The era of easy money - or at least, easy returns for VCs - is over. Tom Chavez is calling for VCs to show up in-person at August board meetings, get off the sidelines, and start adding real value and hands-on support for founders.
Earlier this month, we had a board of directors (BOD) meeting for one of our super{set} companies. I was a little astonished to see one of our directors – the only VC in the room, in person.
His presence was conspicuous. Anyone who has been around the block knows precisely why: VCs take a good amount of the summer and all of August off. Several in attendance joked that it was lunacy to call a BOD meeting in August at all.
The lone VC present knew this, too. In fact, that’s exactly why he showed up. He told me that during his 30+ years as a successful VC, he'd made a point of always working during August, November, and December – precisely because he knew all of his VC peers would be on vacation then. He wanted to be known as the hard-working contrarian, and he was rightfully proud of it.
I had another conversation last month with a VC friend who is earlier in her career and hustling for deals. Recently, she’s been wondering if she’s too late to the party. Did she miss the relatively easy gains in software investing over the prior 25 years? The secular trend for software investing has been so abundant and huge that she wonders if any investor of just average intelligence with access to a reasonable deal flow could've made outsized returns.
Both encounters led me to reflect on my dealings with VCs over the last 25 years and what prototype of VC I’d like to work with for the next 25. It's a profession with a wealth-to-work ratio that outstrips any other career on the planet. That is why you never see VCs responding to emails or joining BOD meetings in August (or November or December, for that matter). But I’m starting to see many more VCs lately who are intuiting that the good times might be coming to an end.
Markets are efficient. There’s too much money and too many VCs competing for quality deals that are growing somewhat but not nearly at the same rate as the volume of capital sloshing around. Softbank's recent $23B loss points to the same general malaise of too much money and too many professionals chasing a market creaking under the weight of the caffeinated expectations hanging over it.
Just as management consulting enjoyed its heyday in the 80s and investment banking enjoyed its run in the 90s and early aughts, it's possible we’re approaching a similar turning point for VC.
There are a few who've earned big perches at established funds who will continue harvesting outsized monetary gains for a while longer. But most recognize they need to work harder, and they must usher in and deliberately battle-harden the next generation.
So what does the future look like?
Increasingly, VCs recognize they need to specialize. There was a time in the late 90s and early 00's when hedge funds could earn outsized returns by making fairly simple long-short bets and exploiting arbitrage opportunities. But again, markets are efficient, which is why all those gaps and price discrepancies have mostly been traded away. The easy money has already been made.
The same applies to VC. When I got into the game in 1999, VCs would read vapid Morgan Stanley reports and score points at their Monday meetings by quoting the bullets at the beginning of the report. They gave entrepreneurs inane advice like, "You need to focus," "You should fire your sales guy," and 'You need more revenue." You still get stupid comments and questions from some VCs when pitching a new project, but generally, they're all smarter simply because they have to be.
The days of easy, outsized VC returns are over. The VCs we're lucky to work with are showing up with meaningful insights about the markets we're chasing and the products we're building. They're more like investigative reporters than traditional financiers and asset allocators. That's a good thing for entrepreneurs in general, as it reflects the requirements and dynamics of the broader market.
The Accel approach pioneered by Arthur Patterson called for a 'prepared mind,' following Lavoisier's dictum that 'chance favors the prepared mind.' The idea was that by preparing and going deep in a particular sector (networking, vertical SaaS, etc.), a VC could discern the winning elements of a venture opportunity by pattern-matching from past data points and thinking deeply about the competitive advantage and market movements markets in a particular space. Other frameworks for specialization include Mike Maples at Floodgate’s two-pronged consideration of what he calls 'Inflections' and 'Insights'; Clint Korver at Ulu’s application of decision analysis to uncertain venture opportunities; Peter Wagner at Wing’s approach to the Data-Driven Enterprise; or super{set}'s data-driven thesis, which we use to structure product-centric, data management companies in markets ripe for cloud+data+AI disruption.
