Great Things Happen When the Cycles Align

Posted by Senia Rapisarda

Part of me was counting on the Mayans being right so I would not have to face my inbox after the holidays.

The end of the world did not come and my emails were still there, but the announced apocalypse still had its benefits: it forced many of us (or me at least) to read more about the five cycles of the Mayan calendar and how they would all align on December 21, causing not just the end of an era, but the start of something new.

That got me thinking that this is exactly what we face in venture capital for each and every company we invest in: a Mayan calendar on steroids.

ALIGNING THE VC CYCLES

We all know that growing a great tech company is a multidimensional game which requires a strong team, a disruptive product, a market with a serious pain to address and a solid syndicate of investors, among other things. External factors also play a part, such as the financial market, the appetite of large corporations for M&As, and even the price of oil.

But we often underestimate how important the alignment of all these different components can be for the success of a company, especially at startup and exit times.

You could have a dream product, for instance, for which the market is just not ready. I am still reeling from an investment that went wrong (we all have a few of those and they are the ones we most learn from) in a company that developed a ground-breaking technology to create ebooks. It failed because no publisher wanted to give us their content: they thought at the time nobody would want to use some infernal electronic gadget to read books and newspapers. That was back in 1998.

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Or, as a founder, you may be wishing to continue building your company even if it is taking a tad longer than expected, while your investors are eager for returns so they can raise their next fund. You suddenly receive an offer to sell at a fair price and everybody in the boardroom is jumping up and down - except you. You have this gnawing feeling that it is too early to let go, but you know you can’t hold out by yourself.

NO MAGIC SOLUTION

There is no magic solution to these misalignments. Some of the cycles one can control or predict better than others, and we should be aware of the most important variables when choosing companies, management or investors.

As an entrepreneur, you may want to pay extra attention, for instance, to where your actual and prospective investors are in the cycle of their funds. Then try to align their expectations of when to exit your company with your own objectives, or put together a team that can withstand rapid growth and change, and deliver.

As an investor, one thing I learned firsthand is that you must detach yourself from how innovative the product looks, and actually test market acceptance and the sale cycle as much as you can before committing.

It is said there is always a dose of luck behind great success stories. Or maybe success happens when venture capital’s own Mayan calendar aligns. Whatever it is, there are always some things beyond our control. The important thing is to minimize them.

By the way, the next time the full Mayan long count takes place will be on October 13, 4772. By then, the IPO market for technology companies should have come back. In the meantime, it is up to us, VCs and entrepreneurs working together, to make great things happen.

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Senia Rapisarda

Senia Rapisarda

Senia has been a venture capitalist for 15 year, including as Vice-president of Strategic Investments and Initiatives at BDC Venture Capital. Before that, she was an investment banker, a big firm M&A lawyer, and a Fulbright Scholar. more




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