VC’s are marketers, not financiers
Why storytelling is more important than financial acumen in Venture Capital
Venture capital is the only asset class where the seller cares who the buyer is.
Unlike other asset classes, where past performance is rarely an indicator of future success, past performance in the venture industry is a very good indicator of future success.
Since entrepreneurs prefer to work with investors who have achieved successful exits, such VCs enjoy a higher likelihood of working with the best startups, and thus a higher probability of successful exits.
And so on.
The “power law” of VC returns applies to VC funds as well as to individual startup investments. Most VC’s don’t generate market-beating returns.
So how do you break into VC as a new fund, and beat the odds?
VC is fundamentally about two things:
To get both without a track record, you need to be good at telling stories.
The stories you tell explain why you are great and how you can add value. Hopefully, they are true stories.
Thus, this is marketing, not finance.
It’s a tough, competitive market out there for VC’s, and in reality most funds won’t generate market-beating returns.
In many ways it is a better time to be a founder than a VC at the moment.
There is a lot more branded cash around than big, original ideas.