Another way to differentiate is to become more useful to entrepreneurs. The VC industry refers to this as ‘platform’ capabilities. SignalFire touts its recruiting capabilities in helping newly formed companies staff their teams; A16Z brings outsourcing help to a company's marketing, technology, product, recruiting, and HR operations.
In general, I'm a little skeptical of these methods, first because it's just hard for a VC, however well-meaning, to engage with matters as critical as these without having their hands on the steering wheel. The related complexity is that, if they are successful, they might inadvertently disempower the CEO, who ultimately needs to have control and accountability for everything. But it's also possible that I haven't experienced those models firsthand, so perhaps they're more valuable than I know. At the very least, entrepreneurs should have high standards for them.
We started super{set} to provide the most direct hands-on support possible in early stage formation. Rather than chase outside ideas, we ideate in-house and then recruit and empower world-class product leaders as we build out the initial team and product. Just like they taught you when you had your learner’s permit: our hands never leave the steering wheel - 10:00 and 2:00 the entire time. Of course, not every VC can do what super{set} does, nor should we expect them to. However, the ecosystem needs the capital and the selection acumen VCs provide to enable scale and growth.
Let’s call this the Tiger model. No board seats, just money – with minimal terms. It works great during the go-go times, even if it declines along with the business cycle. No board seats, just money with minimal terms. I think we’ll see the spigot open again, but even as it does, it's not clear to me that this is a durable approach for a true venture investor (as opposed to a big money allocator) to survive and differentiate.
So what’s the bottom line for entrepreneurs and the VCs that serve them?
Entrepreneurs have more agency than they think they do. So I’m telling every founder in my network and the co-founders and leadership teams within super{set} that it’s time to start asking and expecting a whole hell of a lot more from our VCs. In an industry that thrives by demanding founders work round the clock to earn their keep, it seems those skimming so much off the top should bring much more to the table than money and weak platitudes. Where are the VCs who will stick with you through thick and thin and stand shoulder-to-shoulder with you when the going gets rough? Where are the VCs who come to BOD meetings in person in August? I’m pretty sure I’m not the only entrepreneur taking stock of the rare VC who shows up for my company, however inconvenient or arduous the circumstances.
Transcript
Go-to-market has entered a new operating environment. Enter: RevOps. We dig into the next solution space for super{set}, analyzing the paradigm shift in GTM and the data challenges a new class of company must solve.
read moreIn the first episode of The Closed Session, meet Tom Chavez and Vivek Vaidya, serial entrepreneurs and podcast hosts.
read moreIn the second episode of The Closed Session, Tom and Vivek discuss the framework for starting your own company from scratch, and the three dimensions that should be taken into account.
read moreYou’ve decided to launch a business, but before you hurtle blindly into the breach, you need a bulletproof plan and a perfect pitch deck to persuade your co-founders, investors, partners, and employees to follow you into the unknown.
read moreIn this episode of The Closed Session, Tom and Vivek talk about dilution, methods, mindset, benchmarks and best practices for raising investment capital for a new tech startup.
read moreNow that you've written the business plan and raised money, it's time to recruit your early team. In this episode, Tom and Vivek cover the do's and dont's of building a high-output team - who to hire, how to build chemistry and throughput, how to think about talent when your company is a toddler versus when it's an adolescent.
read moreWelcome to Season 2 of The Closed Session! In this first episode of 2020, Tom and Vivek talk about the five companies super{set} launched in 2019 and the lessons they’re learning as they go.
read moreTom and Vivek talk about inclusion and reflect on their personal experiences as brown guys in tech. Inclusion feels like a moral imperative, but does it really make for stronger, better companies? Are there unintended consequences of acting on good intentions to 'fix' an inclusion problem at a company? Why is tech so lacking in diversity, and what can we do to get it right?
read moreWe are living in a time of extraordinary concern about the negative consequences of online platforms and social media. We worry about the damage interactive technologies cause to society; about the impact to our mental health; and about the way that these platforms and their practices play to our most destructive impulses. Too often, the experiences we have online serve only to polarize, divide, and amplify the worst of human nature.
read moreThis post was written by Habu software engineer, Martín Vargas-Vega, as part of our new #PassTheMic series.
