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Something that gets missed out a lot from the conversations about VC firms is the problem of generating deal flow. Good VC firms (and great investors) need to n
by areoform 8y ago
Something that gets missed out a lot from the conversations about VC firms is the problem of generating deal flow. Good VC firms (and great investors) need to not only know how to invest and support a great company but also how to get them through the door. I suspect it's why socially adept people thrive in VC so much - they can quickly learn how to create a spider's web around them and listen in for deals.
For most of its life, KPCB had a web around the firm. Great companies would come in and pitch themselves. So, for the most part, the job was to "only" pick whom to invest in (picking is just as hard!). As an extreme outsider, it seems that their operating rubric is so focused on this that they've lost the institutional capacity to spin new webs of their own. They are reliant on outsized personalities delivering the win rather than the institution itself pulling it in.
That's a tricky spot for the firm to be in. And it's a tricker spot to navigate out of. They'll have to rebuild institutional knowledge and prospect like other firms now; a mindset shift that could be hard for most veterans to get into as early on this would have been a negative signal in their careers and for their firm. Now, that it's a requirement; it has to be a tough sell to everyone involved (note: I don't know anyone at the firm. I have simply seen this pattern play out a few times).
They can hire fantastic new investors who know how to hunt, but will the firm be able to listen to them? This is a firm where getting rid of nametags was noteworthy enough to make it into Fortune; imagine how hard a sell getting down into the mud must be.
FWIW, such firms eventually recover. Eventually. They're just too big not to. But it is a painful road until that point. I wish the best of luck to them.
- jiveturkey 8y ago> For most of its life, KPCB had a web around the firm. [... Then they didn't.] Was this an organic thing of their own doing, or was this due to disruptors, like A16Z?
- seem_2211 8y agoThis is a great point - to some degree this explains the power law in VC - founders hustle hard to get in front of Sequoia / A16Z / Benchmark etc, whereas you can stumble on other VC sites and see a bunch of logos but nothing impressive. I've been in SF for 3 years now and haven't really heard anything that impressive about Kleiner, but looking at Crunchbase, they've led the A for Rippling, the C for Plaid, the D round for Intercom, the B round for Figma, the E round for Peleton. They have a bunch of other impressive logos that they've also managed to lock in. To your point about the web - they clearly still have it. Yes, they're out of the loop and aren't getting the early stage deal flow that they used to (to the benefit of many others), but they clearly have a deep moat still and can get an ok return from that.
- heymijo 8y agoI learned from the article that KP's problem was that their firm bifurcated. They had a growth fund led by Mary Meeker which was likely responsible for a number of those impressive logos you listed. Meeker's success with the growth fund happened as KP's early stage venture fund went into decline even though it was the original and the stalwart for decades. The article mentioned that Meeker left last year with her entire team to start her own fund and one of KP's biggest problems has been the inability to keep its own talent. So "they clearly still have it" is likely in reference to people who have left with their 'web' and KP may not have anything.
- seem_2211 8y agoExtremely good point
- mathattack 8y agoThe point of the article is they’re returning 2X on their recent funds. Their competitors who got in earlier are returning 25X.
- seem_2211 8y agoWhich is great from an ego point of view, but also not that important necessarily - I think Matt Levine's point about hedge fund is largely true for VC - the point of being successful at running a hedge fund is keeping your job for a long time, rather than being exceptional.
- deleted 8y ago[deleted]
- this2shallPass 8y agoThis is an interesting point. One question. How does one distinguish between the institution and the people that make up that institution?
- scottlocklin 8y agoThe other thing that gets left out: lots of them are lottery winners who think they're Ed Thorp. Kleiner is a great example of this.