Terry Jones

I’ve been talking to people about raising money for Fluidinfo over the last 5 months. Along the way I’ve had plenty of time to reflect on the process. I have a series of blog posts saved up. They’re mainly about oddities and discrepancies between appearance and reality. I plan to write them up gradually. Here’s one I wrote earlier this year but which I never finished. It’s still unpolished – but what the hell. This is a blog, after all.

In September 2007, Fred Wilson posted asking whether VCs should blog. The first thing I thought about when I read his title was transparency.

Increased transparency is a side-effect of easier communication between people. There are many relatively opaque human institutions and professions that have persisted for decades or centuries, relying on the fact that their subjects or customers were unable to communicate easily, to self-organize, to be widely heard, etc. Exclusionary access to knowledge is the foundation of power. As barriers to communication begin to fall, openness and transparency increase. Cracks appear in the walls. At that point anything can happen. The typical response is a heavy-handed crackdown to maintain or regain control. Examples are so numerous and widespread that any small sample would be woefully inadequate. This never-ending dynamic is just a part of the human condition and the nature of power.

But in some arenas, especially when there’s a market or in repeated games (a rich area of game theory), there may be a competitive advantage to (usually) smaller players who act disruptively to deliberately increase transparency. Those players differentiate themselves by (often informally) defecting from the (often tacit) group of gatekeepers. Advantages may include potential clients tending to trust you more, wide attention, and better opportunities. If increased transparency gets a foothold, there can then follow a kind of race to the bottom as players reveal increasingly more formerly-inside knowledge. This is also a drama that has been played out many times, and it’s fascinating and educational to watch.

We’re now seeing the cracks open wide in the VC world. The rise of the VC blogger has provided us with hundreds of eye-holes through which we can get some view of the works. The VC bloggers are implicitly calling out their less open colleagues, challenging them to open up. An extreme example is Venture Hacks, written by VC industry insiders, whose aim is to “open source” VC strategy in order to aid entrepreneurs. Then there’s The Funded, which shook the VC world as formerly isolated entrepreneurs got together (and in relative privacy, no less!) to exchange opinions and experiences. While The Funded is unquestionably biased, and based on small sample sizes, part of the fuss was unquestionably about control.

I awoke yesterday with another thought about transparency, why VCs should blog, and the curious dynamics of the VC/entrepreneur dance.

VCs should also blog because it allows entrepreneurs to see who they are as people. That may sound trite, but I think it’s quite interesting.

I’ve attended probably 50 events where one or more VCs takes the stage and gives some kind of a presentation. The presentations are very often excruciatingly dull. That’s because they’re filled to bursting with VC clichés. Even when VCs make an effort to differentiate themselves they tend to use clichés! They’re active investors, they have deep experience, broad contacts, want to help management, etc. I sat in the audience at Le Web a couple of weeks ago while several investors were on stage doing their thing. I wound up laughing with the guy who sat next to me, who I’d never met before. We rolled eyes at each other, passed notes, and ended up whispering nasty and disrespectful comments during the presentation. We were obviously there because we were interested to learn more, but we were served up standard VC fare. Steak and eggs.

The interesting thing is that entrepreneurs are a wildly idiosyncratic bunch. One would therefore expect that they’d tend to highly appreciate signs of character and individuality in VCs. Meanwhile VCs tend to keep things buttoned down and insist on making dreary presentations.

If nothing else, the existing dynamics are amusing. Wild-eyed, power-hungry, idiosyncratic, unconventional, and often deeply weird entrepreneurs are trying to act straight, to project an image of reliability, stability, balance, good sense, etc., in order to get funded. Simultaneously, the VC companies the entrepreneurs are evaluating, and who partly rely on being attractive to entrepreneurs, go to lengths to homogenize themselves – in the process washing out the very thing that an entrepreneur might find most reassuring.

There’s opportunity in this discrepancy. VCs who blog about themselves, in addition to talking about their industry and flogging their portfolio companies, may have tapped into this. Allowing entrepreneurs to see what you’re like as a person is a differentiator.

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