Q1 Capital Partners

Baseball and venture capital always seem to make an effective pairing for analogies. As in baseball, much of the cachet of venture capital is inspired by the romance of the metaphoric grand slam. The recipe has been the same since venture capital began: Find a team, give it money, sit back, and wait for the bloom. Most investments fail. But a few could be big winners and make it all turn out just fine. It used to be said in this business...

As a venture capitalist, I’m constantly on the receiving end of pitches from entrepreneurs looking for capital. Over time, I’ve found that these pitches fall into three categories: (1) The Introduction, (2) The First Shot, and (3) The Full Pitch. The same mistakes regularly appear in each category—following are some of the common ones and what you can do about them.

There is an oft-repeated mantra than venture capital is broken.  The evidence cited is the dismal absolute median returns of the venture capital industry.   It is true that the venture asset class has become more competitive in the economic sense, i.e., excess returns are more difficult to achieve.  That is to be expected.   Excess profits attract competitors and returns decline.   But that doesn’t mean all competitors converge to the equilibrium return. It just means that the winners will either have the same strategy as every one else with better execution, or simply better strategies.

I have been spending time sitting down with a variety of cleantech VCs on both coasts lately, and I find it to be always a very humbling experience.  Hearing how all these smart investors approach this unique sector -- and in a variety of different ways, I might add -- always serves to remind me how much more I have to learn about venture investing in this sector.

And that's one of the things that's broken about venture capital in general......

William H. Davidow, a venture capitalist, says he would want to know why an entrepreneur’s last deal failed “and what the person learned from it.”

Alan Patricof, managing director of Greycroft Partners, a venture capital firm that invests in digital media companies, offers this view of how venture capital investing has been changing.