Ignorance is Bliss

They say ignorance is bliss and I’m beginning to appreciate the sentiment in new ways. The more I learn about a company and/or industry the more I realize just how little I know and how much more I want/need to learn. In case you didn’t know, I’m a VERY big fan of knowledge and one of my philosophies is that one can never know enough. Having said that, you might find it somewhat paradoxical that I’m a VC given what it is we VCs do for a living. Well, I have two thoughts I’d like to share with you. First, as much as I enjoy the quest for knowledge and the intellectual exercise of analyzing risk, I fundamentally believe that it is simply a means to an end and that one can suffer from “paralysis by analysis” if he or she loses sight of the overall objective of simply determining whether to make an investment (i.e., whether the potential reward justifies and outweighs the risk). Second, being a seed and early-stage investor is ALL about taking risk given the nascent natures of the companies we invest in. There is always a “leap of faith” on our part. We simply have to qualify and quantify such leaps and mitigate any risks (both those identified and those yet to have been identified) accordingly. As daunting as that sounds, it is absolutely invigorating and I LOVE my “job” such that I don’t consider it work at all.

Venture Capital was historically known as “Risk Capital” for the simple reason that its practitioners risked money on new ventures with the hopes of making many times over their money back for having taken such risk. Some have been arguing of late that the rewards just aren’t correlative to the risk they are taking with today’s start-ups.  Ask most seasoned VCs whether they would have invested in their biggest hits to date if they knew then what they know now and almost all of them respond with a resounding “no, too risky”. As fund sizes have grown larger, firm’s investment strategies have gravitated towards later-stage companies…seemingly leaving somewhat of a void at the earliest stages of investing and to those willing to take such risks. I, for one, am willing and up for the challenge.