VC Cliché of the Week

The hardest part of the VC business is knowing when to fold.

It's a decision frought with emotion. The pain of admitting you made a mistake. The setback of a financial loss. Letting a group of people who have worked tirelessly for probably years know that you are shutting them down. I could go on and on. Just thinking about it is giving me agita.

But possibly the hardest part is actually making the decision to fold. Because "it's always darkest right before the dawn".

I am an optimistic person.  And I have been involved in some spectacular turnarounds in my twenty years in the VC business. 

I remember Multex staring down a patent lawsuit, a failed sale transaction, and a empty bank account.  And Isaak pulled that one out.

I remember Bigfoot reeling from an acquisition that came with way too many liabilities, burning cash, the weekly calls to Silicon Valley Bank to keep the line open, and a last ditch financing that wouldn't close.  And Al pulled that one out.

I remember Gurunet left for dead with no business model, no investor base, and no management team.  And Bob pulled that one out.

I remember Comscore watching its customer base disappear, facing a merger of two competitors who would shut it out of the audience measurement business, grappling with a huge real estate liability, and an envrionment when nobody wanted to put any more money up.  And Gian and Magid pulled that one out.

I'll stop now, but I assure you that I could go on and on.

The venture business is full of these stories of willful entrepreneurs who cannot and will not fail. And I like to stand behind them if at all possible.  Because I have seen the pitch black darkness that comes before the dawn.  And I know that if you can get through that period, you will make it.

Comments

[Constantin]

Great and inspiring post, thanks a lot!
I'm an entrepreneur myself and your posts are very useful for me. Thanks again!

[Tom W.]

Fred - my all-time fave cliche post - having been in the darkness myself twice, so very true.

[Jackson]

It suddenly hits me, never play poker with Fred.....

"You gotta know hwne to hold 'em
Know when to fold 'em
Know when to walk away
Know whne to run
You never count your money
When you're sitting at the table
There'll be time enough for counting
When the dealing's done"

[Raj Bala]

Your stream of consciousness posts, such as this one, are always my favs.

[Brij]

Great post.

How do you generally go about handling entrepreneurs during these "darkest" moment?.

There are tons of literature for training management team on how to handle crisis but how does entrepreneur and VC relationship plays out in similar situation.

Thanks

[Laurent Kretz]

Wow ... a piece of literature !
As Tom, one of my favorites Cliche.

As every first time entrepreneur, I read and read and read .... to get feedback, insight, ideas, answer questions....
And before the (long-awaited) launch, I apprehend those dawns that we'll have to face ... Like a surfer paddling to the break point and seeing ahead of him a series of waves he'll have to duck under .... !

Great post. Inspiring.

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[Ari Newman]

this is both a cliche' and a truth - to me this is a triggers a reality-check for venture investing. For every turn-around story, there are holes in the ground still smoldering where a young promising start-up used to live. Having been on both sides of this fence I believe knowing when to fold is one of the hardest decisions to make. Even a fire sale is better than a total crater if there is no cash left. So, build a solid foundation, use concrete...