Sunday, May 22, 2005

So You Want to Be a Venture Capitalist

I enjoyed reading an article in the Sunday NY Times entitled "So You Want to Be a Venture Capitalist", in large part because I've long entertained an interest in becoming a venture capitalist, but also because it gives you a sense of a few of the "fault lines" in the venture capital sector today.
 
Buried in the article, near the end, is an extremely important phrase that describes the essence of venture capital: "the ability to assess whether there's a market for something."  There are many factors that go into achieving success with venture capital, but market demand is the king of the hill.
 

1 Comments:

At 2:26 PM EDT , Blogger Denim Doc said...

Thanks, Jack, for alerting me to this article and I'm glad we both agree what the telling line in this article was.

This was my comment in my blog (http://www.sacredcowdung.com/archives/2005/05/so_you_want_to.html)

First I have to thank Jack Krupansky for drawing my attention to this article. While there are a number of trends which this article hints at, the most important line is the quote by Richard Kramlich of NEA where is says —

“[Venture Capital is] more about people skills and the ability to assess whether there's a market for something.”

We, at The Verticom Group, spend alot of time codifing Principles and Best Practices of Venture Capital and Building Companies but the most important principle I feel is —

“Behind Every Successful Company Lies an Accurate Market Hypothesis”

A well-written business plan and presentation to a VC should always build a strong case for a “Precise Market Hypothesis” — but all companies are just market experiments to prove the accuracy of that “precisely articulated market hypothesis”.

The art of venture capital is to bet on “precisely articulated market hypotheses which prove to be accurate” and that, when you are right, it pays off big enough to pay for all of the times you were wrong (and there will be plenty of them for sure).

In other word, you need BIG MARKET OPPORTUNITIES and you need to be right once in awhile.

 

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