Venture: 20 Years Later

Mark Suster published a post a few days ago that’s worth reading in full. The main point he’s making is that some fundamental changes have taken place in venture capital over the past 20 years.

For example, although the amount of money being raised by venture funds is now at levels last seen in 1999, we are far better informed on the potential and limitations of internet businesses than we were 20 years ago — and so the size of the funds being deployed is not, of itself, an indicator of a 1999-style bubble. I enjoyed Mark’s post and think that, beyond the macro discussion, there are also some great facts in there (for example, Amazon raised only $9m before going public, while the still-private Uber had at that point raised $19.9bn).

But while I enjoyed the post, I’ve been having a very different thought about venture recently — which is that in other ways not very much has changed at all. I’m currently reading eBoys (a book about the early days of Benchmark Capital) and the world it describes is surprisingly familiar.

For example, the way companies get introduced to investors has basically not changed, the way entrepreneurs pitch for investment looks much the same, and the manner in which decisions are taken is almost identical (the scale is 1–10 and cowards vote 5).

Why is this? Some things about the process of raising venture don’t work that well and could be improved. For example, there are various initiatives that are trying to change the way entrepreneurs meet investors, as the reliance on warm intros leads to fewer opportunities for certain companies — in particular those led by female teams.

Other things just make sense, so why change them. I heard Marc Andreessen (speaking on the Zero to IPO podcast) recently describe the process of asking people to put together a pitch deck as a “sort of test” — and I agree with that. If you can’t build a pitch deck and sell me as an investor the story of your business, how do I trust that you can sell your idea to either the new hires you’ll need to join the company or to the customers you’ll need to make your business a success?

So although I agree with the point that some important things have moved on in 20 years, from an entrepreneur’s point of view, my guess is that venture functions much the same now as it did back then.

Last thing to say is that for anyone interested in learning more about venture, eBoys is a great read. It feels like a venture version of Barbarians at the Gate, which remains one of my all-time favourite books.