As we close out the previous year and begin a new one, there is a natural tendency to make resolutions and set goals for the year to come. This of course holds true in many walks of life, e.g. enrolling in a gym membership, resolving to improve personal relationships, committing to advance one’s career, etc.
Venture investors perform an annual exercise in reflection too: renewing themes for new investment, preparing portfolio companies for exit, embarking on fundraisings. While I believe such an annual drill is important – actually I believe in “quarterly annual meetings” for strategic reflection – sometimes this exercise becomes overburdened by concerns for trends at the macro level, and this troubles me.
For example, wondering how deep the European recession will be in the upcoming year, or whether the U.S. economy is recovering or double-dipping, or whether too many angel investors are encroaching upon early-stage VC territory, etc. makes for interesting and worthwhile intellectual debate. However, to the extent that such considerations impact investment strategy or the pace of capital deployment, I think such banter can be a distraction and potentially unhealthy.
I feel this way because in venture investing, the micro matters more than the macro. I recently came across a statement from Sonali de Ryker of Accel Partners in the UK which captures the idea perfectly in my opinion:
“We are a bottoms-up business not top-down. Our business is about great entrepreneurs, interesting technology/consumer/buying trends and specific niches that then grow to make room for large businesses.”
Of course in venture capital we need to be conscious of macro trends when thinking about investment themes (e.g. mobile is going to be big; let’s invest in mobile). And of course we need to be aware of macroeconomic conditions that could have an impact on LPs and hence plans for GP fundraising. But if we get caught up in the trap of throttling our investment pace based on our interpretation of macro issues, we risk losing sight of the compelling opportunities right in front of our noses.
