Gold in the Garbage

A Wired article this month features a tactic being employed by Allen Morgan of Mayfield Fund.  Morgan has been analyzing Mayfield’s dealflow, as well as the tech press, from the Dotcom boom to see if there are companies or ideas that may have failed at the time, but would work well today.  It is an interesting thought.

However, the article made me think of a different issue.  Is the VC business increasingly about ideas?  There has been some high-profile discussion in the VC community regarding the changing dynamics of the business.  Some contributing factors have been identified as:

  • Relative ease of fundraising due to humble returns elsewhere
  • Decreasing need for capital in some startups, due to open-source, offshore outsourcing, etc.
  • Competition from large companies acquiring startups earlier than usual

I have heard various prioritizations of the attributes one needs in the VC business, including corporate finance knowledge, quantitative skills, analytical strength, patience, and good gut to filter BS.  In the face of the changes described above, I suspect the ability to develop (or recognize) themes and filter ideas will gain precedence as the prime quality of a successful VC.

I see Fred Wilson and Brad Burnham’s USV as good example of a theme and idea based VC outfit (and we’ll see if it’s a successful one, as well.)  Nivi, a prolific idea generator, recently joined Bessemer Venture Partners, as Entrepreneur-in-Residence.

I root for ideas.

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