Venture Extinction Is Upon Us

Some days I look at people and feel pity, with as much pity as Captain Paul Watson from the Sea Shepherd felt when many years ago he looked straight into the eye of one of the whales he was trying to rescue, while a harpoon flew overhead. He felt pity for humanity. The same pity I feel for people who take the innovations business for an easy ride and kill it by sucking it dry.

Ways to work Silicon Valley
In my thirty years of the emerging business of technology I have seen product marketing managers at one of the fastest-growing software companies pick products that sell themselves, and turn them into “geniuses”. I have seen salespeople at the same company make tons of easy money for the same reason, only for them later in their career be faced with a more sober reality. I have seen people in another Silicon Valley bellwether hop from one division to another, never to be confronted with the outcome of their guidance in each. I have seen people hop from one Silicon Valley company to another, only to pick up valuable equity in each along the way. I have seen people make friends with pivotal “gatekeepers”, only to become employed for long enough to get a piece of equity their merit would have never earned them. I have seen those gatekeepers provide endless references to each other, securing them cushy positions through those who get in first.

Too many times have I seen investors loan-shark companies and dilute unsuspecting entrepreneurs into powerless shareholders. I found out too late that an angel investor employed, traveled with, and otherwise befriended the wife of the company founder, who I was going to straighten out because of his consistent underperformance, false promises and blatant lies. I should have known when I heard the angel was previously dating a friend’s best friend, and allegedly forcing her to break up their relationship. I have seen entrepreneurs pitch to “living-dead” VC firms, crushing their dreams. I have seen Venture Capitalists straight out of business school force CEOs to adopt their misguided agendas or otherwise be sandwiched and squeezed out between investor and founding ownerships. I have seen VC artificially segment the industry, putting off outliers of innovation. I have seen VCs lie about the value I, not they created. I have seen VCs work the books so their investment thesis can never be held to account. I have seen Limited Partners play nice with Venture Capitalists knowing that someday they too will join the club that slides them into a much more lucrative salary.

I have seen it all. The foundation of the venture business is a bigger mess than I could ever attempt to describe here, and much more systemic than temporal.

Proud to be difficult and different
For many of the people described above, I am difficult to work with. Because I simply refuse to erode what I stand for by playing games (that sadly have become so popular). My passion is to build socio-economic value that touches real people and as a result, builds attractive monetization (in that order). I care a lot about money, but only when I feel my participation deserves it. I do what I say and I say what I do. And every product strategy or company I built became an outlier as a result.

To do so one must challenge everything, including oneself.

The hard part is to walk away from investors and entrepreneurs. I have halted an investment at the last hour from a very wealthy family I have known for more than ten years after I just discovered a string of misconduct and violations of fiduciary obligations of previous board members. The company would have been a blowout success under my leadership. I also declined an investment from another angel and a friend of the lead investor, after I found out that his reasons for investing where not in line with the business strategy I had laid out and executed on with great success as the CEO. In both cases, the original founding board could not see beyond some quick money and are now suffering from significant dilution in ownership and performance, if they are to survive. I challenged my own position from the decisions I made, a clearly different strategy from the self-serving and pleasing route most in our business would have taken.

Technology innovation has become the Wild West who’s easy days have passed and where gold no longer simply washes ashore. We are now stuck with an overhang of gold diggers whose verifiable merit to locate gold hidden a little deeper has become inadequate. The actions of many in our industry have been too self-serving, and therefore by default unsustainable.

Doing the right thing is more important than doing what is most popular. Yet doing what is right conserves a unique species we all rely on.

Conservation of a unique species
Whaling has been banned by most governments, but the Japanese keep hunting whales under the “research” exemption and continue to threaten the important role of an endangered species in the ecosystem. The wrong thing to do that will impact us all.

The endangered species in the technology industry are the real entrepreneurs who with great ideas and with diligence and persistence, together with experienced business managers and visionary investors have the integrity to produce groundbreaking socio-economic value and thus fantastic investment returns. Many VC investors, too busy protecting their own interests and busy concocting elaborate diversification strategies, have lost their ability to recognize and attract those entrepreneurs. And a reduction of VC investors will not fix its dysfunctional investment thesis, and will not cure its systemic disease in which the improper deployment of risk of micro Private Equity has displaced and dislodged venture capital. And don’t be fooled again, VC spinning their wheels just like the last ten years with the improper risk deployed will not lead to the recovery of public trust the sector needs.

Circumvention of government regulation proves in whaling and venture capital that government regulation is not the panacea. The only way to prevent the extinction of a unique species is to provide an incentive (or de-incentive) for supply and demand, which in technology innovation can be driven directly by the investment discipline of knowledgable Limited Partners.

So, the conservation of groundbreaking innovation is solely in the hands of Limited Partners, who if they open their eyes and get to know their ecosystem still have time to correct course and can continue to reap generous rewards from the massive opportunity in technology innovation that lies ahead.

On most days I still believe I can help Limited Partners fix venture (although some people have discouraged me), just like Paul Watson believes he can still save the whales. I remain optimistic we can save ourselves, but we are running out of precious time.

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