read moreThis post was written by Ketch Developer Advocate, Ryan Overton, as part of our #PassTheMic series.
read moreThis post was written by Ketch Data Privacy & Compliance Specialist, Jocelyn Brunson, as part of our #PassTheMic series.
read moreThis post was written by Ketch Sales Director, Sheridan Rice, as part of our #PassTheMic series.
read moreThe super{set} studio model for early-stage venture It is still early days for the startup studio model. We know this because at super{set} we still get questions from experienced operators and investors. One investor that we’ve known for years recently asked us: “you have a fund — aren’t you just a venture capital firm with a different label?”
read moreThis post was written by MarkovML Co-Founder, Lindsey Meyl, as part of our #PassTheMic series.
read moreWhere do the ideas come from? How do we build companies from scratch at super{set}?
read moreComing up with new company ideas is easy: we take the day off, go to the park, and let the thoughts arrive like butterflies. Maybe we grab a coconut from that guy for a little buzz. While this describes a pleasant day in San Francisco, it couldn’t be further from the truth of what we do at super{set}. If only we could pull great ideas out of thin air. Unfortunately, it just doesn’t work that way.
read moreThe wheel. Electricity. The automobile. These are technologies that had a disproportionate impact on the merits of their first practical use-case; but beyond that, because they enabled so much in terms of subsequent innovation, economic historians call them “general-purpose technologies” or GPTs...
read moreIn our last post, we discussed how data is the new general-purpose technology and that is why at super{set} we form data-driven companies from scratch. But new technologies are a promise, not a sudden phase change.
read moreWhen a VC decides to invest in a company, they write up a document called the “Investment Memo” to convince their partners that the decision is sound. This document is a thorough analysis of the startup...
read moreThis post was written by Ketch Solutions Engineer, Sahiti Surapaneni, as part of our #PassTheMic series.
read moreWhat does it mean to be a super{set} co-founder and who do we look for? Why is the Head of Product the first co-founder we bring on board?
read moreConsidered by some to be “America’s Second Independence Day,” Juneteenth has only recently entered the national zeitgeist. Celebrated on the third Saturday in June, it became a federal holiday just last year under President Joe Biden. Many companies are left wondering how to acknowledge the holiday. We sat down with Eskalera’s co-founder Dr. Tolonda Tolbert to get her take.
read moreHas someone looking to make a key hire ever told you that they are after “coachability”? Take a look at the Google ngram for “coachability” — off like a rocket ship since the Dot Com bubble, and it’s not even a real word! Coaching is everywhere in Silicon Valley...
read moreAt super{set}, we stand side-by-side and pick up the shovel with our co-founders. Our first outside co-founder at a super{set} company is usually a Head of Product. Let’s unpack each portion of that title....
read morePankaj Rajan, co-founder at MarkovML, describes his Big Tech and startup experience and his journey to starting a company at super{set}.
read moreThe decision to start a company – or to join an early stage one – is an act of the gut. On good days, I see it as a quasi-spiritual commitment. On bad days, I see it as sheer irrationality. Whichever it is, you’ll be happier if you acknowledge and calmly accept the lunacy of it all...
read moreTom and Vivek describe how building the best product is like planning the perfect heist: just like Danny Ocean, spend the time upfront to blueprint and stage, get into the casino with the insertion product, then drill into the safe and make your escape with the perfect product roadmap.
read moreTom and Vivek discuss what the very first customers of a startup must look and act like, the staging and sequencing of setting up a sales operation with a feedback loop to product, and end with special guest Matt Kilmartin, CEO of Habu and former Chief Revenue Officer (CRO) of Krux, for his advice on effective entrepreneurial selling.
read moreReflections after a summer as an engineering intern at super{set}
read moreGal Vered of Checksum explains his rationale for leaving Google to co-found a super{set} company.
read moreThe era of easy money - or at least, easy returns for VCs - is over. Tom Chavez is calling for VCs to show up in-person at August board meetings, get off the sidelines, and start adding real value and hands-on support for founders.
