Home > Investor Relations, Private Equity and VC > Frontier Capital – Learnin’s from the ol’ West

Frontier Capital – Learnin’s from the ol’ West

Buffalo Bill's Wild West Show and Congress of ...
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Traditionally, the Venture Capital industry has taken its lead from the West. Sure there are fine firms up and down the US and beyond, but think of venture capital and it’s hard not to imagine Google’s garage or a sarcastic VC cutting through some poor entrepreneur’s far-fetched American dream (or, if it’s 1999, funding it).

Now that probes into the services that 3rd party marketing firms and placement agents offer are causing some concern, VCs need to wise-up on the marketing of their own funds. And it’s not going to be easy.

I’ve written before on certain similarities between the actions of some in the fundraising industry and of those in the Wild West. I wasn’t too complimentary, but I wonder what we can learn from the Ol’ West? Here are some quick pointers:

Firstly, if you can, it’s important to show some kind of track history. After all…

It’s better to be a has-been than a never-was.

But track history isn’t everything, of course; it might have been easy raising your last fund in ’06: You delivered 30%+ IRR and most of the LPs were reckoning on funding their commitments with distribution in any case. But, in 2009, if you can’t show how your teams delivered those returns, you’re sure gonna hear this an awful lot:

Timing has a lot to do with the outcome of a rain dance

And honesty really is the best policy; let’s hear it for bad news, told well. The amount of DD LPs are putting in these days means that it is going to be increasingly difficult to exercise that special sort of creativity that some VCs are rumoured to be indulging in with the valuations of some slightly wonky Chinese portfolio companies. Much better to open the books and tell the story of what happened and what was learned.

Good judgment comes from experience, and a lotta that comes from bad judgment.

Of course, one of the most important skills is getting an upfront read on who might be ready to commit and who is still waiting before making new commitments. It’s like they used to say:

Never slap a man who’s chewin’ tobacco.

So:

  1. Show what you have done
  2. Show how you did it
  3. Don’t just tell the good news
  4. Wait for the right time to tell it

If you get all that licked, you might stand half a chance!

I’ll tail off now..:

Never miss a good chance to shut up.

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  1. RY
    June 30, 2009 at 4:16 pm

    Great stuff, really like the quotes! Quick question – Do you help formulate business plans and sources out funding for projects?

  2. June 30, 2009 at 9:42 pm

    We work with venture capital firms and private equity houses to help them raise capital for investment, rather than with entrepreneurs, directly, but if what you need is someone to help clarify the messaging in a pitch deck, once you have the business plan sorted, I can certainly help you with that. You may find some useful resources in one of my linkedin groups, if you are on linkedin :
    http://www.linkedin.com/groups?gid=1870895
    Hope that is some help!

  3. October 15, 2009 at 4:59 pm

    Great post Matt,

    Love the rain dance quote – very true.

    I think transparency and track record are critical here. In investing, people want certainty more than anything else – especially when times are tough as they are today.

    Great post and great analogies!

    CQ

    • Matt Craig Greene
      October 15, 2009 at 7:06 pm

      Thanks for your comment, Charlie! If only past returns were a truly reliable indicator of future performance… Best regards, Matthew Craig-Greene IE Consulting http://www.ieconsulting.co.uk

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