2015-03-11

The best VC Blogs are among the best resources for learning about a range of subjects in the tech industry. Some examples (the usual suspects) that come to mind include:

These blogs offer both anecdotal and data-backed perspectives on subjects ranging from B2B SaaS pricing models to Series B fundraising dos and don'ts.

When I read something, afterwards I like to step back and consider things form one higher level of abstraction. If I'm reading a novel, this might be a reflection on the plot devices or syntax that was employed. If I'm reading a blog post, I like to think about the motivations of the author.

For VC Blogs, I can think of a few drivers:

  • Awareness & Expertise building (transition from founder to VC)
  • Paying it forward
  • Dishing out the dirt
  • Position Building
  • Inbound funnel

1. Awareness Building

Each blog listed above is affiliated with young funds that needed to differentiate itself and make itself known to the world (and have succeeded spectacularly at doing so). Demonstrating and communicating experience, perspective, and thought leadership goes a long way towards associating the fund's brand with one of competence.

2. Paying it Forward

It's long standing culture to "pay it forward" in this industry. We've all been helped by people more senior than us, where they took a chance on us even though they had very little to gain. Once we find our own bit of success, we're compelled to take a chance on the next generation and help out where possible. It's something that can have huge leverage -- a small amount of effort on our part can be a huge boost to someone else, hopefully leading to a virtuous cycle thereafter.

It's also "good for business". Good deeds tend to come back to us in unexpected ways.

3. Dishing out the Dirt

a.k.a. "Tell it Like it Is". Ben Horowitz is particularly (in)famous for this.

We all have a desire to dish out the dirt, and lay it all out. But we can't. We're still beholden to the powers that be. Pissing off some famous guy or company (or even just saying how tough things are how mentally worn out we are) could come back to bite us. So we shut up. And wait. We wait until we've made it -- when we are no longer beholden to anyone.

Horowitz himself says in his book that he couldn't say most of the things in his book while he was running Opsware because of the possible negative effects it could have on the company. He has come out in full force since then.

Still, some VCs do things that I really don't like. This post is for them.

Four Things Some VCs Do That I Don't Like - Ben's Blog

Can you imagine anyone saying this while still running a (young) company? No way. A blog can be an outlet for all those years of not being able to publicly say things that you've wanted to scream at the top of your lungs to the world.

4. Position Building

Position Building is pretty interesting. It allows the blogger to gradually shift the trends in their favor by taking a position on an point that could be taken "either way". The key is that they take positions on issues where either position is arguably correct. This is in contrast to outright predatory behavior or misdirection.

The most visible form of this is often used by Venture Capital's older brother, Hedge Funds. The very visible founder takes the stage to shift discourse on a public security in his favor (ex: David Einhorn pushing hard for AAPL to buyback stock). VCs are more subtle than this. For example:

...some of the smartest founders I work with are taking advantage of the seed funding boom to raise larger early rounds, buying themselves more time to get more done and hit more of those critical inflection points. If you're only new and shiny once, get as much out of it as you can.

What the Seed Funding Boom Means for Raising a Series A - First Round Review

This is a well supported piece of advice within a well argued longer post. But "larger seed rounds" have recently been a point of contention between Angels / Seed Funds and VC Funds. Early stage or multistage VCs have been coming down the ladder into seed rounds, sometimes taking seed rounds for themselves and squeezing angels and Seed Funds out by offering more cash and a perhaps a higher valuation. Given this context, First Round Capital's (a young multi-stage fund founded in 2004) well reasoned advice can be taken as position talk that is beneficial to VCs over investors with shallower pockets.

Take Hunter Walk's (partner at Homebrew, a Seed stage fund) perspective on the matter:

Anecdotally, over the last 3-6 months we're definitely seeing more examples of larger early stage or multistage funds offer to do 80-100% of a company's seed round.

...

(c) Barbelling of VCs: There have been debates as to whether the VC industry is barbelling - that's to say, a number of near-billion dollar+ funds on one end and sub $250m funds on the other. To be caught in the middle, especially without a strong brand and partnership (aka the Benchmark exception), is to miss out. But theres a lot of capital concentrated in that middle right now, often in firms who have a partner or two known as top in their vertical but without necessarily a broader reputation in other spaces. Thus the firm doesn't see the breakout good deals in those other spaces. In order to go after them, they need to head earlier into seed. And they need to own enough of the company in order to get the returns they need from a $500m fund, so instead of owning 10% and splitting the seed round with another investor and some angels, they go to own 20%, which is more typical of their model in Series A and beyond. They're less price sensitive and more ownership sensitive, so these firms are willing to pay more to get the deal. This theory is the most structural one suggested here and I tend to believe is influencing some early stage investment behaviors.

Goodbye Party Round, Hello Piggy Round: Should Seed Stage Founders Raise From Just a Single Investor? - hunterwalk.com

He treads lightly in his post, offering 4 possible explanations as to why this may be happening (one of which I cited here). But as a seed stage VC, he isn't exactly enthused about this development.

It's a clash of positions. Both sides of the argument have perfectly valid points. As a founder, there is no clear right answer. But they write to steer things towards a more favorable future for themselves. There's nothing sinister or predatory about that.

5. Inbound Funnel

But ultimately...

Investors want to make sure they get 'the call' from founders when they begin fundraising - so they're motivated to send 'happy vibes' in order to stay around the hoop.

What the Seed Funding Boom Means for Raising a Series A - First Round Review

This is likely the biggest reason why VC Blogs exist today.


Ulterior motives aside, these blogs are like Google/Stackoverflow for a developer. Never have there been so many great free online resources to figure out what to do, what not to do, and where to go.

It's a good time to be a founder.