Balance

A friend commented on the Business 2.0 article about Union Square Ventures.

She said, "Your quotes were a mix of unbridled enthusiasm and measured market intelligence."

I was glad to hear that because its a balance that we have been trying to strike and its hard to get it exactly right.

On one hand, we are huge believers in the transformative power of the Internet and internet-based technologies. When you get us talking about all the interesting stuff that is happening out there, we sound like unbridled enthusiasts for sure.

On the other hand, we lived through one internet bubble and don't really want to see a second. Talk to the entrepreneurs who we are saying no to and you'll hear that we (and others in the VC business) are being too cautious.

Getting that balance right is hard.

But if you get it right, you can be a very effective investor and partner for the entrepreneurs you back. You have to believe in what you invest in and work hard to get others to believe in it too.  But you also need to be bring a dose of reality to everything you work on. Entrepreneurs are also unbridled enthusiasts and one of the main roles for an investor is to pull on the reins from time to time.

So I am happy that we came across with that balance.  It's something we work hard on and it's important.

Comments

[Mark Sigal]

First off, I agree with your thesis on applied technology. While there is plenty of hard “PhD realm” technology yet to proliferate in the market, my gut is that the industry has moved irrevocably from “supply will create its own demand” to “really good demand drives better quality, more utility bearing supply.” It’s akin to an industry making the leap from selling ingredients to building recipes and running restaurants.

And my personal interest and bias (two startups that I am seeding right now) is that you are right on in asserting that marketing, media and finance offer the richest fields of opportunity. After all, these segments lend themselves really well to interesting combinations of community, content and context – tailor made for creating applications where information arbitrage, aggregation, filtration and personalization is the “applied innovation.”

The potential fly in the ointment, however, as the article raises, and Mark Fletcher’s excellent blog post, “Stealth startups suck” does a good job of calling out (SEE http://www.wingedpig.com/archives/000207.html) is that there appears to be very little defensibility in terms of barriers to cooption or unfair advantages for startups in this realm. Other than installed base and limited user lock-in, how does a small startup grow into a big goliath, especially now that the large market players have gotten savvy how to play the game; namely, follow fast, coopt or buy one of the segment’s many competitors for undisclosed terms? Interested in your thought process, as feels like a game best tuned for small ball versus home run fest.

Best,

Mark

[dan]

Great article, Fred.

You are right on the dot -- today's VCs are
pulling in the reins on how much capital they're deciding to slosh.

And as I read earlier this week (forgot who said it), the internet revolution is more than anything a marketing one.

Good job.