Getting to "yes" in a world of "no"…


(This week’s guest post comes courtesy of a well-known celebrity VC blogger.)

When your startup’s magnificent plans inevitably crumble to Ozymandian dust in the face of some unforeseen market reality, VCs often say it’s simply your customers’ way of telling you to change direction fast, AKA “pivoting”. So, if Muammar Gaddafi were a startup in my portfolio, what do you think I should be saying to him right now? “Pivot, you moron!“, right?

Well… there are those who would point out that the sustained highlights of 42 years of the Libyan Arab Republic make pretty persuasive slideware:

  • plenty of traction (usually at gunpoint)
  • great channel control (also usually at gunpoint)
  • extreme horizontal and vertical integration (forming a monolithic state apparatus)
  • sustained dividends payouts to keep the execs motivated (typically in Swiss bank accounts)
  • sustainable advantage from a chokehold on regional resources (of the liquid, black, underground variety)
  • strategic alliances with well-funded allies (Idi Amin, Bokassa, Mengistu, Charles Taylor, Gordon Brown, Patassé, etc)

Having myself seen thousands of startup presentations, I think that if you presented a killer presentation deck full of slides like the above, most VCs would eat your hand off even for a slice of the Series Z round. So, when Gaddafi’s IP (‘Ideological Property‘) is so clearly a winning formula, why on earth would anyone want to fix something that isn’t broken?

Well… if you believe the news reports (which, as you know, VCs never do – the world outside Sand Hill Road remains eternally off our radar), events in Tripoli would superficially seem to indicate that Gaddafi now has active competitors in his segment. However as we modern VCs like to say, the presence of competition merely validates the whole marketplace. Hence for us, fighting on the streets is no more than a market signal that Libya is indeed a prize worth fighting for.

It’s entirely true that back in 1969, VC firms would surely have invested in risky, passionate, ambitious young guns like Gaddafi (though for, say, Sequoia Capital, this would not have been possible – it was founded three years later). But really, we’re now far more interested in backing old guns: those heady days are long, long gone. And even though as an industry, we continue to be obsessed with talking about startups and with blogging about pivoting, you have to understand that in reality we find it 20x easier to do deals with mature industry players (e.g. Gaddafi circa 2011), simply because the main reason they need money is greed, not growth. Which is an attitude LPs in Menlo Park can really relate to.

Don’t get me wrong, VCs still love backing startups: the only caveat being that we tend to define ‘startups’ as “40-year-old firms with multi-billion dollar revenue who don’t actually need VC money“. So what do you think now: should Gaddafi pivot? I’d say no way – if he was smart, he should email us a deck, I’m sure we’d be able to work something out…

* * * * * *

(PS: a note from the editor: it’s a little-known fact that the letters in the phrase ‘Venture Capital’ can be anagrammed to form

  • An Evil Pact – True!
  • Let Avarice Punt!
  • Cue Viral Patent!
  • Crapulent Vitae
  • Vertical Peanut
  • Teacup Interval

Enjoy!)

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