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August 18, 2004

VCs with operating experience not necessarily superior: Bill Burnhan

Conventional wisdom has it that operating experience contributes significantly to making a successful VC.

Bill Burnham, Managing Partner at Softbank Capital Partners, doesn't buy it. An extract from his recent blog post on the topic:

When you catch most VCs in a moment of honest reflection they will tell you that while they enjoy working with their investments and trying to “add value” by using their operating experience, the single most important action that they take is deciding whether or not to invest. This is because a start-up’s initial “genetics” in terms of market opportunity, technology and founding team are typically the biggest determinants of investment’s success. Put another way, it’s almost impossible to turn a start-up with bad genetics into a good investment, no matter how good an operator you are. Thus, if the initial investment decision is so critical, than it stands to reason that investment skills are potentially more important to VC success than operating skills.