What makes a good VC? (Research project)
Hey everyone! Hope you're having a fine Saturday. I am working on a stats project and have decided to do it on what makes a successful VC. I need to come up with both quantitative and binary qualitative variables. Here's what I've got so far:
Quantitative: -total $ amount raised in all funds -total $ earned from all liquidity events from portfolio companies -$ valuation of remaining [currently] illiquid portfolio companies
Qualitative -STEM background (y/n) -MBA (y/n) -Former entrepreneur (y/n) -Finance background (y/n)
Constructed Variables -% return on investments
What else would you all add to the list? If you have suggestions where to find any of this data that would also be very helpful, I don't anticipate that being a straightforward task. Thanks!
Timing of investment. What worked in the 90's/2000's may not work now. 5 years ago Apps were in vogue, now it's AI focused companies.
Timing is the most underrated aspect of investing/success. Too early or too late and you lose creditability.
Okay, so how do you think the best way to quantify/qualify that would be? I could set an arbitrary date for "relevant/hot" and then split investments into y/n categories. Or would it be better to measure them being "early" or "on time", instead of "on time" or "not on time"?
Sales and marketing experience. Countless startups fail or disappoint because they have clever technology but no idea how to sell it, and/or no idea how much (work, $, time) it is going to cost them to acquire and retain each customer. Shortsighted finance and engineering people tend to look down a little on the sales and marketing functions, but they are critically important, especially in the early days when the product is (usually) ok but not great.
Guy Kawasaki would certainly agree with you. https://guykawasaki.com/the_venture_cap/
I have no idea why you got MS for that post, other than for what could be read as a pejorative tone about "shortsighted finance and engineering people."
Non-technical operating roles inside startups are critical, especially the first half dozen hires. Typically you see the CEO running around wearing too many hats at once. Senior Product Manager, Sales Manager, Marketing Manager, Operations Manager, and BD Lead, all at once.
This means that everything gets done passably at best (which you'd be amazed to see how far that will take you in seed and Series A land) in a haphazard style of 'whatever's squeaking the loudest gets greased now'.
Smart, talented operators who know pricing, marketing, customer success, and sales ops are some of the most critical components to the rapid growth that everyone dreams of after raising a seed round. Win with those, and all of a sudden you start sailing past your metrics three times earlier than you thought. Then your successive fundraises become an exercise in filtering out investors, not wooing them to even take the meeting.
Wish I wasn't out of SBs, this guy gets it.
ability to take a tidal wide of liquidity from central banks and invest it in companies that would otherwise never receive a dime of funding, and then take them public at exorbitant valuations with no chance of profitability.
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