David Hornik is a partner at August Capital, a Menlo Park, CA, venture capital firm, and a respected invested in software companies. He recently started his own blog called VentureBlog, a Random Walk Down Sand Hill Road. Yet after 10 years in the business, he still struggled with what to write about. A partner at his firm responded, “That’s because you’re just getting started.”
“Ten years in Venture Capital is a drop in the bucket,” writes Hornik. “In my first ten years in the Venture business, I have funded 15 companies — that’s one and a half companies a year. And of those companies, the majority were funded in the latter half of the decade and are really just getting started. While there are a few anomalies out there, the vast majority of “meaningfully large” companies require 6, 8, even 10 years to get to scale.”
Successful venture capitalists must think long term, Hornik says. It probably takes about two decades for enough companies to “ripen on the vine” before you know with any certainty whether they are going to be winners or not.
Which means your first ten years in your venture capital job will largely be an exercise in “pattern recognition.” That is, observing the characteristics of successful businesses and finding new businesses that match these characteristics. “After a decade in the Venture business, it is abundantly clear that … pattern matching is among the powerful tools we VCs have,” says Hornik, who argues that your first decade in Venture will likely be all about acquiring the patterns of successful businesses.
What’s your take? Aside from patience, what are the most important tools in a successful venture capitalist’s arsenal? Add your comments below.
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