VCs betting on ‘known entities’

I just met up with a local journalist and in casual chat about the venture capital scene in Boston came up a discussion around Boston VCs wanting to bet on ‘known entities’, i.e. entrepreneurs that either the same VCs or others have bet on before, and have been somewhat successful with. I have heard this term a few times now and since I am still new to the field, trying to make sure I understand it well. Obviously interested in learning what you think. Some thoughts:

  • When you look at some of the more successful VCs, they seem to have killer instincts for entrepreneurs. Not so much the technologies, but people who drive businesses to success. So yup, people matter a lot and one should certainly bet on them before anything else.
  • So who are the people we should bet on? Are these wild eyed first-time entrepreneurs who dare to think big and whose passion is infectious and scary crazy at the same time?, or those who have carefully thought through answers to our questions?
  • Are the ‘known entities’ in our circles really the big hitters? or do we risk restricting ourselves to entrepreneurs who have had small successes in the past and can’t see past that to those billion dollar exits VCs would like to see? There are not that many billion dollar  ‘known entities’ around, esp in Boston. At least not in my (admittedly small) circle.
  • Should we worry about what I call a ‘closed box syndrome’, i.e.  – group-think – if we keep talking to the same entrepreneurs on their 4th, 5th, 6th business plans? How do we think out of the box? I have observed a tendency among some entrepreneurs to think VCs must know what they are talking about and hence they change their pitches dramatically to suit the VCs. Generally it is not a good idea. Yes, take advice, but your idea is your idea and I am only reflecting on it from the outside.
  • How do you marry the ‘known entities’ with the aspiring first-time entrepreneurs to create the potential killer team? Maybe this is one place where VCs can help as matchmakers? But this is not a recruiting role. The passions have to intersect as founders for the creative juices to flow.

Anyways…just thinking aloud. Good VCs bet on great entrepreneurs, and as I observe my senior partners at GC, I see that in practice. I need to find those great entrepreneurs myself. So if you think you are one, and open to a conversation, just drop me a line.

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2 Responses to VCs betting on ‘known entities’

  1. Samir Shaikh says:

    I’ll ramble some on your blog as well, of course with your permission.

    In my experience investment on anything, be it a home for yourself, an asset, in your children, spouse, parents, friends, or even a philanthropic effort, of either time or money, or both is always successful if its done for the right reasons and more often then not by the right people.

    I always sought discussion on the following thoughts in my mind:

    * Why do VCs pay great emphasis on a grand defined business plan? Especially since the business plan must be more or less fluid enough to react to real world changes? The more important thing that is required is to ascertain judgment call of the entrepreneur and personal skills for the investor. If anything the business plan must be worked on in partnership between the VC-firm and the entrepreneur and in that process the two parties can make themselves ‘known-entities’.

    * Why is there no required document in the stack for the founder to describe who they are in their own words? And this could be a discussion point that is had over the meeting as well.

    Let me know your thoughts.

  2. Meena says:

    Bilal,
    1. Unless someone gave those tried and true entrepreneurs a chance – how would they have achieved their status? It’s dumb to go back to the you need experience to get a job but you have to have a job to get experience.
    2. Issue with old VCs working with newbees is that the tried and true ones might adhere to their ways…trampling the new ones.

    Samir
    1. you have my cousins exact name…except spelling; made me double take.
    2. Business Plan is just a check to make sure you can coherently create, put together, and present a concept. And to show you are invested enough to invest some time vs. just deciding something. It’s like college apps – take the time to write essays for what?
    3. Don’t VCs interview entrepreneurs? Isn’t that when they can ask?

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