What Paul Graham and Fred Wilson are Really Saying

Don’t chase.

The meme going on right now in the VC/Startup world started with Paul Graham. Fred has a post too.

I keep my investing simple. I try like hell not to chase. I keep my math simple. It has to be simple enough I can run the numbers quickly in my head. By having simple systems you have context. It’s not perfect but it helps you visualize outcomes. If it was perfect, $ZNGA would have stayed at a $3 million valuation long enough for me to wire my money.

I wish I would have chased and broken my rules when Fred Wilson offered me twitter shares at around a $20 million valuation. Quite simple, I could not visualize an outcome that would get me returns I needed with an understanding of the dilution I take from being a one and done angel investor.

If you are a venture Capitalist in 2012 you have a shitpile of money to put to work and a crowded landscape of investors. No matter how many companies are getting started – and there a zillions – the best get crowded.

I love AngelList of course but I believe it’s purpose is to help the best companies get funding…FASTER and crowdsource the best investors that will help the company accelerate at speeds never seen before.

Crowdfunding and Social Graphs and the tools of the trade used properly on today’s batch of startups is startup steroids.

Steroids helped sluggers break all the home run records, but in the end, there are a lot of asterisks. I smell a lot of 2012 Silicon Valley asterisks. I have a few in 2012. My first since 2007.

There have been plenty of warnings pre the Facebook IPO. Paul Graham’s email is just a friendly reminder of an old adage: ‘Just because I said jump off that bridge does not mean you should’.

Think for yourself. Follow some basic rules. Early investing is the riskiest investing class I have ever participated in. I love it because I expect the worst and I manage the expectations as best I can for all involved.

It feels like I am in the minority though and for that reason yes you should be wary.

PS – Always be building lists and hunting as some people call it. It works in the stock market and now with AngelList and Crunchbase it works in the tech and start-up world. Just because the valuations and exits may start to come down and dry up does not mean you stop devouring dealflow and data so your feel and eye stay strong.


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  3. Ryan Speers says:

    “Crowdfunding and Social Graphs and the tools of the trade used properly on today’s batch of startups is startup steroids.”Golden quote.

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  5. terrific post Howard. It is great for people to not get caught in ‘herd’ mentality and as William mentioned – it always interesting to experiment with breaking a couple of the rules

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