What's 🔥 in Enterprise IT/VC #282

Lessons from the early days of VC, relationships not transactions, doubling down when others won't

Mar 26

I’ve been reading The Power Law: Venture Capital and the Making of the New Future by Sebastian Mallaby which traces the history of VC and the idea that a small handful of companies generate the majority of returns for investors. Mallaby’s book also reminded me of how VC was in the early days, an industry powered by deep and strong relationships with the founders. With all of this 💰 flushed into the system, I feel that the world is becoming more transactional and data driven versus relationship driven, and Power Law is an important reminder for all of us to make sure we focus on more than just the numbers and don’t lose the personal touch.

It’s the personal touch and deep connection that gave Kleiner the conviction to double down on Tandem when no one else would. If investors want to buy up in companies and increase ownership as companies grow, one of the only ways to do it is to have inside information and conviction when others don’t. It’s having the belief a winner is a winner before others believe it is. Here’s a great example:

Ed Sim @edsim

Art of venture - want massive returns? Double down on winners especially when others don’t think so…goes back to 1975 when Kleiner was practicing this art Must read Power Law from ⁦@scmallaby⁩ a.co/g0GI973

This brings me back to the Kustomer closing dinner which was held this past week with the Kusty exec team, investors, and bankers. It was so awesome to finally see everyone in person for the first time, celebrate, and also share stories on the

journey from day one. That evening I was also reminded of the fact that everything was not always 📈. Fundraising was tough in the early days after the A round, and we at boldstart, Social Leverage, and Canaan led a bridge round between the A and the B, to buy more time to hit a few more product milestones and close a few more customers.

So what gave us the conviction to write a bigger check in the bridge round than in our initial seed? Relationship and true belief in the founders and team’s ability to deliver the additional features needed on the product to close more deals. Fortunately that turned out quite well. In fact, looking at a number of our best companies and 🦄 in the portfolio I can say that almost all of them had a few bumps in the road and needed a bridge between some early rounds to get to the promised land.

Here’s how the evening ended…with Vikas Bhambri aka @spicedawg56, our first

Ed Sim @edsim

So we promised @spicedawg56 we'd dance in Times Sq if he crushed the @kustomer ARR goals for the year...so here we are a few months later - I would have thought we'd have something more energetic than Careless Whisper by Wham - got to have fun + where was the rest of the board 🤷🏼‍♂️

and only Global Head of Sales, and I dancing in Times Square for a debt owed on a bet made at a board meeting. I will miss the entire Kusty team but along the way I made new friends, learned a ton, and had lots of fun. Founders, investors remember - relationships matter and if you want to make it through the tough times and also realize outsized returns, focus on relationships and not transactions. And who knows you may get to brush up on some of your dance moves along the way!

As always, 🙏🏼 for reading and please share with your friends and colleagues!

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