What’s the best way to understand investor behavior?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Difference Between Large Funds and Small Funds – AVC

I have always been a “small fund” oriented investor. Both models work if executed well, but they are different. With small funds, you only need to find a few good ideas a year to get behind. That is true in hedge funds, private equity, venture capital, and probably many other asset classes. With large funds, you need to get behind every good idea every year.

What’s the best way to understand how your VC thinks about your business?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Perception Of Conflict Is Conflict – AVC

If you cannot get an entrepreneur to listen to you objectively and rationally, then you have lost your greatest hope of postively impacting that investment. And that is a tool that VCs should not throw away lightly. So the meta point I am making in this post is that it isn’t the facts that matter when discussing conflict. It is the perception that matters. If anyone in a relationship with you percieves that you are in a conflicted situation, you … (read more)

What’s the best way to understand how your VC thinks about your business?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Venture Capital Returns – AVC

Early stage investing is hard. You lose more than you win. And when you win, you need to win big. Later stage investing is a bit easier. You can pick winners in that business more easily. But so can everyone else. Each deal is an auction and the winner pays the highest price. So the next time you are bidding one VC against another, maybe you can feel just a bit of empathy for us. We are in a tough business, trying to make a buck to live to fight… (read more)

What’s the best way to understand how your VC thinks about your business?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Where’s My Billion Dollar Check, I Wonder – AVC

Startups are hard. They require great sacrifice from everyone. They are stressful and fail more often than they succeed. And when you’ve been toiling away month after month, year after year, with no pot of gold in sight, it can be hard to watch that billion dollar deal go down. It’s a punch to the gut. It hurts. I’d love to say to all of you who are feeling that pain that your time will come. But most likely it will not. That’s the way this game… (read more)

What’s the best way to understand how your VC thinks about your business?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Can The Crowd Be More Patient? – AVC

Internet and mobile product development cycles are measured in months not years. And the capital required to get a product built and into the market is less than $1mm. And the returns, when things work out, can be enormous. Contrast that with biotech. A new drug takes $100mm in capital investment to get to market. And that process can take a decade or more.

What’s the best way to understand how your VC thinks about your business?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
From The Archives: The Poker Analogy – AVC

Early stage venture capital is a lot like poker. The first round is the ante. I think keeping the ante as low as possible is a good thing. I like to think of it as an opportunity to play in the next round and to see the cards. Clearly, we don’t ante up to just any deal, but it is very useful to think of the first round as the ante. For the first year or 18 months, however long the first round lasts, you get to “see your cards”. You learn a l… (read more)

What’s the best way to understand investor behavior?

Paul Graham (Co-Founder & Partner at Y Combinator)
Default Alive or Default Dead?

Kill-or-cure strategies are optimal for VCs because they’re protected by the portfolio effect. VCs want to blow you up, in one sense of the phrase or the other. But as a founder your incentives are different. You want above all to survive.

What’s the best way to understand investor behavior?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Fund Level Vs Deal By Deal Carry – AVC

Deal by deal carry has not been common in the VC business. It is more common in private equity where the distribution of outcomes looks very differently. But with the rise of syndicates being raised on venture capital marketplaces, we are seeing an increasing number of angel and early stage investors who have deal by deal carry. As I said, there are pros and cons to both compensation models. I don’t want to say that one is better than the other…. (read more)

What’s the best way to understand how your VC thinks about your business?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Some Thoughts On Tweeting Vs Blogging – AVC

[when thinking about Twitter] I had been blogging for almost four years at that point and was completely sold on the huge benefits that come from publicly sharing your insights, opinions, and decisions. I would advocate blogging to everyone. And folks would try it. And that vast majority of them (way greater than 90%) would not be able to sustain it. So when tweeting showed up, I thought “well this has most of the benefits of blogging but is at l… (read more)