Why Do VCs Blog (and Tweet)?
For decades, the venture capital industry was like a Yale Secret Society – very clubby, discrete and opaque. VCs had all the power in the VC-entrepreneur equation, and entrepreneurs had to work hard to decode the mysterious VC process to obtain funding.
My how the world has changed in a few short years.
Pundits will tell you that in terms of trends, 2009 was the year of the real-time Web/Twitter, smart phones/iPhone and the mainstream emergence of digital advertising. But 2009 was also the year VCs blogging and tweeting really became mainstream.
Today, over 100 VCs blog regularly (including all five of the Flybridge general partners!). One blogroll puts the number at 129 VC bloggers.
That’s 10-15% of the active VC population of 1000. Here’s how I get that number: the NVCA says there are 882 firms in existence in 2008, but with many firms no longer investing new money, I would estimate that approximately 400-500 firms are truly active. With an average of 2-3 senior investors per firm, there are therefore probably 1,000 VCs that are actively seeking deals and sitting on boards. The two gut checks on that are: (1) 1500 new deals get done each year and 1.5 deals per senior VC is the right average and (2) On a bottoms up, geographic basis, there are maybe 500-600 in CA, 100 each in Boston and NY (maybe a bit more in Boston and a bit less in NY), 200-300 elsewhere in the US.
So 10-15% of our entire industry blogs. And nearly all of the VC bloggers tweet as well. Think about how extraordinary that is. Imagine if 50 of the members of congress blogged and tweeted regularly. Or if 50-75 of the Fortune 500 CEOs. Or 40-60 of the 400 NBA players.
The amount of transparency and richness of information available to entrepreneurs about the VC world is unprecendented. This is surely leading to more efficient markets in what many call the most inefficient market of all – the dance of small businesses seeking capital.
When I first started blogging five years ago (inspired by David Hornik, who started VentureBlog in 2003!), I got some funny looks from my peers. At the time, the thought of VCs revealing our inside secrets and investment strategies was ridiculed. Further, VCs were supposed to be too busy to blog, so the best VCs wouldn’t do it as it would take away from their work looking for great deals and managing their portfolio. Tell that to VC bloggers like David Cowan, Brad Feld, Fred Wilson and other VCs who have 15 year plus great track records.
So why do VCs blog (and tweet) with such frequency? I can’t speak for all 129, but here’s why I do it:
1) I love to write. Simply put, I enjoy words, language and the challenge of expression and composition.
2) Creative expression. As a VC, I can’t exert my creativity in the same way that I did when I was an entrepreneur. My blog is one productive yet harmless outlet to express my creativity.
3) Educational. There’s an old adage that if you truly want to learn something, teach it to someone else. Forcing myself to explain the VC business to entrepreneurs through my blog has pushed my own thinking and required me to study issues more deeply than I might otherwise have done.
4) Transparency. The VC business can be an intimidating business to many. I am an iconoclast at heart. As a former entrepreneur, I particularly enjoy breaking down barriers and making the VC business more accessible and transparent for others.
Will more than half our industry blog and tweet five years from now? Stay tuned.
Jeff is a partner with Boston-based VC firm Flybridge Capital Partners. Read his past peHUB posts, or follow him on Twitter at www.twitter.com/bussgang.
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Bill said on January 6, 2010
No to be cynical but….I occasionally read 3-4 VC’s. The way they fawn over Google and Google’s products seems to be shameless pandering, wishing/hoping that Google will purchase one of their companies.
Darren Herman said on January 6, 2010
jeff, great as always. I think you also left out that deal flow comes from the blogs, right?
Michael said on January 6, 2010
And not to point this to Jeff nor is it necessarily a bad thing, but without a doubt many do it for pr purposes or to further awareness of themselves.
John Prendergast said on January 6, 2010
Jeff,
Great article! Entrepreneurs do have a wealth of resources that weren’t available even 3 years ago. Its a big help, particularly to new entrepreneurs, that VC Transparency is increasing as a result of VCs becoming more open.
Your article made me think about one of the most interesting things about VC blogging to me: the way its impacted deal sourcing for VCs and broken some barriers for those who aren’t at the most well known firms. It seems to me that this is critical because while it takes time on the front end, I understand from those VCs I’ve spoken with who blog, it helps the right entrepreneurs self select into a given VCs social circle. As a result, while there will always be a healthy flow of inappropriate business opportunities, blogging can help increase the absolute number of potential good fits.
Have you seen that in your firm?
Alain Raynaud said on January 6, 2010
Hum, I think you forgot to mention reason #1 why VCs blog: because it increases their exposure.
There was a land grab in the late 2005-2009. The first-tier VCs didn’t see a need to promote themselves, but younger, hungrier firms stepped in and seized the opportunity. Union Square Ventures wouldn’t be where they are now without blogging. It goes beyond deal flow.
Sarah said on January 6, 2010
Great post.
I blogged about this same topic not too long ago — My take is that the reason VCs blog and tweet is because it’s really our “freemium” product aka lead gen for deals. The difference is, we’re trying to give entrepreneurs a taste of what we’ve got so that they’ll some of our money!
