Aug 1, 2017

The Future and the Process

"People are often asking me what’s going to happen next in science that’s important, and of course, the whole point is that if it’s important, it’s something we didn’t expect. All the really important things come as a big surprise."

Uncertainty about the world, desire to control our destinies,  maturation - all make us want to understand what’s going to happen in the future. Similarly, one of the jobs of the investor is to buy an asset today that in the future increases in value. Thus, investors - and particularly early stage venture investors - often are asked what they think the future holds: “What’s next? What’s the new new thing?”

I have no idea what the future holds. When asked I supply generic answers.

What if the role of the venture investor is not to predict the future. What if the job is to develop a process to evaluate enormous amounts of data and ideas(quantitative and qualitative), collaborate on making decisions with that data, and then choose a set of investments which represent different possibilities for the future.

In other words, the VC job is not to peer into the future but instead to come up with a process that allows you to construct a large set of different choices about what the future potentially could be.  Perhaps, then, venture capital is about the process, not the outcomes. Trust the process.

Process means you think about situations in two ways - those you can control and those you cannot control. We can’t control what happens with the companies we invest in - the outcomes - but we can control how we make the investment decisions - the process.

There are many types of investing processes, what is important is just to have one, create its parameters and trust it. USV’s is comprised of these attributes: thesis driven, small funds, early stage, collaborative decision making, one office in one city, conversational, active investing. Each of these components is an explicit constraint that tightly guides decision making. It may not be the best process, but it is uniquely USV’s.

Out of that process comes a portfolio of investments, associated with a particular fund. Each of our funds, for example, has 20-24 companies. Those companies are what our process has determined to be our view of one potential future.

Relying on a process is hard when faced with rapid change and enormous uncertainty, when you see companies struggling or failing. I’ve made investments in companies that have blown up. I am sure I will continue to do so. Human nature and ego ask us to change course when things don’t appear to be working. The process, however, requires us to keep going.

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