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Venture Capital & Picking vs. Poking

Written by: Paul Kedrosky

Article Overview: There is lots of partner tribalism in venture capital, but one worth noting is the schism between pickers and pokers.

Venture Capital & Picking vs. Poking

There is lots of partner tribalism in venture capital, but one worth noting is the schism between pickers and pokers.

Most IT investors think biotech investors are "mere" pickers. In other words, to the extent said biotech VCs are successful it is because they get behind the right technology/platform/people and ride it. To that way of thinking, your average biotech venture investor is going to do diddly to assist a typical investee -- sit at a bench, and stain my blue shirt? be serious! -- so they are, at least from the perspective of their non-biotech VC brethren, pickers. All the work is in the picking, and once they have done their 1.5 investments that year they might as well go on holidays.

Following the same stereotype along, most venture investors see themselves as pokers. That is, they poke, and probe, and cajole, and generally try to push the company in a direction that they, in their wisdom, think is the right one for said company. Information tech venture investors see themselves as pokers, and look down their noses somewhat at biotech sorts as mere pickers.

So who's right? Both and neither. While there is no doubt adept investors can add value now and then, the reality is, I'm increasingly convinced, that 90% of the value in venture investing comes at the picking stage. Don't tell anyone, but so long as you fire incompetent people, act impatient now and then at board meetings about progress and spending, and otherwise generally stay out of the way, you're probably better off following the medical dictum of "first, do no harm".

The preceding will annoy lots of smart people I know. They like to think their 2% of asset management fee pays for more than just making a good private equity stock pick and then getting the hell out of the way, but it doesn't (other than in true seed investing, which is a very different business).

In the debate between pickers and pokers you don't always win with with good pickers, but that's definitely the way to bet your money.

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Article Tags: asset management, biotech investors, board meetings, brethren, dictum, first do no harm, investee, management fee, no doubt, noses, private equity, right technology, schism, stereotype, stock pick, technology platform, tribalism, venture capital, venture investor, venture investors



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