Leave Money on the Table

I was having a conversation last night with another VC who was suggesting I monetize the pro-ratas that I don't take by creating SPVs.  As a small fund, I've been writing one check only to a company to help get them off the ground that that has served me really well so far.

"But you could charge fees or at least carry for that...  You're leaving money on the table!" he said.

I said, "Dude, I run an $8 million fund and I'm about to finish raising a $15 million fund.  I'm the King of Leaving Money on the Table."

For me, I'd rather have a very simple, straightforward business model--one where no one has to think to figure out if I'm giving advice on your next round based on some special vehicle or deal I have on the side.

It made me think of an investment I just made where the entrepreneur found an extremely profitable niche that he is already taking advantage of.  He was pretty flexible about terms because he felt like he was going to make so much money that the terms of the deal didn't really make that much of a difference.  

My favorite ice cream shop, Ample Hills Creamery, has some flavors that are less profitable than others--but that doesn't stop the shop from making them.  They could probably make more money replacing these flavors with simpler ones, but they wouldn't be Ample Hills if they did.

That's the kind of company you want to fund as an investor--not something that only gets big when you need to squeeze every last dime out of the opportunity.  You're never going to be able to do that as a startup, and often times that comes at the expense of your user experience and happiness.  

Same thing happens with people.

Who wants to be around someone who counts every last penny and never misses an opportunity to cash in.

Those aren't the kind of people I want to be around and it's not the kind of relationship I want to have with a company.  It's definitely not the kind of relationship I want to have as an investor.