Is venture capital a team or individual sport?

Lately I’ve been talking and listening to a number of friends, business colleagues, investors, entrepreneurs about how VCs are judged. Should they be judged as a team or as an individual?

Few thoughts come to mind as I mull over those various discussions:

0 – The reality is that a vc firm is judged by their fund performance which is based on the team’s behavior, actions, decisions (probably why there is a fair amount of turnover in this business but I’ll leave that topic out of this post). But there are other points to consider as well.

1- As an entrepreneur you should pick a partner at the firm that is compatible with your vision, that you get along with and can work with your co-investors. You can’t fire your board member is one way to look at it. Fred has a well written post on the subject.

2 – As an entrepreneur you should also consider the firm as well. I know of a few deals that didn’t get to the finish line because the entpreneur didn’t like the firm they were talking to (even though they liked the specific partner they were working with). The feeling goes that if that partner “gets hit by a bus” (or leaves the firm) they will be stuck with a VC firm that doesn’t get it.

3 – Success has many fathers. I’ve heard from some VCs that deal credit can be quite confusing. Sometimes a VC will leave a firm and there is confusion with LPs on what that investor did or didn’t do. I guess where this comes into play is when a partner leaves a firm and joins or starts a new firm. The LPs want to know their track record. That leads to point #4.

4 – Here’s another example that happens all the time: People ask me often how “my” investments are doing in this economy. When I start talking about a particular company in our portfolio at Spark they will often interupt and say, “no, I meant your company” (they mean for the boards I’m on). I often respond, “they are all mine because they are all ours”.

5 – Similarly, blame has many targets. A few weeks ago I was in the bay area and met with a friend of mine that is at a great company now. I’ll call him Joe. Joe used to work at a high profile sand hill venture firm. We were talking about another partner that left a firm. Joe said that guy would have been one of the best VCs on the planet but his partnership wouldn’t let him do x,y, z investments. Had he done those deals he would have had the best track record in recent memory. It’s hard to say how real this account is in retrospect but it’s a good point nonetheless. If your partners don’t like the deal then it’s going to be hard/impossible to make the investment. And that may or may not be a bad thing. So in this case the individuals track record was radically impaired because of his partners judgement. Morale of the story: a) individual IRR can be misleading and b) make sure you pick your partners well! :)

So when I hear people ask, “Is venture capital a team or individual sport?” – my answer is always team. A well functioning team is key. I know that at our firm, we are better because of the team.  We help each other make better choices, get each other out of potential land mines, help our companies with hiring, compare life experiences in certain areas, etc. Even if its’ just to brainstorm – or vent.

I couldn’t imagine working in a firm that didn’t have that attitude.