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Part III I move on to two more issues: (1) The Hay Stack. Apparently a venture firm can have a polished Web site put up for them, get some publicity by writi

Part III I move on to two more issues: (1) The Hay Stack. Apparently a venture firm can have a polished Web site put up for them, get some publicity by writing columns in the tech media, and then, presto, get in their e-mail a huge stream of contacts from entrepreneurs. Maybe they will fairly quickly get 2000 such contacts a year. So, such a VC gets a huge stack of hay in which they are looking for golden needles. Here's my guess at where the VCs are making a huge mistake: They are trying to learn from the hay. They start to conclude that the hay is 'representative' of 'what is going on in information technology', read a few hundred such contacts, and conclude that they are developing "deep domain knowledge". They start to believe that the best possible investments are from the better looking stalks of hay. A huge problem here is that they just have no other very good criteria. In strong contrast, the guys who did the physics for the Navy's version of GPS had physics going for them; they were correct, knew they were correct, knew just why they were correct, and could convince Navy technical problem sponsors that beyond any doubt they were correct, feasible, practical, realistic, etc. No important role for guessing or intuition. Not a lot of doubt. Not much risk. And whatever else was in whatever stack of hay was just irrelevant. And revolutionize military strategy. As an explanation there is: "It is still an unending source of surprise for me how a few scribbles on a blackboard or on a piece of paper can change the course of human affairs." Stanislaw Ulam VCs and their limited partners might want to start to listen up. Especially from Ulam: On its first try, his second contribution yielded the energy of 15 million tons of TNT. On its first try, his first contribution yielded about 15 thousand tons. Before that he had a nice result in probability the French probabilist Le Cam called 'tightness' with a nice presentation in Billingsley's 'Convergence of Probability Measures'. (2) The Research I can believe that the VCs don't receive many promising proposals based on research. One reason is that not many talented, well trained researchers cross over to become entrepreneurs. A second reason is, researchers who contact VCs get such a poor reception that researchers have been discouraged. So, VCs don't see much promising research in their incoming e-mail. We might also anticipate that a VC has described to their limited partners what projects they will fund, and research on paper is NOT included! There have long been plenty of US DoD technical problem sponsors who were 'innovative' with astoundingly high batting averages. Somehow VCs seem to have ignored such work. Net, looking for an 'innovative' angel or VC looks like looking for hen's teeth. Final remark: What to do about the situation? For me, as an entrepreneur, just be successful, thus, solve the problem for myself, and let others draw what they will from my example. More generally, I don't know what VCs would say to what limited partners to make a significant difference, and then I don't know how they would get good projects based on research. So for now for me, the flip side of the problem is an opportunity.

diminium 14y ago
"That is, as far as I can tell, one could count on one hand all the 'information technology' equity investors in the US who would be at all "innovative". " What do you think some of those are? Yes, they are rare and getting funded by one probably has better odds than hitting the lotto but who are they?
- ten_fingers 14y ago
  The VC team with the best technical qualifications and about the best background in research relevant to 'information technology' is likely YC. Alas, maybe now they invest only via their two annual 'incubator classes'. About the best I can suggest is to try some people who: (1) have shown some strong interest in being thoughtful (and not wacko) and least independent and hopefully innovative and (2) have been successful and, thus, have some confidence to go 'outside the lines' or the herd or whatever. If they are VCs with money from limited partners, then likely they need already to have been quite successful to keep their limited partners from complaining about going 'outside the lines'. If they are angel investors, then they need a good supply of their own money and a lot of experience and success in investing. I would avoid any investor with a lot of definite opinions: A good investor needs to appreciate and accept that they can't know more than all the entrepreneurs and for a particular, good project can't know more about that project than that entrepreneur so just MUST shut the f^^k up, turn off the electronics, listen up, and think. It's the entrepreneur who is supposed to be cutting the new trail at the frontier and the investor who is supposed to be following along behind. In particular I would set aside any investor with a long list of Dos and Don'ts on how to give a technical presentation. E.g., here we have a VC who majored in history, got an MBA, and joined a startup in marketing and then became a VC. And there we have an entrepreneur who got a technical Bachelor's, Master's, and Ph.D., taught undergraduate courses as a graduate student, gave a successful oral defense of his research, presented research at respected conferences, sat in classes for years listening to some of the brightest and most accomplished people ever to live, taught in classes for years, etc. So, suddenly this VC tells this entrepreneur that they don't know how to present technical material and needs this new, chopped up, watered down, made up, deliberately brain-dead, novel format. Bummer. As bad as that is, think ahead to the VC being on the Board and that entrepreneur presenting to the Board a new project, with some research content, for improving the 'secret sauce', the ad targeting, the data collection, the system security, performance, or reliability, etc. Before 90 seconds into the presentation, the VC is connected Zynga on his iPhone. Bummer. So: (1) VC Brad Feld may be willing and able to be innovative. He likes to say that he invests only in 'themes' or some such, but he may conclude that your project fits one of his themes and may bend a theme otherwise. (2) Similarly for VC Fred Wilson. (3) A-H has tried to be at least somewhat flexible in what they do. They've raised a lot of money and apparently recently reported gains from their first fund to their limited partners. So with happy limited partners and lots of 'dry powder', A-H may take a relatively serious look at your project. (4) Try VC Fred Destin at Atlas -- hit him over the head with something to see if he is just asleep or really dead. If he wakes up, then there is a chance that he will at least start actually thinking. He's been successful in business but been a VC for only a short time and, thus, has a chance of being smart without falling in with the VC herd behavior. (5) Try Andy Fillat at Leapfrog. He can pay attention and be both insightful and forthcoming. (6) History suggests that angel Andy Bechtolsheim can quickly see a diamond in the rough and write a check. (7) Of course the same for angel Ron Conway (who has a son at A-H). (8) One of the brightest, best qualified, wealthy people in the country is James Simons. If you can get to him, do so. Maybe claim that you need some help with S. Chern's notes on differentiable manifolds or want to teach differential geometry to 10th graders! Otherwise I would look for investors with rock solid technical backgrounds and accomplishments with solid experience in business with usually a Ph.D., at least in computer science, better still in theoretical parts of electronic engineering, still better in applied math. Might look for profs at Stanford, CMU, or MIT.

