In Praise of Venture Capital

Recently, the health food store in my home town announced that it will close.  Vitamins, alas, have been slow movers during the Great Recession.

As an entrepreneur, I generally pay attention to such for-whom-the-bell-tolls moments, but in this case, it hit especially close to home.  My parents, both health nuts, had befriended the owner and learned that he will soon lose his house, which he had mortgaged to open the business.

Fellow Silicon Valley entrepreneurs, let this be a reminder: While there are many flaws in our world of angel investors and venture capitalists, we are very fortunate overall.

On Main Street, even seasoned professionals must sign deals with the devil to get six-figure loans.  When their ventures fail, banks unflinchingly extract their pound of flesh from the founders.  On Sand Hill road, we have somehow come to see cliffs in founders’ vesting schedules as atrocities. is young, and I fully expect to publish some critiques of the venture industry as we accumulate more experience, but I vow, now and publicly, to remember: while VCs sometimes use tough terms to juice returns, I have never heard of a VC-backed founder who lost his home on the way to the deadpool.


5 thoughts on “In Praise of Venture Capital

  1. An interesting aside, which has little to do with the VC content of this post but rather the health store observation : I’ve read that GNC is actually doing very brisk business now with people who are self-medicating because they cannot afford to see a real doctor (e.g., taking echinecea rather than antibiotics). I imagine your friend was more scrupulous.

  2. *Perhaps* Along the lines of Melody’s comment…

    It seems that many businesses are in fact facing an economy in which ‘Mom&Pop’s’ will inevitably go under if they don’t effectively ‘go digital.’ As a sort of non-sequitur I’d recently seen an episode of CNN in which Google was featured… What fascinated me was the segment on Google Ads. There was a business that had begun as a “Mom&Pop” with no VCs in sight for them (they were est. in the 1800s) & succeeded locally without the immediate ‘global’ pressures such entreprenurial ventures currently face including… the gigantic pharmaceutical-juggernauts & their online counterparts (as an aside, I wonder what % of GNC’s profits are generated from online sales.) This particular entity(M&P Business) on the segment had evolved to the point where it made good ‘cents’ to purchase a geographic/key-term -based segment of ‘google ads’ and effectively *eBay-ify* their business on the largest ‘search market’ in the world: Google. They’re doing amazingly! (Despite their continued reliance on eBay itself for generating a % of their profits.) Fortunately, Google is still *useful. This brings me to… What is’s role?

    At any rate, it certainly seems like this forum is trying to function as a sort of ‘consumer-reports-cum-online-better-business bureau’ at the same time. It’s a very interesting premise. If I’ve understood Melody’s point correctly, it’s that should not attempt to *encourage people to seek out non-expert opinions on crucial financial matters. After all, too is a *business* and might suffer financial liability from *bad advice* as in ‘go buy virtual real estate! it’s guaranteed to pay off!’ That doesn’t mean, however, that I wouldn’t* recommend perusing such a site as this in the meanwhile if it simply meant that I could become better acquainted with the questions to ask/concerns to have/etc… However, it would certainly be frustrating if & its peripheral ‘fB app’ turned out to be as *useless to e-consumers as WebMD has proven for doctors & their patients–a colossal time/money waster; you probably should just see an ‘expert’ for diagnosis. To say otherwise would be in your terms *not scrupulous. Trouble is that financial advisors just seem universally creepy. Friend-based ‘financial advise’ *ought not steer anyone ‘wrong,’ if it does, you turn to your friend to fix it. That’s the difficulty I see on the horizon for If anything can go wrong, it usually does. At the moment, I’m just wondering what challenges sees itself facing in 2011? Where would they like to be v. what do they ‘accept’ as ‘reality’?

    I only say, that I doubt these guys are simply ‘WebMD-ing,’ with personal financial products. They must already be familiar with that concern… right??

  3. I should add further that I (same poster as above) have been approached by & invited to apply for a paid blogging position. I’m appending here to put my above post in context.

  4. What amazes me about VC and Private Equity is their lack of knowledge about a lot of the things they throw money after. Then the VC & PE trying to steer the company in a different direction without fully understanding the ramifications from changing the flow.

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