvious - what the product is, etc. -- is the least important.  The bigger process is the tenor of the interchange.  

In broad terms, when I look at an opportunity, I'm asking myself if I or my partners understand the industry, and if our rolodex can help the company fill in the missing pieces - in growth, relationships with other companies, people and so forth. 

Nolan Bushnell finally got the home version of the Pong game to launch in 1974 because one of the venture capitalists' investors knew someone at Sears.  That opened the door in time for Christmas, and, well today video games are  - big. 

So if it's worrying that the quality of the budding relationship with the entrepreneur may not be open to that kind of help - and to coaching about all of the issues growing companies face - then maybe we should pass.

Said another way, if the entrepreneur enthusiastically seeks expertise to get to a common goal we have the beginnings of a potentially interesting opportunity. 

I'm going to flesh out some more of this topic over the coming weeks. 

 

"In a networked world, trust is the most important currency."  

     ---Eric Schmidt, University of Pennsylvania Commencement Address, 2009