read moreTom and Vivek describe what the ideal CEO looks like in the early stage, why great product people aren’t necessarily going to make great CEOs, and what the division of labor looks like between the CEO and the rest of the early team. They then bring on special guest Dane E. Holmes from super{set} company Eskalera to hear about his decision to join a super{set} company and his lessons for early-stage leadership.
read moreo11y - What is it? Why is it important? What are the tools you need? More importantly - how can you adopt an observability mindset? Habu Software Architect Siddharth Sharma reports from his session at super{summit} 2022.
read moreOthmane Rifki, Principal Applied Scientist at super{set} company Spectrum Labs, reports from the session he led at super{summit} 2022: "When Inference Meets Engineering." Using super{set} companies as examples, Othmane reveals the 3 ways that data science can benefit from engineering workflows to deliver business value.
read moreHead of Infrastructure at Ketch, and Kapstan Advisor, Anton Winter explains a few of the infrastructure and DevOps headaches he encounters every day.
read moreTom and Vivek jump on the pod for a special bonus episode to call BULLSHIT on VCs, CEOs, the “categorical shit,” and more. So strap yourselves in because the takes are HOT.
read moreThe Move Accelerates the Rapidly Growing Startup Studio’s Mission to Lead the Next Generation of AI and Data-Driven Market Innovation and Success
read moreAnnouncing Jon Suarez-Davis (jsd) as super{set}’s Chief Commercial Officer: jsd tells us in his own words why he's joining super{set}
read moreTom and Vivek describe the lessons learned from fundraising at Rapt in 1999 - the height of the first internet bubble - through their experience at Krux - amid the most recent tech bubble. After sharing war stories, they describe how super{set} melds funding with hands-on entrepreneurship to set the soil conditions for long-term success.
read moreTom and Vivek have come full circle: in this episode they’re talking about closed session board meetings in The {Closed} Session. They discuss their experience in board meetings - even some tense ones - as serial founders and how they approach board meetings today as both co-founders and seed investors of the companies coming out of the super{set} startup studio.
read moreArthur Patterson, founder of venture capital firm Accel, sits down for a fireside chat with super{set} founding partner Tom Chavez as part of our biweekly super{set} Community Call. Arthur and Tom cover venture investing, company-building, and even some personal stories from their history together.
read moreArthur Patterson, the founder of venture capital firm Accel, sits down for a fireside chat with super{set} founding partner Tom Chavez as part of our biweekly super{set} Community Call.
read moreThis month we pass the mic to Sagar Gaur, Software Engineer at super{set} MLOps company MarkovML, who shares with us his tips for working within a global startup with teams in San Francisco and Bengaluru, India
read moreArthur Patterson, legendary VC and founder of Accel Partners, sits down with Tom Chavez to discuss insights into company building. Tom and Vivek review the tape on the latest episode of The {Closed} Session.
read moreAnnouncing Jon Suarez-Davis (jsd) as super{set}’s Chief Commercial Officer: jsd tells us in his own words why he's joining super{set}
read moreThis post was written by Ketch Data Privacy & Compliance Specialist, Jocelyn Brunson, as part of our #PassTheMic series.
read moreThe Move Accelerates the Rapidly Growing Startup Studio’s Mission to Lead the Next Generation of AI and Data-Driven Market Innovation and Success
read moreConsidered by some to be “America’s Second Independence Day,” Juneteenth has only recently entered the national zeitgeist. Celebrated on the third Saturday in June, it became a federal holiday just last year under President Joe Biden. Many companies are left wondering how to acknowledge the holiday. We sat down with Eskalera’s co-founder Dr. Tolonda Tolbert to get her take.
read moreThe era of easy money - or at least, easy returns for VCs - is over. Tom Chavez is calling for VCs to show up in-person at August board meetings, get off the sidelines, and start adding real value and hands-on support for founders.
read moreHas someone looking to make a key hire ever told you that they are after “coachability”? Take a look at the Google ngram for “coachability” — off like a rocket ship since the Dot Com bubble, and it’s not even a real word! Coaching is everywhere in Silicon Valley...
