It’s easy to see how early-stage tech VC investing can make arguably the largest returns. If you get it right investing in a disruptive business like WhatsApp or Alibaba can generate huge exits: a whopping $22Bn and $25Bn respectively (Sequoia Capital turned $60 million into $3 billion thanks to WhatsApp). And not just in The Valley: Skype was exited for €7.7Bn returning 317x the initial funds of €24m, and Cambridge Silicon Radio returned €2.0Bn from €15m, a 133x return.
But equally it can carry a lot of risk: market-timing, management capability, technology-fit, the business model are all crucial factors for investors to consider. And of course, that risk can quickly become expensive when, with so many tech startups, the signs are ‘nearly there’ and ‘just one more round of funding will do it’.
So, what’s the alternative? Well, many of the more consistently successful VCs get cited because they have experienced investors, sometimes entrepreneurs themselves, and often with a focus and supporting processes. But this is really an obvious point and inherently damning to those many VCs that exist and don’t have this. Surely in any sector, good processes and team is vital? Is that it?
Enter stage right a new style of early stage tech investing: ‘mammalian’ investing.