Venture Capital

Today I'm musing on venture capital, the lifeblood of businesses like mine. I used to be a venture capitalist (twice, actually). And I wonder a couple of things:

1. I wonder if venture capital returns will ever again reach the dizzying levels of the 90s. Part of me wants to believe that venture capital is largely about finding and nurturing innovation, and innnovation is never really a scarce resource. But while it is not scarce, it is certainly elusive... and yet these firms are still operating in the same ways that they have for years (at least most of them are).

Their response to immense change in the tech marketplace is nearly always the same: they switch sectors. "_______ is dead," they proclaim, then proceed down a path that is not nearly as bold as that prediction. "_______ is the new ______," is the clever response.

Here's what I think: finding innovation, in any time of capital glut, will require... ummm, innovation. I'm anxiously awaiting the firm that responds to this massively changed marketplace with a significantly changed model (Y Combinator, maybe?). As a CEO, I responded to changes in marketplace with real changes at my company. VCs should apply to themselves the same logic they encourage people like me to employ.

I still believe in venture capital (in fact, I cannot imagine trying to grow most companies without it); I just wonder if these folks are really going to thrive if they don't apply basic business logic to themselves.

2. I wonder if the advent of "rock star" VCs has created a monster. I wonder, frankly, if VCs haven't gotten too big for their britches. I'm old enough to remember when a venture capitalist invested in a company and then gave the team respect. I was with a company a long time ago, Central Point Software, that was a Hummer Winblad company. Ann Winblad and John Hummer gave the company advice and counsel and tried to impart what they knew, but they never assumed that they held all answers (and in fact assumed that the company knew a lot more about the marketplace in which it competed than they did). Now, too often at too many companies, the investors act like the management team is a bunch of dopes.

Look: I was a Senior VP at Oracle, and I've been a successful CEO before. My COO at Levanta was a VP at SGI when SGI was somebody, and has been at several very nice startups since. My VP of Engineering was successful at places like Apple and IBM. You might have heard of those companies. You can think we're right or you can think we're wrong, but we're not novices and we're not stupid. And our company was pretty remarkable, but not unprecedented. Lots and lots of CEOs and senior people at startups have very nice prior experience. They've done stuff with their lives that has mattered. Enough with the posturing, then. Give us the respect we have absolutely earned.