What’s Next? Gartner Hype Cycle

I wrote an article on “Gartner Hype Cycle Chart“ for the one of venture forums in Seoul early this year. Gartner Chart is a fairly simple but effective tool to predict what’s next. Tech entrepreneurs and venture capitalists often sit down and analyze what’s going to happen next and whether a new technology (or industry) is a hype or not. Nonetheless, we are not futurists but we just want to know what the stage of industry we are currently at and try to look at a big picture.

Almost every industry has shown similar growth pattern in the past like the chart shows above. When a new market opportunity (or technology) emerges, usually it starts with a huge “1) infrastructure investment” with many bells and whistles from media. Following upon that, “2) new business vehicle or platform” on that newly built infrastructure comes after. After major platform and service is up and running, “3) market niche opportunity” comes along by collaborating dominant players. However, market gets more fragmented. “4) failing or aggregating” of a niche opportunity happens at the final stage and market becomes more stable and organically grow.

“Technology trigger” and “peak of inflated expectations” from the Gartner Hype Cycle Chart is when  adventurous entrepreneurs and capitalists are most active and also when competition is most high. If we come along after those stages, then we easily expect that we may buy cheap to build a profitable business, but rarely build momentum to sell it with a high profit. Everyone likes home-run but we live our lives mostly with many hit-and-run potentials so we need to learn how to sustain ourselves during high-risk-low-return phase while we diligently strech our hands to grab a next big thing.

Ideal VC Partners’ Background

 

I want to make a short note on ”ideal VC partners’ background.”

1. Serial entrepreneur, who has done before and gained successful X-multiple returns,
2. Senior executive with two digit years experience at a world-class enterprise, who has successfully climbed corporate ladder and run large a business unit and had P&L responsibility.
3. Experienced portfolio manager, who has gone through entire fund life cycle from the beginning to the end and made a visible top quartile return with heavy involvement with portfolio companies,
4. Experienced equity sales manager, who has gained his knowledge in finance and equity sales and relationship from past I-banking experience; and
5. Others such as journalist, product designer (or marketer), business development specialist, technologist, professors, head hunter, lawyer, etc. who have done extensive work around venture development.

I wouldn’t say which skill-set or background is more relevant to make a strong VC firm, but in a nutshell, operational experience (unless partner wants to get involved with a LBO type of deal) is a key to succeed. That’s something what entrepreneur and investor have to bear in mind to select a right firm to partner with. 

Why VC Asset Class Still Makes Sense?

 

It’s been a while since I made last posting. I’ve been busy traveling (London/NYC/Boston) and completing a number business priorities right after trip. This time, I had a chance to meet with various institutions to exchange knowledge and discuss recent investment activities around the globe. Dow Jones LP Summit in last July was also quite helpful even if it was such a last minute schedule that I added onto my calendar.  There were a number of big pensions, endowments, investment banks, and advisers as well as newbie running a small alternative investment program which manages less than $100M. Many different approaches and investment priorities were discussed during this event, but this year, apparently, middle market private equity and clean tech were hottest asset classes in the alternative investors’ circle.

As a true believer of early stage ventures, I have strong conviction why venture capital asset class is still very competitive even if falling exit ratio and value in the public market or private transaction:

1. Early stage venture is most probable asset class which can create largest value-up.
2. Entry barrier (i.e. originality with scarcity) created by innovation is a key ingredient of early stage ventures’ success. and;
3. Entrepreneurial management team, which is willing to take a risk and go extra miles, and, most importantly, know when to execute and when not to (i.e. timing), really creates difference and turns seeds to fruits.

Venture asset class may not give back as sexy return as before (like early 2000s) like many industry observers have recently reported, but experienced general partners in the venture capital world continuously delivers results. Most successful ones are entrepreneurs at heart who will come back even if there are huge obstacles or past failures. Venture capitalists are not only talking about operational improvement, but creating new team and profit-generating business vehicle.

 

For more future Dow Jones event, you may check here. 

Thoughts on VC Career Track

This is my recent update after a while. I have been traveling lately and I was approached by serious entrepreneurs who had quite interesting business plans and ideas. I’m currently looking for an early stage investment opportunity somewhere between seed and series A funding. It was quite pleasant to talk with ambitious business founders in the various regions and industries. I am quite interested in digital interactive media and alternative energy space these days.

