Fixing Venture Capital

I had the chance to read Joel Spolsky’s “Fixing Venture Capital“, and I had a great laugh at the Whack-a-mole game: I do play “Whack-a-mole” daily. Not only do I play, I am a “High Score” player.

However, I don’t play Whack-a-mole just to play it, there is a set list of criteria we use for selecting businesses for the London Business Angel Network, and if a business doesn’t fit those criteria, then it’s rejected. It’s that simple.

Any self-respecting VC is going to have a strict set of investment criteria. If companies do not fit within those pre-defined parameters, then the fund will not pursue that investment opportunity. This works for Mutual Fund Managers all the way down to Business Angel investors.

On many occasions I have had to reject businesses or ideas that I felt were good, but did not fit the criteria for the LBA and LSC closely enough.

Joel overlooks the fact that, for the businesses that meet the selection criteria, selecting businesses to invest in is very similar to choosing between straight-A students. VCs have limited resources- mainly in terms of time- and cannot give every idea or company the attention they probably deserve- especially B,C,D or F Students. Yes, occasionally the random “back row” student outshines all the straight-A students combined. We all overlook good businesses. We all make mistakes.

Regarding the VC model being broken, I definitely think there are many aspects of the UK VC model that are broken, but I will address those issues in future posts.

For now, go read the manifesto.

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