venture-capital

S.T.O.P. = Start To Open Possibilities

A good portfolio manager knows which companies to keep and which ones to let go. Many a GP has struggled with portfolio companies that cannot meet their value-creation milestones, or raise additional follow-on rounds of capital, or generate target returns in a time span of, say, five to seven years. The faster you recognize those losses, the better it is._-__s David Cowan says, __ust focus on your top five__he rest is distraction._ The harder part of the investor's discipline is to know when to quit._-__ou have to constantly scan all of those things and be willing to adjust your own sense of what's a reasonable outcome and move the company into a position where it has the maximum chance to succeed. _-__ime is your enemy: Portfolio companies always take twice as much capital and twice as long to exit. Early-stage companies rarely meet milestones as planned and always burn cash faster than anticipated.

Each year about 600,000 start-ups are launched. Less than 0.5 percent attract VC. Of Inc. magazine's annual list of the 500 fastest growing companies in the United States assessed over a decade (1997_2007), less than 20 percent of companies were venture backed_ -_62.4 percent of VC investments were completely lost while 3.1 percent of the investments accounted for 53 percent of the profits for roughly 600 investments

Amidst all the hype and hoopla around this business, I wanted to emphasize the challenge__t is seductive but the failure rate is very high. And those who fail have no good place to go.

It is best to be the CEO; it is satisfactory to be an early employee, maybe the fifth or sixth or perhaps the tenth. Alternately, one may become an engineer devising precious algorithms in the cloisters of Google and its like. Otherwise, one becomes a mere employee. A coder of websites at Facebook is no one in particular. A manager at Microsoft is no one. A person (think woman) working in customer relations is a particular type of no one, banished to the bottom, as always, for having spoken directly to a non-technical human being. All these and others are ways for strivers to fall by the wayside _ as the startup culture sees it _ while their betters race ahead of them. Those left behind may see themselves as ordinary, even failures.