I recently talked with my business mentor, a senior VC who’s holding his office on Sand Hill road and it made me to think of potential VC career track. Fresh MBA grads are increasingly looking for a job in the venture capital (or private equity) industry even if hiring window is extremely small. Lucrative pay-checks and early exposure to an emerging business opportunity and passionate entrepreneur may sound quite compelling to young studs fresh out of business school. VC would make money by making other people succeed. VCs run extra miles to make portfolio companies stand out from the crowd and eventually become a crown jewel. Likewise, VCs make their partners (i.e. limited partners) generate handsome returns and they would eventually share profit. VC’s mission statement sounds very cool, doesn’t it? Though, what is a realistic picture of getting into a VC career and secret formula of becoming a successful venture capitalist in the long-run? 

VC associates usually start their careers at the professional VC firm in their late 20s or early 30s. They are usually one of most important assets at typically small-scale (or even large) VC firms as they assist general partners in various ways when general partners’ agendas are fully booked with chainless meetings. VC associates handle numerous work assignments from investment assessment, monitoring, to advisory work for corporate & business development of portfolio companies. Like mentioned above, there are crucial skill-sets required for associates to help a VC firm’s new investment to succeed. Typically, VC firms love a go-getter type associate who is willing to help general partners and business founders no matter what. Though, after spending few years at the VC firm, what’s going to be next? Depending on the size of the firm, associates may join general partnership early-on after a few investments are realized. If associates’ track records are good enough, then they may even start a new firm with other top performers. That sounds like an ideal VC career track.

Like I found during my recent talk with a VC mentor, operating experience is a key for junior VC partner’s long-term success. Operating experience won’t be easily earned unless you are really in the entrepreneurs’ shoes for a certain amount of time. That is why many prominent VC firms look for people who have already gone through entrepreneurial process. It is not uncommon to see that VC firms even recruit talents from their past portfolio companies and send their best men to start a new company or encourage them to join a start-up company for more hands-on operating experiences. That way, associates may make money from equitable growth of business and get relevant experience to offer ”serious” advice to start-up founders later.

When there are already over $30B venture capital commitments in the market, venture funding is becoming commodity. However, people with experience and right connection are scarce. These people are who really make difference. One of most challenging questions from a smart entrepreneur to a VC is whether VC does have a relevant experience and connection in the industry they’re playing. It is even more challenging when VCs are trying to make a new investment in the relatively untapped industry. It is also a very good check point for a VC to measure themselves before making investments whether they could really contribute to start-up founders as a sound business partner or not.

Sometimes, VCs can be quite opportunistic. Though, VC needs to be diligent helping hands to entrepreneurs, not only acting as a sound financial backer or cheer-leader. For my case, one of my early investments was a boot camp for my career development and that company helped me tremendosuly to gain operating experience and have in-depth insights of running a start-up business from scratch and achieving organic growth. Many long hours to come up with a compelling business plan, secure key initial customers, and hire experienced talents may sound fun, but, in reality, it can be a quite daunting process. However, you’d better enjoy it if you really want to make your own mark as a professional venture capitalist. Anyhow, young men, get some operating experience before you jump on the wagon!

Persimmon Frappé: Food Innovation Within Reach

 
I’m a big fan of persimmons. Persimmons are popular in Korea, Japan, China, and Vietnam. It only comes out in late fall and that’s why someone calls persimmon “the mango of autumn.”

There are two types of persimmons as far as I know. The firm one is what we call “dan-gham (단감)” and its texture somewhat feels like carrot. The other one is soft and we call it “hong-shi (홍시)” and it is very juicy and sweet (but not sour.) As persimmon has lots of Vitamin A & C, people in Korea often make them dry food or store it in the freezer so that they can enjoy its wonderful taste and texture throughout the year.  

[ Soft Persimmon ]

Anyhow, the store few minutes walking down the street from my office has great food innovation and came up with “Persimmon Frappé.” Basically, it is a persimmon smoothie. If you’ve tried Jamba Juice or Frappuccino at Starbucks, you know what it feels like.  Persimmons taste ever better if it is served icy cold. Smart coffee store owner is making this delicious fruit more accessible to the general public in the best format I can ever think of.  Unfortunately, I was not able to locate the real picture of Persimmon Frappe as in it is too new to be carried over the Internet. (I guess?) However, the photo below has captured most similar outfit of Persimmon Frappe that I recently tried here in Seoul.

[ Mango & Apricot  Frappe ]

You may find persimmon frappe recipe here on the Life’s Smörgåsbord blog. Just simply replace mango and apricots with persimmons. Maybe, get rid of rum portion if you’re serving it virgin.

Is Starbucks selling persimmon frappe anytime soon like they’ve done for green tea frappuccino? I think it will make great sales. By the way, check out Starbucks founder’s recent investment into the Pink Berry (Read recent article on $27.5M investment to the Pink Berry featured on the Fortune magazine.) It is another cult food innovation designed by Korean-American: a failed restaurateur and a former night club bouncer after great surge of healthy yogurt ice cream in Korea.