Having been around the block in the venture capital business for some time, like many of us, I look forward to reading the Forbes Midas List that Alex Konrad puts together of the 100 greatest venture capitalists of the past year. If nothing else we are all curious; who will be on it, what are the great companies they are credited with and what is the rationale for their selection. So when the latest list was recently published, I went through it carefully looking at each name and the featured company for which their success is credited. My first impression was, great list of investors, great list of companies, but couldn’t help but notice that Twitter was mentioned 10 different times giving new meaning to the phrase “success has many fathers.”
However, as I dig deeper into the names of the venture capital investors listed, it was hard to refute the quality of the people and their work, for these are not just a bunch of one-hit wonders. In my humble opinion, they include some of the most talented people the venture capital business has ever seen, not only because of their amazing ability to invest in big winners but also because of their ability to repeatedly produce great outcomes on a consistent basis. If you examine the criteria for why these tech investors were selected you learn that the top ten VCs have each had an average of 13 significant successes over the last five years. Anyone who understands our business knows that this is nothing short of remarkable. Having repeated success, especially for those that do it at the earliest stages of investing, is like capturing lightning in a bottle and then doing it again and again. In this respect, venture capital is like no other asset class and why there are so few practitioners and so few venture capital firms that do it well – in short it is why a relatively small number of people account for so many of the biggest outcomes.
So what is it about these individuals that make them so different from the thousands of people who call themselves venture capitalists? Having had the pleasure of working and collaborating with more than 40 percent of this year’s Midas list winners, I can personally attest to the fact that it is no accident that these folks are able to accomplish the amazing things that they do. They don’t just place a lot of bets and hope for some pay-off. They are formidable risk takers, but in a measured way, bringing deep knowledge and tremendous experience to the table. Having been to the movie many times before, they know what works but also have the scar tissue that comes with their failures. They know how to embrace entrepreneurs with audacious dreams, yet they are grounded in intellectual honesty. They thrive on the basic idea that by putting the best people in roles that allow them to do their finest work, good things will happen. In essence, what they offer entrepreneurs, beyond the capital, is a playbook for success. And when done well, it is a business philosophy that leads to great outcomes even when applied outside of the tech sector. Just look at what Joe Lacob did after becoming the majority owner of the Golden State Warriors. By applying the skills he developed as an extraordinary venture capitalist at Kleiner Perkins, he turned a failing NBA basketball team into a record-breaking success story.
All this said the thing that I am most proud to share about the people I know on this year’s Midas list (and of the many great venture capitalists that came before them) is that they tend to be genuine and honest people who do not see the world as a zero-sum game. I know this sounds almost naïve, but when you build companies with the advantage of technology and the incentives of shared ownership to attract the best talent, the idea of cheating just does not make any sense. That is not to say that venture capitalists don’t care about their personal net worth. But for most, money is more of a by-product of their efforts, not their primary focus.
So what do great venture capitalists care most about? I would maintain that more than anything else, it is about the opportunity to disrupt the status quo.
It is about helping to create that which seems impossible to others, whether it is transforming an industry, helping to create a better future or reshaping a basketball franchise into world champions. Needless to say, these are not challenges for the faint of heart. It is very hard work. So when it is done well and done well repeatedly, it is certainly worthy of acknowledgment and praise. So hats off to the 2016 Midas list. May you invest long and prosper.