Our company VoltDB just announced a new financing. The Wall Street Journal wrote about it here.

The company is doing well, and we think it can be a driver of returns in our first fund. It is still early days, but with 400+ customers and counting, they are clearly finding a groove.

I’ve received a few emails and social media snippets of congratulations. I’m grateful for that, but I feel that the praise isn’t warranted.

And, there are two reasons. First, credit goes to the management team. They are the ones creating the value and are the stars. We investors are members of the supporting cast.

Second, every VC I suspect thinks about this: am I skillful or lucky? You see, VC is a high-stakes business. As I’ve blogged before, most companies do not even return to its VCs the capital they’ve raised, and only 7 percent of companies generate a 5x+ return.

Since 1998, when I entered the VC business, I’ve seen in the industry quite a few successes. And, a huge number of absolute busts. Someone has a hot hand, and then, poor returns for a decade.

Don’t get me wrong, for I love this business. But, I think a great motivator for every VC can be this: am I good, or am I just lucky?

4 thoughts on “VoltDB

  1. My observation: Most VCs are unremarkable in performance. Provably so. Many VCs have skills but their skill sets are the same as all the other VCs, so they are commodified, i.e., “pattern recognition.” So even if “20-year-old Stanford CS with some traction” is a strong indicator of possible success, if the VC market all recognize it, returns will get bid down.

    So the next layer of conventional wisdom is to be “Contrarian-Correct” but if you are contrarian, that means your model is different from everyone else, which is hard to pull off since the majority of VCs are socially risk-averse and come from a homogeneous social background. So the VCs at the top of the pecking order can afford to take model risk (since that is a benefit of being at the top) and make contrarian bets. This is where the lucky at the top can be revealed to have been situationally lucky, by e.g. making big bets in clean tech.

    So why do I say a VC who went big into clean tech is an indicator of having been situationally lucky and not skillful, because the clean tech “boom” was a political opportunity, driven by tax and grant policy, not a business that was driven by technology, markets or what real people wanted. Like Ginger was telling people what they wanted, too.

    And that is the key to being a great VC. Not being a pattern-matching, portfolio-optimizing, political-edge seeking, morality-agnostic, passive, risk-averse financial engineer, but rather helping build businesses that create huge value for real people that you can look in the eye, and not think are just numbers, demographics, and traction metrics. Abstractions are lies.

    And who builds those businesses? Mission-driven entrepreneurs. Steve Jobs, Elon Musk, Jeff Bezos, the Google Brothers, John Mackey, Sam Walton, and others. It’s win or die trying, because you are going to die anyway so why not do what is important. And winning isn’t making money, it is achieving the mission. Giving people what they want (“want” means “lack”). Giving the people what they lack. These are entrepreneurs who are playing a different game from everyone else.

    VCs should be looking for a Saul and not for the promising young Roman shopkeeper. But they don’t because they lack faith, not in Saul, or in his mission. They lack faith in themselves and their own mission. I would argue that VCs aren’t just motivated by money but they have a dream too of making some kind of impact in the world. Collecting a Unicorn. But if they actually lived that faith, they would probably be entrepreneurs of a kind, and actually I think there is a way to do that:

    I have yet to hear of a VC who says “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win.”

    The VC that does that will attract the mission-based entrepreneurs who are on the same path and earn mutual respect. Team building.

    It takes courage to destroy your ego, to destroy your identity, in order to serve a higher purpose, and it takes even greater courage to “testify.” To say out loud what you believe in, and what your mission is.

    If a VC could say that, he could live the best possible outcome of his life.

    So, Persistence, yes, but also courage, and a higher purpose articulated.

    What a thrilling ride that life is! People, even the 1%, bow down to Fear and sell out their own lives now for so cheap.

    1. Wow, Michael, this is insanely thoughtful. I’m going to re-post it tomorrow as a guest post by you, if that’s OK. No need to reply if that’s the case.

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