There’s a lot of misconceptions about venture investing, which was the inspiration for a recent event we hosted with our friends at Folklore Ventures. Here, VC Catalyst Program Director, Rosh Ghadamian, shares his reflections on the event, and why we need to challenge some of venture investing’s biggest myths.
In my job, I speak to investors from all walks of life – members and investment managers from family offices, corporates, as well as new and experienced angel investors. Very often, particularly when it comes to talking with family offices, venture is viewed with deep suspicion and with some sense of fear that you’re going to ‘lose all their money’.
The truth is often more interesting (and approachable) than the myth, which is what led us to host a panel discussion, in partnership with Folklore Ventures. Comprising Wendy Bonnici, Quentin Wallace and Alister Coleman – each of whom run their own family office – our panel are well versed in the workings of venture investing, and were well placed to debunk some of its myths.
But while the aim of the conversation was to challenge some misconceptions about venture investing, we also wanted to also bring a human element to the topic by capturing the fun, humility and earnestness of the people in the industry. At the end of the day, this is an industry built on people and relationships where the top performers aren’t just diligent and responsible managers of your capital; they’re also people who are straight shooters and passionate about supporting the best founders and technology businesses in Australia.
One of the common exasperations from people who are new to the industry, is that it is unapproachable, full of jargon and not possible to learn. Historically, this might have been the case, as the venture industry was for ‘insiders’ only. But this is no longer the situation, thanks to executive education programs like VC Catalyst and angel groups like ArchAngels and Scale Angels, where you can learn from more experienced investors.
Everyone on the panel started at ground zero at some point, and has lived through many mistakes along the way. “Going too hard, too early” is a common mistake according to Quentin, while Wendy noted the importance of not “getting swept up in the story and founders” early in your investing journey without enough commercial diligence.
“You’ll always pay for your education one way or another” reminisced Al Coleman, whether that’s through professional development or poor investment decisions from the lack of an articulated investment thesis. The panel all agreed that just as you wouldn’t put all your money into a single stock on public markets, the rules don’t just go out the window with private market investing.
Fundamentally, the principal driver for investing in venture is a belief in portfolio diversification, and that there is not just ‘one way’ to do that. There are many ways to build diversification, whether through thematic, stage, funds, syndicates and direct investments.
One thing that shone through the discussion was that unlike public market or property market investing, all members of the panel felt a deep personal connection to the people they were supporting. This is the one asset class where “you can speak to the CEO or the Sales Lead”, and where appropriate, dig in and “open up your network to create value for the team”.
There was consensus from the panel, that venture investing is a fundamentally invigorating pursuit for them, and given that it is a minority allocation in their overall portfolio, a welcome challenge without being overbearing or overwhelming.
Venture is not an opportunity to miss in Australia. The valuations are attractive and venture belongs in every well diversified portfolio of investments. There has been an enormous amount of wealth generated on the ASX from technology companies and ‘it’s never been a good bet to short technology’ and the recent vintage of funds from Australian fund managers have proven top decile and top 5% performance globally.
VC Catalyst is our immersive program for active investors to gain best practice tools and skills to make more successful venture capital investment decisions, delivered at Wade Institute of Entrepreneurship by world-leading venture capital experts and practitioners. Learn more or enquire now.