Image via Wikipedia
(I was in Urban Outfitters on Saturday afternoon in Georgetown and happened upon a product in the check out line called "Freakin' Magical Unicorn" gum. Of course, I bought 3 packs and that began the wheels turning on mythical creatures and the Magical Unicorns in my world.......)
First from Napoleon Dynamite ---
Deb What are you drawing?
Napoleon Dynamite A liger.
Deb What's a liger?
Napoleon Dynamite It's pretty much my favorite animal. It's like a lion and a tiger mixed... bred for its skills in magic.
The reported odds of a venture backed company reaching an Initial Public Offering are 1 in 50,000. Which makes the identification of these companies with any consistency a clear challenge. It takes diligence and a keen eye to differentiate that real potential. Yet, it would be delusional to assume you wouldn't miss one along the way. So the essence of what makes the venture capitalist's job so enjoyable is the difficulty inherent in succeeding regularly. The venture capitalist must find something that is inherently rare. It takes hard work, an open mind and considerable patience. But, it is rewarding to be part (in any way - large or small) of entrepreneur's realized dreams and successes.
Clearly, though, the start ups who will go the distance are rare creatures and the results necessary to propel the company to an IPO are near mythical -- ideally from no revenue to over $100M annually in some short period of years. The proverbial hockey stick that is present in so many investor pitches and missing from so many Board reports. So the venture capital industry and its participants, since it is largely predicated on these IPO companies, must be adept at finding these rare companies.
Simply put, the industry exists to find these rare, almost mythical creatures. As one could well imagine, finding them includes no small amount of diligence in addition to judgment. And being sure of one's decision when the moment arrives (given the odds against it) isn't easy. So the venture capitalist's job entails the endless pursuit of a relatively unique company. The equivalent of finding a lyger or a unicorn?!? Can one find mythical creatures in this day and age?
Yes, they can be found and are found.
Yet there are other mythical creatures in venture capital. But they aren't just limited to moonshot IPO companies.
In practice, there are plenty of mythical creatures in venture capital in my experience.
(Many of which are unlike "Lygers" in that they have not been bred for skills in magic)In ten years of working within the industry, I've encountered many of these mythical creatures. Here are some my favorite mythical creatures from venture capital.
The Polished Turdy Golden Bird
Wait a minute, what is this an incredibly great deal in my email box from an unknown investment banker? Could that be? Forget that it doesn't match any of my pre-existing criteria for investment stage, technology or geography, or that this is a great deal that just needs four times my normal investment bite size to get to the next level. And ignore that great deals don't ever find you, you have to find them. Behold, the great email gift from the unknown investment banker, the polished turdy golden bird. And brought to you by the mythical, generous-with-his-great-deals-even-though-he-doesn't-know-you investment banker. And this special bird exists only in email. If one follows up to find out more, the facts are much less golden and the deal much less polished. This bird only exists in email and if you carry a mobile device, you can hold it in your hand.
The "Deal Doing" Follower Capitalist
This venture capitalist is like the satyr of old -- half man and half goat. The man half meets with you to indicate enthusiasm for your deal while the goat half dominates the rest of his existence. He doesn't lead funding rounds and can't help find you a lead.
Which can serve to reduce the possibility of a deal getting done. All of which is to say, that like the satyr he is "described as roguish but faint-hearted — subversive and dangerous, yet shy and cowardly".
He is around deals, near deals, about deals but doesn't do them.
Ahhh, who said all mythical creatures are well thought of?
The Knife Floating Hummingbird
Image via Wikipedia
This is a deal creature is predicated on the concept that the knife is no longer falling and now is the right time to invest in something that has never materially progressed as previous funding(s).
This mythical creature isn't really falling, it is floating, you see, you just need to ignore gravity. Yes, it is a knife. But, you must ignore what you see and imagine its wings flapping so fast you can't see them.
You must assume, as the potential investor, that you know how to pick the perfect time to invest.
The Stalled Rocket Phoenix
Many VC's firms support incubators or have carved out a portion of their fund to support early, early start ups. This support is typically capped in amount or requires specific progress milestones to garner further investment support. This creates a possibility of a firm which has not met the milestones but needs investment.
These graduates of incubators or VC firm's start up set aside funds that are described as both "ready to take off" and ineligible from further financial support from the sponsor organization. They are ready to rise even if they people telling you won't put their money where their mouth is.
So yes, while it is a potential phoenix -- it is just stalled where it is for the time being and perhaps forever.
A Freaking Magical Unicorn
The deal everyone has seen and passed on that is now the perfect deal for me. Yes, it is truly magical that I would be soooo lucky. The Freaking Magical Unicorn is often from out of town, frequently from Boston, for some reason. Probably because the Boston VC's have enough respect and affection for their peers in the DC area? Or that they're ok with sending us a "great deal" from time to time?
One has to look upon this Unicorn and question the good fortune that is associated all the Boston VC's passing on this great deal. Why one is so lucky as to it arriving upon one's doorstep?
Well, it is a Freaking Magical Unicorn --- a great deal from out-of-town and that is carried upon the wings of improbability to one's doorstep.
Image via Wikipedia
The deal that is about to sell and create a fabulous return but just needs a little money to get to the finish line. The We're-Maid management team sings a song of low risks and certain returns.
But like the mermaids of legend, the temptation calls to jump from the safe boat to swim to the beckoning call of easy returns.
But, alas, the currents are stronger and the swim longer than meets the eye.
All is inevitably lost faster on a We're-Maid than anything else. The risk-less deal doesn't exist after all. It is the mythical creature of lore not reality.
The We're-Maid team is probably the most frequently spotted of this list.
Looking at this list, I realize that there are other mythical creatures in the venture capital world including those within the industry as vc's, lawyers, bankers, entrepreneurs, etc.
Perhaps best to describe them in another post or two?