Disruptive Thoughts - Latest Comments in Advisory Capital? Not When VCs Do It Better

Re: Advisory Capital? Not When VCs Do It Better

Fraser — Mon, 27 Feb 2006 23:58:53 -0000

For those interested, Eric adds to his comment in a post on his blog.

Re: Advisory Capital? Not When VCs Do It Better

Fraser — Mon, 27 Feb 2006 23:57:02 -0000

Hi Eric,

As always you provide a very thoughtful response.

I love how you phrase this thought: "Another intersting thing that advisory services could do is bring a tier 2 VC to the top tier... If these firms began to add advisory services to their offering they may be able to break out of the tier 2 level sooner and compete with the big guys for deals potentially shaking up the landscape in a way that not only benefits the tier 2 VCs but also benefits entrepreneurs".

That's a very clean summary of one of the points I've been trying to make lately --- that the ENTIRE venture capital industry is not due for a "shake-up" (I dislike the thinking that is behind a blanket statement like this); rather, in the short-term there is an opportunity for an innovative VC firm to experience "growth" at a faster pace than another firm by offering a suite of nontraditional VC services.

I think you're also right in saying that there are a number of VC firms out there providing such services without calling them by this name (Maybe they don't want to draw attention to their competitive advantage? Maybe they're too busy being awesome. Who knows.)

I think sometimes my point gets lost in the longwindedness of my arguements. I'll try to work on that. (I did not succeed with that in this comment ;))

Re: Advisory Capital? Not When VCs Do It Better

Fraser — Mon, 27 Feb 2006 22:58:53 -0000

For those interested, http://www.ventureweek.com/blog/2006/02/27/adviso...rel="nofollow">Eric adds to his comment in a post on his blog.

Re: Advisory Capital? Not When VCs Do It Better

Fraser — Mon, 27 Feb 2006 22:57:02 -0000

Hi Eric, As always you provide a very thoughtful response. I love how you phrase this thought: "Another intersting thing that advisory services could do is bring a tier 2 VC to the top tier... If these firms began to add advisory services to their offering they may be able to break out of the tier 2 level sooner and compete with the big guys for deals potentially shaking up the landscape in a way that not only benefits the tier 2 VCs but also benefits entrepreneurs". That's a very clean summary of one of the points I've been trying to make lately --- that the ENTIRE venture capital industry is not due for a "shake-up" (I dislike the thinking that is behind a blanket statement like this); rather, in the short-term there is an opportunity for an innovative VC firm to experience "growth" at a faster pace than another firm by offering a suite of nontraditional VC services. I think you're also right in saying that there are a number of VC firms out there providing such services without calling them by this name (Maybe they don't want to draw attention to their competitive advantage? Maybe they're too busy being awesome. Who knows.) I think sometimes my point gets lost in the longwindedness of my arguements. I'll try to work on that. (I did not succeed with that in this comment ;))

Re: Advisory Capital? Not When VCs Do It Better

Eric Olson — Mon, 27 Feb 2006 14:25:02 -0000

Another intersting thing that advisory services could do is bring a tier 2 VC to the top tier. There are some good tier 2 VCs that just don't have the reputation or track record of people like DFJ simply because they are too new. If these firms began to add advisory services to their offering they may be able to break out of the tier 2 level sooner and compete with the big guys for deals potentially shaking up the landscape in a way that not only benefits the tier 2 VCs but also benefits entrepreneurs.

I think there are some very hands on VCs out there now already adding in advisroy services without calling them by that name. When I think of these individuals and how they are able to get such great investments things start to make a lot of sense.

Re: Advisory Capital? Not When VCs Do It Better

Eric Olson — Mon, 27 Feb 2006 13:25:02 -0000

Another great piece of writing Fraser. Well done. I had commented on Fred's article in agreement that money ("skin in the game") is important to the VC/entrepreneur relationship. However, I should have thought things through a bit more and I would like to think that if I had I would have come up with your argument. VCs could easily add some of these "advisory" services into their current offering mostly untilizing staff they already have. I think as the VC space becomes more competitive for deal flow you will see some of these advisory services enter into funding offerings. Another intersting thing that advisory services could do is bring a tier 2 VC to the top tier. There are some good tier 2 VCs that just don't have the reputation or track record of people like DFJ simply because they are too new. If these firms began to add advisory services to their offering they may be able to break out of the tier 2 level sooner and compete with the big guys for deals potentially shaking up the landscape in a way that not only benefits the tier 2 VCs but also benefits entrepreneurs. I think there are some very hands on VCs out there now already adding in advisroy services without calling them by that name. When I think of these individuals and how they are able to get such great investments things start to make a lot of sense.