Define success. Most VCs seek to produce financial returns within the vintage of the fund in question, which allows them to raise another parallel or stacked fund in the foreseeable future, with lofty management and carry fees to boot. Great entrepreneurs seek to change the world for the better, or otherwise, you are merely a “greater-fool” bottom-feeder.
So, you can see how the definition of success of a VC is different from that of an entrepreneur. Granted, these outcomes are not necessarily mutually exclusive, but their difference leads to much dispute about what either considers the upside and forms different roads of downside to get to the upside. Exasperated by the extreme fragmentation, collusion, and sub-priming of venture capital, few VCs have the wherewithal to spot and support the full runway of meaningful innovation.
VC success is not even defined by the success of one venture capital fund but defined instead by the consistent returns derived from venture as the asset allocation. So, while one could dig to get (and I have gotten) the absolute returns of venture capital firms (in Silicon Valley), the real success of a venture firm is like that of a restaurant. A consistency of performance by which an asset manager is inclined to return and “dine” again. And some of the biggest names in Silicon Valley, like KPCB and DFJ, have failed miserably in delivering consistency of returns. So, last or current vintage venture-firm returns are only as relevant as your last meal at a restaurant, with the exception that a bad meal is sure to make a lasting impression on discerning entrepreneurs.
The key to defining success for an entrepreneur is the ability of the investor to envision the upside painted by the entrepreneur. An alignment of foresight not steeped in a religion of hindsight, but derived from the brave new world of foresight. In pursuit of the way and excellence by which the world is supposed to work, rather than does. Critical and unaccepting of mediocrity.
Using those metrics, I would say 100% of venture capitalists miserably fail today. As Elon Musk’s story so saliently highlights, none of the Silicon Valley VCs understood the opportunity, or Elon’s wherewithal to make it happen. Even after his success at PayPal. A reason why he had to tap out his own $30M or so and was rescued by Mercedes at some crucial time. Later on, when he crossed the chasm, many VCs jumped on the bandwagon as success is known to claim many hopeless fathers. And a mention of Tesla in the PPM (the “business plan” of VCs) will do wonders in raising another fund.
So, the pickings of VC based on the terms of a broad definition of success are slim to none (despite their returns), and perhaps not all that relevant. Your past performance as an entrepreneur may not be an indicator of your future success, either. You can, and must, however, find a VC that because or despite their performance in the past, has the unique foresight to align with your portrayal of feasible upside. They must be able to demonstrate to find no solace or comfort in the perpetuity of hindsight, for as the outlier you are, your innovation, societal impact, and drive will have no precedent.
