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Wilson: Herky Jerky Investing

Fred Wilson (USV) has today’s VC Post of the day titled Herky Jerky Investing. In it he refers to a WSJ article where several very prominent VCs have recently said they are backing off investing at frothy valuations and now going and looking off the beaten path.

Fred – as usual – has very a very focused reaction to this:

“I am not a fan of this start and stop style of investing. Nobody can time markets. You can’t deliver great returns to your investors by being a momentum investor during some periods and a value investor in others.

I believe the only way to be a top performing investor in any asset class is to have a disciplined investment strategy and approach and apply it consistently and actively in all markets all the time.”

I (Brad) strongly agree and weighed in with my own comment with a cynical view:

“I had the same reaction to the WSJ article. Actually, I had a stronger reaction: “what a load of bullshit – why does the WSJ publish stuff like this and why do VCs say things like this?”

The only thing I could come up with is that it’s actually a head fake from the people saying it with the goal of getting some of their fast followers – VCs who are investing with them, competing with them on “hot deals”, and driving prices up to “slow down and blink” so there’s less competition.”

The comment thread on Fred’s post is very interesting – I encourage you to go take a look and form your own opinion.

January 5th, 2012 by     Categories: Venture Capital     Tags: , , , ,
  • http://www.activetheoryinc.com Alex Gourley

    As usual your opinion is a better read :)

  • Mark Montgomery

    Well guys, I agree with you — I actually had a similar reaction each time I discovered the valuations in each of the rounds along the way, but it was mature of the WSJ to finally balance the scales just a tad. Financial engineering is nothing new, nor is herding, self valuations, hype, media relationships and all the rest, of course, and sometimes on rare occasions it even coincides with real value creation through business building–Lord knows it’s not easy to gain adoption of essential innovation in our society. However, in macro context I thought the piece represents bubble economics introduced to VC in a very big way in the 1990s, sourced in no small part by underfunded pensions chasing unsustainable returns (at that volume), strategic mandates and all manner of other toxic influence to rational economics. Of course one inside joke with LPs links tech with housing directly— slinging spaghetti¬†tonnage¬†against the wall because 4x the amount was invested in RE assets, debt, and equity–than tech business, not to mention public sector jobs reliant on the unsustainable tax structure that expanded easily with the bubble, but just can’t ever seem to contract….. but then that’s just one humble entrepreneurs’ conclusion based on decades of exposure to the negative impacts in the market.

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