Source: The New Yorker, May 2015
“Mediocre V.C.s want to see that your company has traction,” Doshi told me. “The top V.C.s want you to show them you can invent the future.”
Venture capitalists with a knack for the 1,000x know that true innovations don’t follow a pattern. The future is always stranger than we expect: mobile phones and the Internet, not flying cars.
Doug Leone, one of the leaders of Sequoia Capital, by consensus Silicon Valley’s top firm, said, “The biggest outcomes come when you break your previous mental model. The black-swan events of the past forty years—the PC, the router, the Internet, the iPhone—nobody had theses around those. So what’s useful to us is having Dumbo ears.”*
The key to investing, Andreessen contends, is to be aggressive and to fight your instinct to pattern-match. “Breakthrough ideas look crazy, nuts,” he said.
It’s fine to have a lousy record of predicting the future, most of the time, as long as when you’re right you’re really right. Between 2004 and 2013, a mere 0.4 per cent of all venture investments returned at least 50x. The real mistakes aren’t the errors of commission, the companies that crash—all you can lose is your investment—but those of omission.