An Update on Consumer & Enterprise Venture Capital
Inspired by Bill Gurley, Chetan Puttagunta on Invest Like The Best
Worth Stealing
Downturns filter the founder pool
Easy capital turns entrepreneurship into a career option. When money tightens and starting a company stops looking like a safe bet, the opportunistic founders leave. The ones who remain were going to build something regardless.
Starting in a trough gives you a tailwind
A company founded at the bottom matures just as conditions improve. The macro becomes an ally, and the hardest early problems, finding customers and finding people, get easier as sentiment recovers.
Staying private too long loads a time bomb into the cap table
Private cap tables are built to go up. In a downturn, anti-dilution provisions activate, dirty term sheets preserve headline valuations while shifting actual risk onto founders and employees. The structure breaks at the worst moment.
Going public simplifies the capital structure
An IPO converts preference stacks to common. Amazon and Google both dropped 40 or 50 percent at points. They came through because their structures were clean. Late-stage private companies often do not have that advantage.
Risk reprices overnight and recovers slowly
A decade of accumulating risk can reverse in a matter of weeks. The recovery is incremental. That asymmetry matters for how you think about runway and burn.
Outlasting the field is a strategy that rarely gets credit
OpenTable's two venture-backed competitors went bankrupt. Nobody retells that part of the story.
Test the constraint before assuming it is fixed
Tony Hsieh told his shoe vendors Zappos would go under unless they extended payment terms from 45 days to 90. They agreed. If you don't ask, you don't get.
Being greedy when others are fearful requires a definition
Buffett's maxim gets quoted more than it gets applied. The useful version is concrete: given your market position, what does greedy look like now?
My Thoughts
The Buffett line about being greedy when others are fearful gets quoted more than it gets applied. Another way of looking at it is, given where you are right now in terms of cash burn, competitive positioning etc., what does greedy actually look like right now?
The more interesting version of the idea is about timing and scarcity. The reason Buffett's maxim works in markets is structural: when everyone else is retreating, you face less competition for the same asset. That logic ports to life pretty directly. When most people pull back from something - a career change, a difficult conversation, spending your time setting up something new - the field clears, and that's where there can be opportunity.
In markets, fearful is sentiment, and in life it's usually social risk: what will people think, what if it doesn't work, what does it say about me? That is often more restraining than the actual downside of the decision.
The Zappos anecdote is a better vehicle for this than the Buffett line. Hsieh didn't have a grand theory. He just called the vendors and asked. The constraint that others would have treated as fixed turned out not to be. That's the transferable idea: most people never test the thing they're afraid of.