Just to set the stage:
Almost $17 trillion of equity market capitalization has evaporated in the last 6 months with over 40 global stock indices steeped deep in bear markets despite the world’s central banks going into money printing overdrive over this same period.
How brilliant are these morons at the Central Banks and at the FED, as well as the ECB, and CBC, and all central banks worldwide…
The 15 technology companies with the largest market capitalizations in 2000 have been decimated — losing about $1.35 trillion, or roughly 60 per cent, of their combined market value. In fifteen years…
The same exercise is taking shape today with the blue chip Tech private and public stocks losing just as much value and especially the sky high floating Unicorns crashing swiftly back down to earth like the Hinterburger burning. In fifteen weeks…
History repeats itself only the first time is a tragedy and the second time a comedy. The first time is in Human time and the second time on steroids time…
Yet today another 15 companies that were together worth less than $10 billion in 2000, are now among the world’s 50 top technology companies as measured by market capitalization, with a combined worth of $2.1 trillion. Take for example Apple, which even in 2000 was viewed as little more than a curiosity, has risen in value from $6 billion to $660 billion.
And the reality is that several of today’s most valuable technology companies did not even exist in 2000 and were created mainly through the diligent application of Venture Capital work. Facebook, LinkedIn and Twitter together have now a collective corporate history of only 33 years. Even Google and SalesForce were barely smudges on the horizon in 2000. These companies now have a combined value of about $850 billion.
Now one must notice that none of these companies do the hard things. namely they don’t do hardware. Yet they have thrived from the artful deployment of software, and in particular the cloud based variant, and for Facebook, LinkedIn, Twitter and Google’s YouTube service, they have built a business and profited from organizing and collating the contributions of their users.
But the fourth, fifth and sixth most valuable technology companies of today — are Alibaba, Tencent, and Baidu. This Chinese companies threesome alone, is now worth almost $500 billion.
Half a Trillion USD is nothing to scoff at…
And this is a testament not just to how much China has progressed in a decade and a half, but to where China is going. Because China is shifting from being the workshop of the world to being the most valuable equities market of the world especially for Technology companies. And after the recent market turmoil unfurling it’s sails and upsetting it’s plans, this becomes a harbinger of the next several decades, as the country places increasing emphasis on spawning its own technology and creating it’s own major market makers from local companies going abroad and overseas to conquer the world…
A few themes jump out of this discussion. First, the power of novelty, second, the shift towards China, ad third the benefits of patience and the virtues of capital efficiency, as deployed through diligent, sustainable, and long term viewing, Venture Capital.
And then we have the Subprime Unicorns.
You know them. They are all the rage. All the young startuppers want to emulate them… And all the young VC wanna get into them. ANd for the right price they get in the club of their choice. Little do they know this is the club for stuck-up idiots. And the price of admission to become a VC for the Unicorns is exuberant optimism.
These Unicorn club going VCs — they represent the Tulip mania amongst the VC community of today. They indeed are the uber-Unicorns of today wearing the horn fashionably well, on top of their horse heads.
And now all those uber-inflated private companies that had stratospheric valuations that have now gotten back down to earth in a hurry and their VCs seek shelter from the storm, but the horse stables are all full up.
Alas — it is far too late for them to find shelter from this storm.
Now they need to go through the purgatory of hell and come out the other way cleansed. The IPO window is firmly shut for them and their exorbitant valuations and there are no New Fools out there to become the next greater fool. So all I have to say to their Investors is this: “Good Luck and Let mw know How this works out for you”
But all the wreckage of these Unicorns has me concerned.
I am terribly concerned that they will become extinct, and my heart goes out to them. Admittedly we are going through a great despeciation event and this is just another proof of it… but one has to have pity in their heart for the fallen ones.
But maybe there will be some Unihorns left if we can find proper employment for them. Maybe the only Unicorns left will be the ones tasked to carry on inside the game for children aptly named: “Ride my little pony” and specifically designed for errant and aberrant VC boys out there.
So let us all stop drinking the Cool-aid and remove the rainbow glasses and start seeing the stars for what they really are.
A celestial miracle of lights — free of real star obscuring space faring and earth bound floating unicorns. Like so much space junk the Unicorns are in constant need to observe and navigate around them, but with their imminent elimination — we are again free to roam the great wilds of our atmosphere and the near earth space.
And we can chalk all of that excess investment that got burned up, with the unicorn Hinterburgers and their likely fellows, the Weworks, the Theranos, the Ubers, the Airbnbs, and their assorted unfit to fly brethren — as an investment in EDUCATION. Education for boys and gals that missed that pivotal Business Economics 101 lesson. Sadly this is not offering any edification for the errant VC boys, but there you have it.