diminium 14y ago

"That is, as far as I can tell, one could count on one hand all the 'information technology' equity investors in the US who would be at all "innovative". " What do you think some of those are? Yes, they are rare and getting funded by one probably has better odds than hitting the lotto but who are they?

ten_fingers 14y ago
The VC team with the best technical qualifications and about the best background in research relevant to 'information technology' is likely YC. Alas, maybe now they invest only via their two annual 'incubator classes'. About the best I can suggest is to try some people who: (1) have shown some strong interest in being thoughtful (and not wacko) and least independent and hopefully innovative and (2) have been successful and, thus, have some confidence to go 'outside the lines' or the herd or whatever. If they are VCs with money from limited partners, then likely they need already to have been quite successful to keep their limited partners from complaining about going 'outside the lines'. If they are angel investors, then they need a good supply of their own money and a lot of experience and success in investing. I would avoid any investor with a lot of definite opinions: A good investor needs to appreciate and accept that they can't know more than all the entrepreneurs and for a particular, good project can't know more about that project than that entrepreneur so just MUST shut the f^^k up, turn off the electronics, listen up, and think. It's the entrepreneur who is supposed to be cutting the new trail at the frontier and the investor who is supposed to be following along behind. In particular I would set aside any investor with a long list of Dos and Don'ts on how to give a technical presentation. E.g., here we have a VC who majored in history, got an MBA, and joined a startup in marketing and then became a VC. And there we have an entrepreneur who got a technical Bachelor's, Master's, and Ph.D., taught undergraduate courses as a graduate student, gave a successful oral defense of his research, presented research at respected conferences, sat in classes for years listening to some of the brightest and most accomplished people ever to live, taught in classes for years, etc. So, suddenly this VC tells this entrepreneur that they don't know how to present technical material and needs this new, chopped up, watered down, made up, deliberately brain-dead, novel format. Bummer. As bad as that is, think ahead to the VC being on the Board and that entrepreneur presenting to the Board a new project, with some research content, for improving the 'secret sauce', the ad targeting, the data collection, the system security, performance, or reliability, etc. Before 90 seconds into the presentation, the VC is connected Zynga on his iPhone. Bummer. So: (1) VC Brad Feld may be willing and able to be innovative. He likes to say that he invests only in 'themes' or some such, but he may conclude that your project fits one of his themes and may bend a theme otherwise. (2) Similarly for VC Fred Wilson. (3) A-H has tried to be at least somewhat flexible in what they do. They've raised a lot of money and apparently recently reported gains from their first fund to their limited partners. So with happy limited partners and lots of 'dry powder', A-H may take a relatively serious look at your project. (4) Try VC Fred Destin at Atlas -- hit him over the head with something to see if he is just asleep or really dead. If he wakes up, then there is a chance that he will at least start actually thinking. He's been successful in business but been a VC for only a short time and, thus, has a chance of being smart without falling in with the VC herd behavior. (5) Try Andy Fillat at Leapfrog. He can pay attention and be both insightful and forthcoming. (6) History suggests that angel Andy Bechtolsheim can quickly see a diamond in the rough and write a check. (7) Of course the same for angel Ron Conway (who has a son at A-H). (8) One of the brightest, best qualified, wealthy people in the country is James Simons. If you can get to him, do so. Maybe claim that you need some help with S. Chern's notes on differentiable manifolds or want to teach differential geometry to 10th graders! Otherwise I would look for investors with rock solid technical backgrounds and accomplishments with solid experience in business with usually a Ph.D., at least in computer science, better still in theoretical parts of electronic engineering, still better in applied math. Might look for profs at Stanford, CMU, or MIT.