Early stage VC is a marathon, not a sprint. That is true in everything, from the hold periods, to the work you do with a portfolio company, to the patience you must show towards a sector you think will be important. It is hard to sustain the enthusiasm sometimes, but if you have conviction about something, you have to stay the course.
AVC
Venture capital investing requires this mindset. Fred Wilson sums it up so perfectly with this quote. Individual investors like our clients only have access to venture investing in the very early stages of a company. That means the company may have a few thousand users. That means the company is very likely not making any money yet, let alone any profits. But what the company does have is a very good product that fills a need in market. The company has a strong team in place with the skills to build and sell the product. So an investment at this stage will require the patience, endurance and confidence to work with that company to fuel its growth through the ups and downs, the highs and lows.
The other side of this quote is this: DO. THE. WORK. Too many investors throw money at an investment and then ignore it. It is very easy to do as an angel investor. But, sadly, this is the biggest reason for shrinking portfolios. If you don’t know what your portfolio looks like, you can’t know how well it is performing. Venture investing almost requires that you do work as investors. Read company updates. Offer advice and connections for the executive leadership in your portfolio companies. Put yourself in position to invest again in the follow-on rounds that are inevitably coming. We believe that even investors have to know how a diversified portfolio works in this asset class as they do in any other. Venture capital investing can be as active or as passive as you make it. Just do the work.
As such, venture investing is not for every investor. But with education and capital, it is the smartest asset class for investing in the 21st century.