Business and simple Venture Capital Leadership lessons come aplenty, when gravity takes hold and the early stage subprime unicorn companies start hurling down to Earth. But when they fly around without any parachute — life is peachy.
And this is truly an exercise in Wisdom seeking, and in gaining practical knowledge from the time when Reality arrives back in the house…
And take this writing for what it is because it best serves as the view from the beach, when the tide goes out and you get to see the naked swimmers crawling out “pruned” and mudy, after staying far too long in the water hoping for the return of the tides…
Not that there is anything really wrong with that — but there you have it.
However when one is seeking true wisdom and knowledge — one has to be diligent enough, and methodical enough, to win.
And to win in the VC game one has to be or become a Leader. Because only the Leaders can command great respect and thus gain the privilege to lead people, companies, and markets.
Don’t worry, followers are aplenty. You’ll never run out of those. But Leaders are a rare thing… And that is the thing we all should aspire to be, if we want to be considered as Great Venturers.
So let me start with a few questions right here.
A few questions that might start you thinking along the lines I choose to think and that might make you a bit smarter if not an outright genius.
Here it goes:
What does it mean to be a Great Leader in Life?
What does it take to be a Great Venture Capital leader?
What is it that great leaders and managers of Growth and Risk Capital do?
How do we set an ethical example for others to emulate?
How do we demonstrate a level of performance that others can only aspire to?
How can we carefully select good people amongst the flotsam and jetsam of the Sargasso sea, that want to work in venture capital with me — only because they think the rewards are immense but they don’t really have any of the required skills?
How do we attract the best ones?
And after we kiss a lot of frogs, how do we distinguish, separate, and motivate the Princes and the Seahorses, to come work creatively and productively with me after passing the frogs off to the French chef?
And how do we design the Princes’ Princesses’ and the Seahorses’ compensation & princely rewards, in a way that is both fair and abundant?
How do we collectively allocate capital?
How do we decide how much risk is prudent?
How do we select the strategic funnel for the companies that get through the fine mesh filters?
How do we avoid meddling with the investee companies’ strategy and execution?
How do we escape dwelling on insignificant details, or on people’s drama, conflicts, and personalities?
How do we shut down the haters, naysayers, negative pussies, and fearful monkeys, that are bound to exist out there?
How do we fire and replace CEOs and colleagues, without hate and rancor?
How do we avoid micro-managing?
How do we exploit the operating expertise and utilize the deep domain knowledge that certain company C-level suits have, since they are far more versed in their businesses and fiefdoms?
How do we bring this general wisdom to bear for the GOOD of all and sundry?
How do we support the VC interests when they are trampled upon, especially when a CEO leads a good business into the muck?
How do we act forcefully and take control – no matter how much one dislikes confrontation?
How do we ask our limited partners for upping their exposure to the Funds?
How do we explain to all the investors and company CEOs, and other shareholders, that first and foremost come our existing Capital investments, and the Fund’s interests and that’s why the term-sheets frequently contain preferential terms that only we can command?
How do we answer the question if there is something we value more in our working life than increasing the underlying value and the ROI of our Venture Company?
These are most all of the questions that we have to fully and viscerally answer each and every day — in order to be the VC Leaders and maintain our Command of the field.
Incidentally these answers will also have to be answered by YOU, in order to be allowed to become a Leader in my world of Capital formation and allocation as well. Just to come work with me you’ve got to do this homework…
Don’t be afraid – reach out to me – because I employ good people and always seek some more. It’s not reality television but real Life and I fire people all the time which – on occasion – causes me to even fire skittish investors and relinquish LPs positions.
This lets my lieutenants and shareholders understand that with me — they own far more of the business they all cherish.
People who work with me long term understand that they own their Destiny and can write their own story, so they best “play” for all they’ve got…
And they surely DO.
As you have no doubt noticed — I haven’t answered these questions today, not only because that is your job and by reading this Leadership series, You have already been treated to all of the answers.
And if you haven’t — no worries. I shall answer conclusively each one of these Questions at length over the next few days focusing on the individual topics.
Yet for now here is a morsel of wisdom straight up: tKeep remembering that here is only one narrative that matters and it’s the one you’ll create for the world. Everything else pales in comparison. So keep your priorities straight…
Now I only hope that the reader of this compilation, will be treated not only to my views on the topic of Venture Capital that is dear to my heart — but also to the cannon of knowledge and wisdom from all the Leaders of this field.
And I further hope that You will attempt to answer these questions o your won because the syllogistic thinking required to answer these questions, will be the best exercise to learn whether my VC world is an appropriate place for you too.
And if You feel that this is a place you can fit in, and make it your business — then I’ll invite you in. But first send me your answers and I will choose the best ones.
Just drop me a note, provided you can hack it.
Martians, invertebrate rule followers, inveterate office keepers, and assorted drama queens — need not apply.