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Friday, November 15, 2002

Morn the Seed, Plant the Seed

Must-read Fortune article on venture capital in 2002. [Scripting News]

What really worries [Stanford business professor Hau] Lee, however, is not washouts and wipeouts but the fact that a fresh, new generation of entrepreneurs is finding it nearly impossible to get venture backing. "The idea that this is hurting entrepreneurism is certainly true," he says. "I have a number of students with interesting ideas. In the past they wouldn't have hesitated (to start a new company) and try them out, but now they've opted to go work for a conventional company."

I morn the seed.  Unfortunately, all the Angels have gone to heaven, VC firms have their own problems and the Seed stage market barely exists.  VCs typically lag behind the NASDAQ by about 1 year, so expect more of the same. 

The prolonged contraction has exausted most entreprenuer's abilities to bootstrap.  And bootstrapping is further held back by buyers of technology who could potentially seed by providing cash flow.  Primarily because buyers have shifted to be more conservative in the technology adoption lifecycle[see whitepaper].  This will have a tremendous downstream impact both in terms of economic growth and innovation.   

The ray of hope eminates from greed.  At some point, technology buyers will risk adoption to gain competitive advantage.  At some point, VCs will invest for their own competitive advantage.  At some point, acquisitions to enter new markets and increase share in existing ones will offer valuable exists.

"I don't believe these guys can effectively manage the dollars they have under their belt," she [Ashley Read at Blueprint Ventures] says of the biggest Bubble Funds. They have so much money, she says, that they can't invest several million bucks in a small startup anymore--they wouldn't be able to manage that many investments. So they're stuck investing larger sums in later-stage ventures or seeking other investment alternatives. At that point "it's no longer a venture capital firm," she says. "What is it? I don't know. An investment company? What it is is an accident waiting to happen."

Ashley hints at a greater point.  While some say that the current environment is simply like the way Venture Capital used to be, I beg to differ.  The bubble spawned too many herdlike trend chasers and its forgotten what venture capital used to be.  Great thinkers.  Great risk takers.  There are some VCs who still hold this title.  At some point, from smaller funds or not, a thoughtful contrarian will envision a new company, take risk and gain competitive advantage -- the way it used to be.

1:52:19 PM    comment []

Sun springs for software maker. The company says it will acquire Terraspring to further its N1 initiative to provide businesses with increasingly autonomous computer systems. [CNET]
11:22:59 AM    comment []

Explicit Knowledge Categories

Jim McGee offers a must read 4 categories of explicit knowledge:

  1. Sharing Answers
  2. Sharing Questions
  3. Sharing Practices
  4. Discovery/Innovation

This kind of segmentation is invaluable.  Besides defining the categories, he identifies their key management issues.

It might be a little out there, but I can't help but offer a 5th, maybe as a category and at least as lens for viewing potential use of the categories -- Revealing Conflicts.  Some of the best tacit knowledge is made explicit through debate, the socratic process of people taking sides on an issue.  When I have a decision to make, lets say on how to do something like define an incentive compensation issue, access to answers helps offer options.  Questions offer some considerations, but are likely not in context with the answers I am considering.  Practices, as Jim points out, lack context as well.

Information and knowledge has no value until it informs a decision.  Until then its just an option.  You exercise both the option of consuming the knowledge at the cost, or premium, of time to read it and hard costs of acquiring it.  The problem arises if you base your decision on categories of explicit knowledge that are "Pros,"  you skew your mental probability distribution of the outcomes of a decision to one side.  If, however, "Pros" are balanced by "Cons" the distribution will be more balanced.  Pros and Cons together also define the context for an issue at one point in time.

But the problem with using conflict as an asset is that many cultures purposely avoid it, will not document it and will even bury it.  Unfortunate, because the best answers, lessons and context come from healthy debate.


11:20:13 AM    comment []

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