Hope, Renewal and Risk
My Christmas card to my friends this year included Jean Giono's The Man Who Planted Trees. The writer is French and the story parallels the American story of Johnny Appleseed. The narrator is a young man who observes the main character, Elzeard Bouffier, singlehandedly reforestate a region of France that has been stripped bare by charcoal burners. As a result of the reforestation the destitute inhabitants are transformed as life and hope returns to the land. A nice story. A fun story. Kind of simplistic and very romantic.
There were three really important messages I got out of this short book that have parallels with investing in emerging companies. The man who planted trees knew: 1) that what he was doing was vital but he did it with utter humility, 2) his math told him that one or two seeds out of twenty would mature, and 3) that his perspective was long and therefore he was extremely patient.
I sent The Man Who Planted Trees to my friends because we all have a passion for supporting entrepreneurs to create really important new businesses. The things I have learned over the past year are:
1) What we do is really important, but to the extent we let others take credit we can be more successful. People create wealth and talented people, people with vision and determination,will create extraordinary wealth that ripples through the economy, which will affect thousands and sometime millions of people...
2) Failure must be part of your investing strategy therefore diversification is essential.
3) Truth in investing is time related. The same investment can seem wrong over 12 months but brilliant in 36 months.
Over the last three years I have been exposed to the biotech institutional investment community. They are very smart people, often very self impressed and also incredibly jaded. I think institutional venture investing is in crisis. The world has changed. In the early eighties biotech VCs were able to invest $10 million to take a drug into phase I trials and then take the Company public at a $100 million valuation before they knew whether the drug was effective. Investors were really buying into the idea of the biotech revolution more than the specific products or risks of a clinical trial. Today public investors are only willing to invest if the drug is in late stage or approved. This means that VCs now must invest $200 million and if they are successful they can take the Company public for a $150 million. Not a very attractive business model. The VCs have reacted by funding fewer companies but investing more money. Intuitively this seems like a mistake as I find most businesses prevail for often impossible-to-predict reasons. They remind me a lot of the big US studios in the 1970's that brought us big-budget disaster films like The Poseidon Adventure, Towering Inferno and Earthquake. Then unpredictably, a director named George Lucas brought us a small film with an $8.5 million budget called Star Wars that brought audiences a story of hope, good triumphing over evil and renewal, and the US film industry was transformed.
I would like to think that one or two of the companies Edson Moore is funding, all of which couldn't get the attention of the big VCs, have a chance to be the Star Wars companies whose success will bring on a new era where funding small companies with big dreams is easier and more rewarding.
There were three really important messages I got out of this short book that have parallels with investing in emerging companies. The man who planted trees knew: 1) that what he was doing was vital but he did it with utter humility, 2) his math told him that one or two seeds out of twenty would mature, and 3) that his perspective was long and therefore he was extremely patient.
I sent The Man Who Planted Trees to my friends because we all have a passion for supporting entrepreneurs to create really important new businesses. The things I have learned over the past year are:
1) What we do is really important, but to the extent we let others take credit we can be more successful. People create wealth and talented people, people with vision and determination,will create extraordinary wealth that ripples through the economy, which will affect thousands and sometime millions of people...
2) Failure must be part of your investing strategy therefore diversification is essential.
3) Truth in investing is time related. The same investment can seem wrong over 12 months but brilliant in 36 months.
Over the last three years I have been exposed to the biotech institutional investment community. They are very smart people, often very self impressed and also incredibly jaded. I think institutional venture investing is in crisis. The world has changed. In the early eighties biotech VCs were able to invest $10 million to take a drug into phase I trials and then take the Company public at a $100 million valuation before they knew whether the drug was effective. Investors were really buying into the idea of the biotech revolution more than the specific products or risks of a clinical trial. Today public investors are only willing to invest if the drug is in late stage or approved. This means that VCs now must invest $200 million and if they are successful they can take the Company public for a $150 million. Not a very attractive business model. The VCs have reacted by funding fewer companies but investing more money. Intuitively this seems like a mistake as I find most businesses prevail for often impossible-to-predict reasons. They remind me a lot of the big US studios in the 1970's that brought us big-budget disaster films like The Poseidon Adventure, Towering Inferno and Earthquake. Then unpredictably, a director named George Lucas brought us a small film with an $8.5 million budget called Star Wars that brought audiences a story of hope, good triumphing over evil and renewal, and the US film industry was transformed.
I would like to think that one or two of the companies Edson Moore is funding, all of which couldn't get the attention of the big VCs, have a chance to be the Star Wars companies whose success will bring on a new era where funding small companies with big dreams is easier and more rewarding.
