4 ms·

So much of VC funding is just about being in the right place at the right time. A lot of these guys seem like geniuses because of winning bets, but that's beca

So much of VC funding is just about being in the right place at the right time. A lot of these guys seem like geniuses because of winning bets, but that's because nobody talks about their flops. It's entertaining watching all of the VCs who have made a major bet on crypto, who are now doubling down on what looks more like an overheated casino losing steam. Fred Wilson might end up watching the tide go out on this one. Maybe people will finally remember that he was part of Twitter's clueless board, the one that didn't think it was important to buy Instagram?

StavrosK 8y ago
Maybe it wasn't important at the time. Instagram only became wildly popular after they introduced stories, which they didn't have at the time, did they?
- rrdharan 8y ago
  Instagram passed Twitter's DAU count well before the introduction of stories. https://www.yahoo.com/news/instagram-hits-300-million-users-passes-twitter-211203097.html https://www.yahoo.com/news/instagram-hits-300-million-users-... Stories is what they introduced to kill Snapchat's growth.
  - amasad 8y ago
    I think OP's larger point stands -- it might've played our differently had Twitter acquired instagram. Maybe they would've done what they did with Vine.
taylorwc 8y ago
This comment could benefit from a little more research. Sure, being a successful venture investor is about being in the right place at the right time, but USV is one of the best out there. Fred Wilson has written extensively about his flops and misses (they passed repeatedly on Airbnb for example), and has also written extensively about the dynamics of investing across risky-enough ideas that there are a lot of failures in a successful portfolio. Sure, Twitter has made a lot of ridiculous decisions, but as an early-stage investment, it returned the fund.
jasode 8y ago
>, but that's because nobody talks about their flops. The KPCB flops in "green tech, clean energy, etc" were widely reported.[1] Also, the VC firm DFJ and Tim Draper in particular were laughingstocks for investing in the Theranos scam because they didn't do proper due diligence. >Fred Wilson [...] was part of Twitter's clueless board, the one that didn't think it was important to buy Instagram? Is there a source that says it was Fred Wilson who blocked the acquisition of Instagram? The story I read was that both Jack Dorsey of Twitter and Mark Zuckerberg of Facebook were courting Instagram at the same time. Jack offered ~$500 million (all in Twitter stock). Mark offered ~$736 million ($300 million of that in cash). Basically, Facebook had the more enticing offer. In 2012, Twitter wasn't generating any profits and didn't have any excess money in the bank to include any cash component to their bid. On the other hand, Facebook was already profitable for 3 years and had ~$4 billion in cash in the bank even before the IPO in May 2012. Having a stock that was backed by real profits and a war chest of cash lets Facebook make more attractive acquisition offers. [1] https://www.google.com/search?q=kpcb+green+tech+lost+money https://www.google.com/search?q=kpcb+green+tech+lost+money
- jamestimmins 8y ago
  Do you have any sources for the DFJ/Theranos backlash? I've wondered if that would hit them, so I'd love to read more if you're aware of any good journalism on that specific investment by DFJ.
wellboy 8y ago
So you're saying after Bitcoin has gone up 300% and crashed equally 15 times, exactly now this won't happen anymore?
mathattack 8y ago
A VC is willing to take 20 flops to get one breakout bet.
- WorldMaker 8y ago
  Sure, but when vetting a baseball player you check the batting average; when handicapping a horse you check the races they've lost for conditions they can't handle as well; when comparing Halo player stats you check the kill/death ratio. Vetting a VC only by wins is missing quite a bit of information, presumably. It can at the very least tell you about potential blind spots and some idea how much actual skill may be involved versus luck or even "a broken clock is right twice a day" scattershot portfolios.
  - ccostes 8y ago
    I think the analogy breaks down somewhat due to the relative scale of their misses vs. hits. A batter can only get so many runs with one hit, but a good investment can make all of the misses look like rounding errors.
    - WorldMaker 8y ago
      Then maybe you are unfamiliar with my analogies? A batter can help win a series, especially the World Series, and make all their losses look uninteresting. But you still are going to at least check their batting average if you are looking to trade them. A horse can win a major stakes race, such as the Kentucky Derby, and bring in a massive purse (and eventual stud rights) that makes any losses look like warmup rounds. But before heading to the betting window you are still going to check if they've lost any big rainy races if it's raining on Derby Day. A Halo player can win a championship or tournament and no one will question any losses they've had. But you still are going to want some idea of their kill/death efficiency before scouting them for your team in the next deathmatch.
  - aaavl2821 8y ago
    And batting .300 is considered good -- high rate of failure doesn't necessarily mean something is bad. The metric VCs are judged on is financial return. If they invest in one company that gets them 200x return and 20 that lost all money, they've still done well at their job
ttul 8y ago
My take is that, while there is skill involved in picking venture investments, success in the field has more to do with social skills, status, and wealth than it does with skill. Only the richest have access to the deal flow of the best entrepreneurs.
aaavl2821 8y ago
The success metric in VC is financial return (IRR or cash proceeds / cash invested). % of investments that succeed or fail is not really that important. The VC model is based on finding a few really big investments at the cost of many that don't work out. Something like 60% of VC returns come from less than 10% of deals
wellboy 8y ago
Isn't is the best time to invest again in crypto when it's at the yearly all time low?
fredwilson 8y ago
So much? All of it