My blog post: http://www.adventurista.com/2009/11/venture-capitals-freemium-model.html
Sarah
Jeff Bussgang said on January 7, 2010
Great comments – thanks to all for providing them. I think the promotional and deal flow aspects of blogging are present, but not as important as people might think. I can’t point to a deal that we did that came through the blog. Maybe there are deals that we “won” because the discrening entrepreneur read our blogs and thought we “got it” and it helped them with their due diligence on us. At the end of the days, it’s too much work to maintain if you don’t love doing it for its own sake. As I said – 5 years posting 2x per month is a lot of posts!
VC Cafe said on January 7, 2010
Jeff, I really enjoyed reading your insights on this topic, and I linked to it from VC Cafe.
I think we both instinctively agree that for the question should VCs Tweet/blog the answer is yes, but do we believe that entrepreneur X would approach a specific VC just because of it? I think the answer is maybe.
On the other hand, it is likely to assume that an active VC in social media is more approachable, than someone who only has his corporate bio up. The social VC is likely to me more connected, both in terms of number of people and attention to social media trends, which casts a ‘wider net’ on the entrepreneurship market.
If this is clear to the VCs as well, why don’t we see them more active online?
Eze
Georges van Hoegaerden said on January 7, 2010
Jeff,
The transparency we need in venture is the one that establishes merit, not some rhetoric that makes you look good. We’ve got plenty of the latter but no confirmation who and who is not contributing to better performance than 10% IRR over the last ten years.
BTW: I find it also amusing that those VCs that don’t have the time to give entrepreneurs a decent answer as to why they won’t invest are the same ones most active with blogging.
Venture will change, but not because of self serving blogs but a refined responsibility of generating returns. I would suggest VCs to spent ALL their time on that.
Best,
Georges
Nathan Beckord said on January 8, 2010
Regardless of the motive– whether ego, a desire to give back, or simply a desire to hear themselves speak– the volume of blogging and tweeting is definitely a ‘good thing’ for the startup community.
As they say in sales, “mystery = margin”; prolific blogging by VCs has made the industry more transparent…thus stripping away some of the mystique of venture capital and increasing competition amongst VCs…thus shifting some of the power to founders during entrepreneur VC negotiations.
As an example: with a little digging you can find ideal vs. onerous term sheet terms, insight into venture valuation, and feedback on negotiation styles of investors from founders who have been there, done that with individual firms and partners.
In effect, reading blogs of VCs is like having a window into their thought processes, which certainly gives entrepreneurs a leg up when pitching or negotiating on a deal. For that very reason, I’ve been compiling a list of VC blogs (similar to Larry’s): http://www.venturearchetypes.com/Blogs_written_by_VCs.html
and,
a list of VCs who twitter: http://www.venturearchetypes.com/List_of_VCs_on_Twitter.html
enjoy, Nathan
Jeff Bussgang said on January 8, 2010
Thanks for the comments. I enjoyed your link, Nathan – thanks for sharing. Whatever the motivation, more transparency is better for everyone.
Georges van Hoegaerden said on January 8, 2010
Disagree Jeff, not all transparency is created equal or for that matter valuable. Venture is today is completely in-transparent where it matters.
Best,
Georges
Ego, Vanity, Exposure, Promotionalism said on January 10, 2010
Notice virtually NONE of the frequent VC Bloggers are ones who have had home run or grand slam successes in the 1990′s or 2000′s. None ever made the Forbes Midas List of most successful VC’s. UnionSquare??? Their predecessor firm? Flybridge what??? Morphed from folded IDG Ventures Boston??? Foundry, their failed predecessor Mobius which folded, their failed predecessor Softbank that failed? BTW none of these bloggers have been successful CEO’s of VC funded startups either.
None of these VC’s have the pedigree or track record or business success or business name recognition, so they blog and attract readers to inflate image, get exposure, and certainly feed ego.
BTW do you write your own posts or is the blogging handled by “Kate Castle, Vice President of Marketing” Why do VC firms need VP’s of Marketing anyway???
Lynn-Ann Gries said on January 15, 2010
Jeff, thanks for the post. Blogging definitely makes information more readily available to the masses and has helped to demystify the topic of venture capital. As a seed stage venture investor with a focus on companies in the Midwest, I enjoy reading posts form my brethren around the country – it helps me keep abreast of current trends. (Just last month I highlighted 12 great VC-related blogs worth reading). I think you make some great points about why people blog. I know at our firm we started a blog not only to provide an outlet for personal viewpoints on various venture-related topics but also as a PR opportunity for the firm and the individual bloggers. That said, keeping a blog timely and relevant is hard work. Keeping the material fresh is a challenge and I’m impressed (and thankful) that so many VCs take the time to post. I wish I were as diligent. Active blogging by a VC may get them increased deal flow and definitely gets them enhanced name recognition which, for the amount of time and effort a blog requires, is more than deserved.