Columbia’s Private Equity & Venture Capital Conference
Yesterday was the 17th Annual Columbia Business School Private Equity & Venture Capital Club Conference. We had a slew of fantastic speakers, a plethora of outstanding panelists, and the 750+ attendees were a who’s-who of the industry. Part of my role as co-President of the club is getting credit for things I actually had very little to do with, and the PEVC Conference is certainly an example of this. The event was great and Laura D’Antonio, Sean Karamchandani, Kunal Shah, Matt Wiener, and their army of AVPs and volunteers deserve all of the praise.
Our afternoon keynote speaker was Stuart Ellman, co-founder of RRE Ventures and a member of Columbia’s adjunct faculty (I’m also the teaching assistant for his course which he teaches with Will Porteous). While Stuart was writing his speech in the weeks leading up to the conference, I was privy to the drafts he produced as well as several conversations he had with colleagues about key sections.
I won’t share the details here, but one thing I was previously oblivious to was how time-consuming the preparations are for these sorts of speeches. Apparently, most speechwriters guess it takes one hour of writing, revising, and rehearsing for every minute of speech-giving. Stuart spoke for about 30 minutes which is roughly in-line with the 25 hours he estimates it took to produce the final work. I would highly recommend checking out his full speech (warning: my shaky intro is up first), but I transposed the last minute or so below. His major theme was about challenging all players in the VC industry to be unconventional in their thinking in order to find the next big idea. Here’s my favorite part:
So, what does all this mean for venture capitalists and limited partners, and what relevance, if any, does it have for entrepreneurs?
First, for Venture Capitalists, recognize that an overwhelming number of people and firms in our industry are trying to succeed conventionally and that an enormous amount of capital will flow to companies that represent what has recently come into fashion. If you are doing a deal, do you really KNOW that it is the best company in a given market space? Do you really understand the sheer number of competitors that already exist? What do your best entrepreneurs, particularly the young ones, think about this deal? Above all, do not fear the unconventional.
Secondly, for Limited Partners, recognize that success in the future will not necessarily look like success in the past. Outsized returns come from unusual risks. You want your general partners to invest in and build the next generation of great companies; recognize that those opportunities aren’t necessarily going to be in “hot” spaces when they do the deals. Instead, listen for the tension, listen for the controversy, listen for how your GP’s expect value to be created in non-standard ways.
Finally, for entrepreneurs: Be bold! Be original! See where the crowd is going. Understand the “new” conventional wisdom and the extraordinary flows of capital that gravitate toward it and do something different. Be determined and, most of all, do not fear failure.
In the end, it all comes down to how you think about failure. I tell my companies not to fear failure. I tell my students not to fear failure. I tell my children and myself not to fear failure. I would rather fund someone who has failed for the right reasons and is hungry than someone who was successful and either complacent or lucky. For venture capitalists, failing conventionally is not really taking a risk. It is just doing what the rest of the industry is doing and dying a slow death. The only way to really fail or succeed is to take big, unconventional risks. To do less is to condemn yourself to mediocrity.