Great piece in the Boston Globe yesterday by Scott Kirsner: In Venture Capital, a Growing Rift Over Blogs. It’s the best look I’ve seen so far into why some VCs blog and why others pass. Makes some excellent points about the main advantage for VCs — better deal flow — and the main advantages for entrepreneurs — leveling the playing field, including from a geographic standpoint. That latter point is one I’ve written about a lot, and a very real issue for founders not lucky enough to be located in one of the VC hotbeds.
I like the way Kirsner characterizes VC blogging as the "new parity in the world of venture capital."
The article quotes one of the best-known VC bloggers out there, Fred Wilson of Union Square Ventures in NYC, a guy who’s invested in many Internet and Web 2.0 deals. Here’s an excerpt from the article that quotes Fred:
Venture capitalists who blog say it isn’t just about helping pump up
their firm’s reputation and show how market-savvy they are. Blogging,
writes Wilson via e-mail, is "the best tool for VC investing that I’ve
ever seen, and I’ve been in this business for more than 20 years."Wilson
says his blog not only helps him meet more start-ups, but it brings him
companies that are "more targeted and more relevant" to the areas he’s
interested in. Wilson also likes it when his readers argue with him or
tell him about companies he might not already know; it’s not unusual
for one of his posts to attract 25 or 30 comments. "You can’t buy that
kind of education," he writes, "and I get it every day for free."
Later in the piece, an opposing viewpoint is put forth:
"My gut says that there’s no correlation between VC blogging and
financial returns," Spark Capital’s (Bijan) Sabet says, noting that blogger
Fred Wilson has done well with his investments – but so has John Doerr
of the Silicon Valley firm Kleiner Perkins, who doesn’t blog but has
put money into Amazon, Google, and Intuit.
The trouble with that characterization, however, is that those latter deals were done long before blogging was popular. Granted, it’s hard to argue that big-kahuna KP needs to blog. But there’s a whole universe of newer, younger VCs out there who are finding it benefits them.
IDG Ventures’ Jeff Bussgang adds this great thought:
…as entrepreneurs increasingly maintain blogs of their own, Bussgang
says, "they want to see that the VCs are their peers and are wrestling
with similar issues and thinking through things."
I wonder how many VC bloggers will be at DEMOfall, starting later today? I’m looking forward to talking with them.
What do you think about blogging representing "the new parity in venture capital"? What are your experiences?
Hmm.
I guess how from my quote you can assume I’m against blogging. But that isn’t true. I blog every day.
I told Scott that I don’t think it’s for everyone. That’s all. For some of us, it’s invaluable. For others it’s not. And there are plenty of successful VCs that don’t blog and they have had recent big wins (Mortiz/Sequoia, Brody/Redpoint, list goes on).
For more on this see my blog 🙂
http://sabet.typepad.com/bijanblog/2007/09/why-i-blog.html
I think whether you blog or not is based on your personality and how comfortable you are sharing your ideas with people good or bad.
I am never going to know as much as I want to about technology and investing, so I use blogs as a way to educate myself. Being in fly-over land, I don’t get a chance to network with coastal VC’s.
As for networking and marketing, the one challenge as a VC blogger is not to eclipse the firm brand.
But it is fun….
The more information they are willing to publicly share, the better entrepreneur pitches will become!
Guy Kawasaki’s (Garage Ventures) blog has really helped me!
I can’t say I know enough about VCs to form a solid opinion about their blogging habits. One of my customers, however, is a former VC who just started his own Web 2.0 business, and he and I are collecting info on blogging in his industry. Your post is one I’ll share with him in our research. Thanks for gathering this information.
Interesting question — actually, a larger question than whether blogging makes VC more efficient — does blogging make complex, nonlinear processes more efficient?
– Venture capital is a nonlinear process — it’s not about rolling ‘widgets’ off an assembly line. There is much complexity and uncertainty on both sides of the equation. It’s a delicate dance to bring suitable parties together and close a transaction. We can’t see the end from the beginning.
– Information theory tells us that the quality of a nonlinear process will increase in direct proportion to the granularity of information units and the frequency of feedback cycles in the system. In simple terms, think of an auto.pnglot system that senses and adjusts 10,000 times per second vs. once every 10 seconds. Tight linkages — frequent and small adjustments — produce higher quality.
Any form of communication — blogging, e-mail, instant messaging, smoke signals — that produces tighter feedback loops and more complete information in real time will improve the quality of results. More qualified buyers and sellers finding each other — more qualified investors and investments finding each other.
I do agile development with my developers in Bulgaria using instant messaging. Sure, we could communicate less frequently in units of information that are larger and more rigid — and we would produce results that are lower in quality, higher in cost, and more extensive in schedule. Same principle applies to the ‘hunt’ in which ventures and venture capitalists find each other. Although the venture financing process has historically been a complex, nonlinear process, market forces are shaping it into a more collaborative, more symmetrical, even more nonlinear process. It’s about suitable investors and investments finding each other. As the capital markets become more collaborative and interactive (more ideal in their market characteristics), they will benefit increasingly from communication that is more granular — more agile. Perhaps we’re embarking on a new era of ‘agile’ financing.