A year on the dark side

Real Ventures is one year old this week, which means it’s been a year since I joined the “dark side”. As a finance guy I was completely enamoured by the World of VC when I first encountered it. So much so that when I was still in  a CA firm I called up David Lawee (now running Corp Dev at Google) who was the lead VC in what became my first startup. I called him to see if he had any questions about the company’s audited financials. As if a VC would really care. I just wanted to talk to one.

When I joined that startup full time I vowed that in 10 years I would be a VC myself. It took me 11 years. The funny thing is when the opportunity finally presented itself I hesitated. Why? Well for one I felt that the CFO work I was doing under StartupCFO was needed. But also the VC industry has not been successful. This is not limited to Canada. Venture returns in the US are positive but they are limited to a select few top tier funds. Still, I knew I wanted to do it and felt I could have a big impact – so I took the plunge.

I have to say that for the 1st six months I was perhaps a reluctant VC. Not that I regretted the switch. More, I did not fully embrace the role. There is a perception (which I’d like to debunk in this post) that VC is the dark side. And while I had no illusions about what VC is, I still hung to my “I’m an advisor first” mantra.

I have gotten past that now. Advising is still a huge focus but I look at everything through the lens of building great companies and generating great returns.

The darkside

So, let’s clear the air on this whole dark side nonsense. You don’t have to search far to find stories of founders who have been replaced as CEO, nightmare boards, startups that blew up from too much VC or not enough VC, etc, etc. There are plenty of horror stories out there. And while there may in fact be a few evil emperors out in the VC World, it would be wrong (IMHO) to conclude that this means VC = dark side.

To conclude that is to not understand what you are agreeing to when you take VC$ and to not understand the objectives of your new financial partner. As a VC I want each startup I invest in to win, but I know that won’t be the case. And I am only interested in startups with the potential to deliver 10X returns. This means we say ‘no’ to perfectly good businesses. Just ones that don’t fit our strict criteria.

It also means making tough calls for companies you have backed. Do you continue funding under performers? Do you change or augment management? When is the right time to sell? There are so many tough calls and areas where founders and their investors might not agree.

This last year has been really great. I always wondered why VCs didn’t spend more time “adding value” to their portfolios. I get it now. You are overwhelmed with opportunities to look at. And since we are early in our investment period at Real, we need to devote lots of time to finding the best deals. From meeting other investors, strategic acquirers, looking for management talent, attending conferences, meeting with our own investors, etc there are huge demands on our time.

One of my partner’s calendars looks like what I imagine President Obama’s calendar does. Back 2 back 2 back meetings. I still leave big blocks of unallocated time. And I stay out of the office one day/ week (today) for deeper thinking / issues & catching up. Still, it’s a crazy schedule. And we have a (relatively) tiny fund and do most of our investing in our own backyard. I can’t imagine the schedules of VCs with bigger funds and a larger area to scour for investments.

Looking back on the past 12 months, I am proud of the portfolio we have assembled and am excited to see who will be next. I’m looking forward to the challenge of helping our portfolio companies raise follow on capital and find that market sweet spot so they can hit the gas pedal.

So if this is the dark side, then I guess I’m evil. But I don’t think so…