Old O’Malley used to dispense sage advice from his stoop in Brooklyn. The smoke of cheap cigars and the cracking of the Yankee game on the transistor radio hung heavy in the humid night as O’Malley meted out wisdom like Aristotle under an olive tree. And one nugget that stuck with me through the years goes as follows: “never buy a girl secondhand flowers. The last girl may have enjoyed them, but your girl will just think of them as used up.”
So what does this have to do with investing? Recently, I was talking to someone about a company that was about to go public and they were lamenting the large discount to public comps implied by the bankers’ pricing guidance. Of course, IPO investors crave a first day pop, but the discount seemed to be bigger than they had seen lately. We wondered aloud why that might be? Lackluster aftermarket performance of last year’s IPOs? Higher perceived risk in the economy? Idiosyncratic risks of this company? And so on. This person also talked about how the bankers remarked that some private companies were pretty close to being overvalued relative to public companies, creating an inversion that would make any liquidity efforts tough.
As I crank up some posts (and other cool content) over the coming weeks, I thought I’d take the dog days of summer to repost some of my favorite stuff from years past.
I was inspired to look back to the story of Captain Asoh by Bessemer’s recent updates to its anti-portfolio. I’ve always loved the honesty of BVP’s reflections and admire them for being so vulnerable in what can be such an ego-driven business. Warren Buffett often says that there are no called strikes in investing, referring to the practice of a batter letting an unpalatable and often inconsequential pitch go by. But in VC, our called strikes can feel like a called third strike. With the bases loaded. In the last inning. Of the World Series.
Brad Feld just gave me a shout out in his fine blog and I was touched because he has always been an inspiration to me. In the early days, there were a handful of folks who got me really excited about blogging to bring transparency to the voodoo that we do. There are too many people to acknowledge, but a few stand out: Josh Kopelman with his razor sharp insights was my first inspiration, David Hornik was saying some really thoughtful stuff with a really distinctive voice, Paul Kedrosky was using data in some really interesting ways, and Brad was bringing a real authenticity, in addition to intelligence, to his writing.
Indeed, authenticity became one of my critical evaluation factors during those heady days a decade ago. After all, entrepreneurs were changing and so were venture capitalists. Coming out of the Great Internet Bubble, founders and VCs were demanding a different level of accountability of each other. Groups like First Round were talking about venture capital as a product with the entrepreneur as customer and the phrase “founder friendly” became almost cliché because every VC firm had adopted this catchphrase as part of their values. Underlying it all, however, was a tacit acknowledgment that venture capital is a multi-period interaction; in Silicon Valley, “you’re never on your way up or down, you’re always coming around.” In a world like that, inauthenticity can be an albatross, imposing costs that can be significant.
Here’s a fundraising tip: “you’ll be sorry you missed this” has never once worked as a tactic to get me – or most LPs for that matter – interested in a fund. Neither has telling me, “if you miss this fund you’ll never be able to get into future funds.”
Such bluster usually earns one-way ticket to my “managers” folder, a place that is alphabetically and existentially distinct from my “interesting managers” folder. After all, if you throw around the bombast with me, it makes me wonder: how do you treat entrepreneurs? I’m your shareholder; they’re your customers.