Ensight – Jeremy Wright

Rick Segal pointed out a video today. It’s some of the fathers of the Venture Capital industry, and it is absolutely freaking fascinating.

Rick recommends you start at the 1:16 mark (it’s 2 hours long). I recommend that if you’re looking at getting funding, that you start the beginning. Open your mind. Let it challenge your assumptions. Take notes. Then look at your business afterwards and ask yourself how far off track you’ve gotten.

Here are some of my notes and thoughts. I didn’t think to start taking notes until about the 1 hour mark, but I’ll be going back and rewatching the first hour. It’s a lot of time, but it’s fantastically golden stuff.

Builders vs Promoters

When asked why the bubble happened (according to the VC’s in the room, the late 90s bubble wasn’t the first, nor will it be the last… and bubbles are a part of any cycle so they aren’t necessarily bad, but they can be… Anyways), this VC responded that he believed it was because of the difference between builders and promoters.

He said builders want to see a company succeed. Promoters want a quick buck. Builders look at the management team, promoters look at the stock market to see if they can IPO the company (this was in 2002, today promoters would look at the acquisitions market).

He said it was these promoters that were causing unrealistic funding models. Builders didn’t mind IPO’ing a company, but would only do so if they felt they could generate returns for the public of 20%+. Promoters don’t look beyond the day of the IPO.

Entrepreneurs are Guilty Too

While he was talking, it struck me that this mentality has totally invaded the entrepreneurial world. At a recent lunch in Vancouver, I was sitting with a bunch of Web 2.0y types, all with companies in some stage of funding. And the predominant conversation was:

1. How to get money
2. How to manage that money
3. How to exit

Now, I will say that seeing #2 there was heartening. It was good to see that the last bubble at least taught us not to spend millions on Aeron chairs. However, this whole perception of selling the company being the endpoint is robbing our industry of history, of leaders and of character. It kind of makes me think of a one-night stand. You find the VC, have a good time, then dump the company. You leave your partners, employees and relationships totally in the dust.

This is so not what I’m about. I’d much rather transform an industry than just be another market tick in its history.

How to Change the Funding Industry

This thought line totally brought me back to what Rick Segal was asking a few months ago. His thoughts, and mine, have stuck with me because I’m a huge fan of disruption, especially when it does an industry good

So I guess the question is, how do we shift the perception of VC’s and entrepreneurs so that we’re not only making money (nothing wrong with that), so that we’re not only prepped for an exit (again, nothing wrong with that), but so that we are looking forward to transforming our industry and building viable businesses.

How many entrepreneurs would start a company if they knew it was a 5-10 year endeavor? My guess is far fewer. And that’s a good thing. When asked if you have an exit strategy, to you have the guts to say “sure, but I’d rather transform my industry”? After all, if you’re an entrepreneur looking to do that, you probably don’t want to partner with a VC just looking to make a quick buck.

How many entrepreneurs would go after funding if they knew they had to go through a 3-6 month bootcamp first?

If I have more thoughts from the beginnings of the video, I’ll put them in at the end. Thanks to Rick for stirring more great thought, and to the Computer History Museum for putting the video up