StavrosK 8y ago

Maybe it wasn't important at the time. Instagram only became wildly popular after they introduced stories, which they didn't have at the time, did they?

rrdharan 8y ago
Instagram passed Twitter's DAU count well before the introduction of stories. https://www.yahoo.com/news/instagram-hits-300-million-users-passes-twitter-211203097.html https://www.yahoo.com/news/instagram-hits-300-million-users-... Stories is what they introduced to kill Snapchat's growth.
- amasad 8y ago
  I think OP's larger point stands -- it might've played our differently had Twitter acquired instagram. Maybe they would've done what they did with Vine.

taylorwc 8y ago

This comment could benefit from a little more research. Sure, being a successful venture investor is about being in the right place at the right time, but USV is one of the best out there. Fred Wilson has written extensively about his flops and misses (they passed repeatedly on Airbnb for example), and has also written extensively about the dynamics of investing across risky-enough ideas that there are a lot of failures in a successful portfolio. Sure, Twitter has made a lot of ridiculous decisions, but as an early-stage investment, it returned the fund.

jasode 8y ago

>, but that's because nobody talks about their flops. The KPCB flops in "green tech, clean energy, etc" were widely reported.[1] Also, the VC firm DFJ and Tim Draper in particular were laughingstocks for investing in the Theranos scam because they didn't do proper due diligence. >Fred Wilson [...] was part of Twitter's clueless board, the one that didn't think it was important to buy Instagram? Is there a source that says it was Fred Wilson who blocked the acquisition of Instagram? The story I read was that both Jack Dorsey of Twitter and Mark Zuckerberg of Facebook were courting Instagram at the same time. Jack offered ~$500 million (all in Twitter stock). Mark offered ~$736 million ($300 million of that in cash). Basically, Facebook had the more enticing offer. In 2012, Twitter wasn't generating any profits and didn't have any excess money in the bank to include any cash component to their bid. On the other hand, Facebook was already profitable for 3 years and had ~$4 billion in cash in the bank even before the IPO in May 2012. Having a stock that was backed by real profits and a war chest of cash lets Facebook make more attractive acquisition offers. [1] https://www.google.com/search?q=kpcb+green+tech+lost+money https://www.google.com/search?q=kpcb+green+tech+lost+money

jamestimmins 8y ago
Do you have any sources for the DFJ/Theranos backlash? I've wondered if that would hit them, so I'd love to read more if you're aware of any good journalism on that specific investment by DFJ.

wellboy 8y ago

So you're saying after Bitcoin has gone up 300% and crashed equally 15 times, exactly now this won't happen anymore?

mathattack 8y ago

A VC is willing to take 20 flops to get one breakout bet.

WorldMaker 8y ago
Sure, but when vetting a baseball player you check the batting average; when handicapping a horse you check the races they've lost for conditions they can't handle as well; when comparing Halo player stats you check the kill/death ratio. Vetting a VC only by wins is missing quite a bit of information, presumably. It can at the very least tell you about potential blind spots and some idea how much actual skill may be involved versus luck or even "a broken clock is right twice a day" scattershot portfolios.
- ccostes 8y ago
  I think the analogy breaks down somewhat due to the relative scale of their misses vs. hits. A batter can only get so many runs with one hit, but a good investment can make all of the misses look like rounding errors.
  - WorldMaker 8y ago
    Then maybe you are unfamiliar with my analogies? A batter can help win a series, especially the World Series, and make all their losses look uninteresting. But you still are going to at least check their batting average if you are looking to trade them. A horse can win a major stakes race, such as the Kentucky Derby, and bring in a massive purse (and eventual stud rights) that makes any losses look like warmup rounds. But before heading to the betting window you are still going to check if they've lost any big rainy races if it's raining on Derby Day. A Halo player can win a championship or tournament and no one will question any losses they've had. But you still are going to want some idea of their kill/death efficiency before scouting them for your team in the next deathmatch.
- aaavl2821 8y ago
  And batting .300 is considered good -- high rate of failure doesn't necessarily mean something is bad. The metric VCs are judged on is financial return. If they invest in one company that gets them 200x return and 20 that lost all money, they've still done well at their job

ttul 8y ago

My take is that, while there is skill involved in picking venture investments, success in the field has more to do with social skills, status, and wealth than it does with skill. Only the richest have access to the deal flow of the best entrepreneurs.

aaavl2821 8y ago

The success metric in VC is financial return (IRR or cash proceeds / cash invested). % of investments that succeed or fail is not really that important. The VC model is based on finding a few really big investments at the cost of many that don't work out. Something like 60% of VC returns come from less than 10% of deals

wellboy 8y ago

Isn't is the best time to invest again in crypto when it's at the yearly all time low?

fredwilson 8y ago

So much? All of it