read moreThis post was written by Ketch Solutions Engineer, Sahiti Surapaneni, as part of our #PassTheMic series.
read moreThe super{set} studio model for early-stage venture It is still early days for the startup studio model. We know this because at super{set} we still get questions from experienced operators and investors. One investor that we’ve known for years recently asked us: “you have a fund — aren’t you just a venture capital firm with a different label?”
read moreWhen a VC decides to invest in a company, they write up a document called the “Investment Memo” to convince their partners that the decision is sound. This document is a thorough analysis of the startup...
read moreThis post was written by MarkovML Co-Founder, Lindsey Meyl, as part of our #PassTheMic series.
read moreThe decision to start a company – or to join an early stage one – is an act of the gut. On good days, I see it as a quasi-spiritual commitment. On bad days, I see it as sheer irrationality. Whichever it is, you’ll be happier if you acknowledge and calmly accept the lunacy of it all...
read moreOthmane Rifki, Principal Applied Scientist at super{set} company Spectrum Labs, reports from the session he led at super{summit} 2022: "When Inference Meets Engineering." Using super{set} companies as examples, Othmane reveals the 3 ways that data science can benefit from engineering workflows to deliver business value.
read moreComing up with new company ideas is easy: we take the day off, go to the park, and let the thoughts arrive like butterflies. Maybe we grab a coconut from that guy for a little buzz. While this describes a pleasant day in San Francisco, it couldn’t be further from the truth of what we do at super{set}. If only we could pull great ideas out of thin air. Unfortunately, it just doesn’t work that way.
read moreThis post was written by Ketch Developer Advocate, Ryan Overton, as part of our #PassTheMic series.
read moreThe wheel. Electricity. The automobile. These are technologies that had a disproportionate impact on the merits of their first practical use-case; but beyond that, because they enabled so much in terms of subsequent innovation, economic historians call them “general-purpose technologies” or GPTs...
read moreIn our last post, we discussed how data is the new general-purpose technology and that is why at super{set} we form data-driven companies from scratch. But new technologies are a promise, not a sudden phase change.
read moreThis post was written by Habu software engineer, Martín Vargas-Vega, as part of our new #PassTheMic series.
read moreReflections after a summer as an engineering intern at super{set}
read moreAt super{set}, we stand side-by-side and pick up the shovel with our co-founders. Our first outside co-founder at a super{set} company is usually a Head of Product. Let’s unpack each portion of that title....
read moreHead of Infrastructure at Ketch, and Kapstan Advisor, Anton Winter explains a few of the infrastructure and DevOps headaches he encounters every day.
read moreThis post was written by Ketch Sales Director, Sheridan Rice, as part of our #PassTheMic series.
read moreo11y - What is it? Why is it important? What are the tools you need? More importantly - how can you adopt an observability mindset? Habu Software Architect Siddharth Sharma reports from his session at super{summit} 2022.
read moreWe are living in a time of extraordinary concern about the negative consequences of online platforms and social media. We worry about the damage interactive technologies cause to society; about the impact to our mental health; and about the way that these platforms and their practices play to our most destructive impulses. Too often, the experiences we have online serve only to polarize, divide, and amplify the worst of human nature.
read moreGal Vered of Checksum explains his rationale for leaving Google to co-found a super{set} company.
read morePankaj Rajan, co-founder at MarkovML, describes his Big Tech and startup experience and his journey to starting a company at super{set}.
read moreGo-to-market has entered a new operating environment. Enter: RevOps. We dig into the next solution space for super{set}, analyzing the paradigm shift in GTM and the data challenges a new class of company must solve.
read moreThis month we pass the mic to Sagar Gaur, Software Engineer at super{set} MLOps company MarkovML, who shares with us his tips for working within a global startup with teams in San Francisco and Bengaluru, India
read moreArthur Patterson, founder of venture capital firm Accel, sits down for a fireside chat with super{set} founding partner Tom Chavez as part of our biweekly super{set} Community Call. Arthur and Tom cover venture investing, company-building, and even some personal stories from their history together.
read more