VC firms should have Anti-Portfolios

VCs get to review hundred of business plans a year and while it should be clear to most people that people are more important than the idea. This is because often the idea will have to change and the original business plan never holds so it is important for VCs to find people they really believe can see their idea through all these changes. At the time most VCs are pitched for investment it is very early and it might often be unclear what the business model of the company is and it is still extremely difficult to predict how people will do. Recently Vinod Khosla told the story of how the Google founders wanted to sell it for a million dollars and this illustrates how extreme the uncertainty can be even for the people who have the idea and vision. When entrepreneurs don’t even realize the potential value of their business it’s of course very hard for investors to foresee which investments will be successful and therefore many VC investments will likely fail. These are the rules of the VC game and most people agree on them.

However  just as VCs celebrate when they exit their good investments, it would be interesting to see more have anti-portifolios of the deals they were pitched and turned down, which have gone on to become successful. An old and also very successful VC fund that does this is Bessemer Venture Partners. You can see their anti-portfolio along with the entertaining background stories here.

It’s also clearly not very easy to be a VC and many of them also don’t do a particularly impressive job in generating returns to their investors so they might prefer opecity over transparency but in general I think entrepreneurs and VCs would be better off knowing more about the mistakes VCs have made in evaluating investment opportunities. This takes investors who has also had successes and is honest about admitting their mistakes and from an entrepreneur’s point of view I think it sends a strong signal.

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Posted: oktober 26th, 2010
Categories: startups, VC
Comments: 1 Comment.
  • Daniele Dellafiore

    Nice point. Should be nice to improve some existing VC-angels list with their portfolio/anti-portfolio links.