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Idiot Limited Partners

Almost one year ago I wrote a wildly popular Idiot CEOs article that highlighted my affection for the crucial role of visionary CEOs at early stage companies, and how instead they are foolishly made/forced to believe that the directives from the company’s board (mostly VCs) will guide them to success. That article was meant to […]

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The Systemic Risk of Venture Capital

The debate is heating up about the impending regulations from the government applied to Private Equity (PE) and its sub-class Venture Capital (VC), fought by the National Venture Capital Association (NVCA) and reluctantly supported by the Private Equity Council (PEC). The latter stating that private equity does not represent a systemic risk. Perhaps not, if […]

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A VC Revolution In The Making

Last night I was invited to attend (thank you Brenda Chia, president AAAIM) the panel discussion “Market Changeup: Fund Management as a Business”, with Priya Mathur (Board director of CalPERS, California Public Employees’ Retirement System; one of the biggest investor in LPs and VC funds), David Fann (President & Chief Executive Officer, PCG Asset Management), […]

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How LPs Invested Deep, Not Wide, In Technology

About one year ago I attended a great session in San Francisco, with VC firm limited partners, The Carlyle Group’s Bob Grady and fund managers from Hamilton Lane and SFERS. At the time I was impressed with the rationale behind a deliberate slowdown in new VC fund investments, yet every fund manager assured that the […]

How Subprime VC Fools Limited Partners

The subprime investment tactics by venture capitalists have had a damaging impact on the returns provided to limited partners, and on the technology asset class as a whole. We predict that as a result – and within 2 years, when the gestation period of the post-911 VC funds has expired – LPs will dramatically reduce the inflow of […]

14 Comments

How to Spot Subprime VC

Subprime venture capital, as I described in an earlier post, is easily recognizable Here are some of my metrics. Run for the hills whenever an investor…:

1. Seems more interested in how it is built rather than what the disruptive business proposition is.

Innovation becomes successful when it marries macro-economic value with micro-economic (technology) execution. Technology risk is the least of our worries in Silicon Valley, yet fundamental disruption is crucial and should take up the majority of the discussion.

2. Seems more worried about cost of development than cost of greenfield customer acquisition.

Capital efficiency is a buzz-word investors love to throw around. In most cases they want you to be as cheap as possible. But capital efficiency is relative to the cost and value of customer acquisition. Not all venture capital deals start with a seed round below $250K — more disruptive innovation usually

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