VC is simple - take $7M and make $4B
All Things Venture #080
I’ve been struggling to find time to write lately, #whoops got busy. But in any event I wanted to jam out a short piece on some of the things going on, on my end. For context, I’m past the 1st year mark here at FirstMark. I’ve got a few deals under my belt. I’m becoming a more active board member, and broadly I’d say I’m starting to know enough to be dangerous. That being said, I’m still a rookie. Hell, I might still be in kindergarten because, and I’ve said this before, but VC is an onion. It’s an incredibly layered, complex network, and cultural outgrowth of capitalism that takes getting used to. Without mincing words, what we’re all here to do is make money. (Aaaaand, aaand, and - make an impact if you so choose) But more specifically, what we’re all here to do is take a ~$7M investment, and turn it into a ~$4B return. Which defies investing logic. It doesn’t make sense. But that’s exactly what Benchmark did with their investment in eBay back in 1997.
And then!
You’re supposed to do it again.
$4B is an unfathomable amount of money to me. But that’s the goal, that’s the stakes you play in VC. Is it art? Is it science? I’m not entirely sure. I’m in the process of figuring it out, but from my vantage point today - it’s probably a mix of both. There are certainly patterns that emerge, and one working belief that I have right now is that with every successful VC investment, two things consistently occur:
1) There is a genuine mega trend that enables or unlocks enhanced distribution of the product
2) Users/Customers are empowered on a step function basis relative to their previous habit/way of doing things.
It’s relatively easy to identify the mega trends retroactively, and it’s also important to note that mega trends compound and reinforce one another. Some examples of mega trends/winners of mega trends are:
Semicondcutors (ex. Fairchild Semiconductor, founded 1957)
Application Software (ex. Microsoft founded 1975)
Personal/Mobile Computing (ex. Apple, founded 1976)
Telecommunications/Networking (ex. Cisco, founded 1984)
Internet Based Business (ex. Google, founded 1998)
Social Networking (ex. Facebook, founded in 2004)
Cloud Computing (ex. AWS, launched in 2006)
Vertical SaaS (ex. Veeva Systems, launched in 2007)
Crypto/Web3 (ex. Bitcoin released in 2008)
Productivity/Collaboration (ex. Figma, launched in 2012)
All of the above mega trends introduced technological changes that enhanced distribution and empowered customers/users. They can be studied retroactively and leave breadcrumbs of what the future may be. But predicting what’s next? Whole different ball game. I personally believe that the modern version of venture capital is one that embraces and casts a wider net. More perspective, from more people, producing better outcomes, for everyone invovled. The future isn’t a static entity, it’s not pre-ordained or pre-determined. It’s something that is shaped, molded, proddeed, torn down, thrown away, and resurrected by people, regular people every day. The only requirement to shaping the future, is having the desire to try and start.
That’s all I got for today everyone! Will be back in the next few weeks sharing a few startup spotlights and investor spotlights as well. If you’re a founder and interested in telling your story to the All Things Venture readers, just drop me a note at dez@firstmarkcap.com. PEACE!