DISQUS

Brian McConnell · 3 years ago

There are a lot of situations where you can run a different but complementary business using a shared team and platform. It's not always obvious which product is going to catch on, and which is going to generate high margin revenue.

I've also noticed that most entrepreneurs I know get bored running a single project, and seem to be most productive when they are managing two to three projects. So even if the side project is a flop, if it keeps the team from turning into zombies, it's a good thing.

Zaire Ngowe · 3 years ago

Venture capitalist George Zachary, who backed Odeo, doesn’t seem impressed: “As an investor, I like to see someone who is 100 percent committed to one company,” he tells the Merc.

Oh boy George. Thanks for that nugget of wisdom. Give me a break. Venture Capitalists are a dying breed. Entrepreneurs, the ones who actually "do the work", are sick of your sactimonius advice.

Just say no (to VCs) · 3 years ago

Zaire: venture capitalists may feed off of the work of others, but many entrepreneurs have no problem taking money from them. Perhaps entreprenuers should look to bootstrap or raise funding elsewhere if they don't want to deal with these unsavory characters? It would also make sense if the VCs stopped funding flawed companies run by people who are clearly hedging their bets and looking to collect a nice salary at the very least until the company anybody with common sense can see isn't going to fly.

Just say no (to VCs) · 3 years ago

By the way....

Brian: if I'm a VC, why would I want to invest a large sum of money in any company where key players (e.g. founders, management) aren't commited to making it a success and are clearly not believing in the company's chances? Anybody looking to hedge their bets and incur no personal risk presents a huge red flag. If you don't believe in your business, how can I?

If I'm an honest, ethical entrepreneur, how could I take millions of dollars of somebody else's money and work on any other project? If I can't get excited and keep from getting bored with a company, what right do I as a decent human being have to use somebody else's money for my personal gain when they are relying on me?

For what it's worth, many employment agreements prohibit employees from doing this sort of thing and if I was investing in company would make sure that the founders and management were bound by these types of restrictions. If you can't commit to giving 110% to a company that I'm investing millions of dollars in, I'll take my money to somebody that will. VCs that fail to take this approach deserve the failed startups they're likely to get.

Zaire Ngowe · 3 years ago

VC's are often times nothing more than glorified stockbrokers. They take OTHER peoples money and make bets in industries and companies they claim to know something about. If anything, they have become experts in writing contracts that extract maximum value for themselves and leave the entrepreneur with nothing. I have more respect for Angel Investors. At least they invest with their own money and put their balls on the line.

fred reynolds · 3 years ago

Zaire has an obvious ax to grind with VCs, probably an entrepreneur that never got funded. I think George Zachary is right on target. Why would an investor want to invest a significant amount of money into a company with a distracted executive? Look at someone like Rafer, he has not had success managing one company in the past. Why would I want to bet on him to manage two?

Zaire Ngowe · 3 years ago

No axe to grind Freddy, just speaking the truth. Companies (successful ones) that I have been involved with have been funded over $25M. I've seen the value add that VC's claim to add, then I've seen what they've done. NOTHING. You are part of a "portfolio". I encourage entreprenuers to deal with Angels or use their own money. You will be better off without VC's.

fred reynolds · 3 years ago

Zaire, you are missing the point of the article. This is not about a vc adding value, its about whether a vc wants to invest money in a company where the CEO is distracted by multiple ventures.
A start up needs focus, and this applies to the CEO as well.

Zaire Ngowe · 3 years ago

My point is...i just think its hillarious to extract the expert opinion of some VC to comment on founders that have two companies. What do you expect them to say? We love it? Founders and entreprenuers should do what they think extracts the most value for THEM, not some lowly VC that has its own agenda.

Brian McConnell · 3 years ago

There is a difference between being distracted by multiple ventures and having more than one product.

It is a bit hypocritical of VCs to complain about a company building the same kind of portfolio diversity into its product line that any investor builds into a portfolio.

The right degree of diversification, especially complementary projects or channel strategies, gives you a lot more options. It's not appropriate to do two completely different things, but if you have a platform that can deliver two products for the cost of developing 1.2 products, why not diversify a bit. I've found that it's often a surprise why one product clicks where another doesn't.

My more important point is that creative developers, and creative people in general, get bored easily. Structuring things so "side projects" are built into their job offers a hidden benefit by keeping them intellectually stimulated, which makes them more productive, and less likely to quit on you because they'd shoot themselves if they had to do one more QA run. And, every now and then, someone has an idea that is way better than what you set out to do (Flickr being a cardinal example of this).

connection · 3 years ago

This is exactly what I was looking for, thanks for the great information.

Alpha24Seven · 3 years ago

These types of comments from VCs are indicative of the struggle for survival they are just starting to feel. Everybody is encroaching on their territory and there's nothing they can do about it. As a hedgie, I think it's great that they've got two companies. Maybe I'll fund both of them. Peek at the new paradigm. Hedgies say yes more often and with less capital constraints, hedgies don't need a seat on the board, hedgies want the entrepreneur to have a successful exit, hedgies can engineer an exit -- who do you think owns very large positions in the acquiring companies? Hedgies can be VCs and VCs cannot be hedgies. Trust me when I tell you their days are limited....

fred reynolds · 3 years ago

Zaire, you are an idiot. Remember you are taking an investment from a vc to fund a specific business plan, and the founders have a fiduciary responsibility to their investors. If they want to do what is best for "THEM", they should fund the company THEMselves...

Zaire Ngowe · 3 years ago

Freddy, you are an even bigger idiot my friend and should put down the VC cool aid cup. If a VC wants to invest (somebody elses money), they should realize that they are riding off the ideas and sweat equity of entrepreneurs, not sit and dole out edicts as to what owners of companies can do with their time. Fred, you sound like an inexperienced, never created much of anything in your life, dolt. Put down the crack pipe.

Zaire Ngowe · 3 years ago

Alpha24Seven, you have the correct approach. Build a relationship with the entreprenuer and maybe you get to fund both ideas. Don't sit around, like our friend Freddy Reynolds, and bark orders at entrepreneuers as to what they can and cant do. Entreprenuers, especially the ones who got bent over during the last internet boom, simply despise VC's, and their better than though attitudes.

fred reynolds · 3 years ago

Actually knucklehead, (Zaire) I have become wealthy with the cooperation of some top tier vcs. This is why I have time to engage in this exchange, and defend a support group that is responsible for building technology and global leadership. I suggest when you go back to your hourly wage job dream, and read about the Silicon Valley successes at your local library.

Matt Marshall · 3 years ago

Ok, folks, I think we can stop throwing mud back and forth on whether the VC model works. I think Google shows that it is does. But I agree with the critiques, that sometimes it doesn't work. Rather than arguing in black and white terms, let's look at real examples of what is working and what isn't. Specific examples will help elevate the discussion.

Zaire Ngowe · 3 years ago

Matt, as you can see, Fred chose to sling mud first by running out of cogent arguments and getting personal by calling people he disagrees with "idiots". I think Alpha24Seven has hit the nail on the head with his post earlier. I was born and raised in Silicon Valley and have had the pleasure of being involved with over 6 startups, all with various stages of funding and success. While VC's clearly work, its debatable as to who it really works for.

Chris Wade · 3 years ago

I think Fred makes some very relevant and appropriate comments. Look at the majority of successful companies in the valley, venture funded. The comments from Alpha are ridiculous, vcs will continue to have a very important place in the company development cycle, regardless of the reduced cost barriers related to technology start ups.