SCORE!
By Amir Gal-Or
Quite often I am asked, due to my pilot background, if there is a connection between flying and venture capital. Well, yes there is and I will share my thoughts about this in the near future. In the meantime, I will start with an easier comparison. Do venture capitalists who invest in and guide portfolio companies have anything in common with soccer club owners, coaches and sports managers who identify, groom and support soccer players and their teams? Yes – firstly and at the core of it, we want our interest – company, player or team - to score.
Imagine that you are the venture capital equivalent of a sports talent agent for a legendary athlete like Ronaldo or Messi. You’d make goal after goal – securing advertising endorsements from name brands, club contracts, and all that goes with the popularity that success brings. As the agent, you take pride in these wins because you know that none of this success could have happened without you – your guidance, your support, and your wisdom based on years of experience. You take pride because you know you had the good sense and good fortune to identify a winner AND early on at the ‘rookie’ stage.
You managed to convince this rookie and those who support him, that in addition to the great chemistry you have, that he should go with you because you will share your valuable contacts, relationships and available resources to his great benefit. To quote from the movie Jerry Maguire, you will “show him the money”.
This same sports agent-star athlete courtship exists in the world of finance and investment. There was a time when Intel, CheckPoint and Google would have been considered promising ‘new’ start-ups, the business equivalent of the sports rookie. Imagine the first interaction between these companies and their first investors, the courtship that followed and the eventual agreement to partner up. The first investors identified talent and clearly understood the vision and the ideas of their “rookies” and had the correct intuition and foresight to know that introducing them to the right players in the market while concurrently helping them to finance their first steps would ultimately lead to thriving businesses and successful IPOs.
Whether you are a team coach, a talent scout or a venture capitalist, part of your job requires the innate ability to find the needle in the haystack and know, as soon as you see it, that a great talent with enormous potential value stands before you. These soft skills coupled with a "good eye” can make all the difference between winning and losing.
Like talent agents, coaches too engage in a courtship and dance with their players. The difference is they need to worry about their chemistry with not just one but ALL of the players on the team as well as the chemistry ‘between’ the teammates. It’s the coach’s job to maximize the potential of these relationships and the various talents that their players bring to the club in order to create an atmosphere of teamwork that plays well practically on the field as well as during the ‘after game’ with the media. Reputation is everything and a much more difficult element to shape and control.
Amongst venture capital companies, some apply a teamwork strategy, others don’t. Some VCs are opportunistic. They invest and promote companies that have nothing to do with each other. Here, strategies for portfolio companies are designed independently and are unique to each company. Because there isn’t any common denominator in terms of ‘sector’, synergy is neither needed nor a criteria. Benefits are without limit and quick response is normal practice. Conversely, there are venture capitalists who look for ‘more’ when building their portfolios. They invest in clusters and strive to create an ecosystem where the companies within the portfolio help each other by sharing expertise as well as leveraging channels and relationships. Which way is better? This remains an open question.
At Infinity, we adopted a cluster strategy around companies that focus on the China market and with the type of value that only know-how can bring. Our cluster plan assumes that it creates synergy and mutual learning. It helps us to design better quality deals, sustain our impeccable reputation and maintain and bolster our access to industry players and experts. What’s the down side? It's a more difficult way to operate. It limits choice and mandates longer term play and higher risk.
In soccer, though the agent makes more money than those on the team and the club owners, the team and the club owners hold the power and reign famous. Allow me to elaborate. Talent agents are for the most part ‘unknown’. They keep a low profile and focus on the industry network. The spotlight is set squarely on their players. Owners of soccer teams, conversely, are very well known. For them it’s much more about ego and fame rather than the profit. This same structure applies to venture capital – the style is just different. There are venture capital firms that prioritize more like soccer team owners rather than talent agents. Why? They want the famous deals, the "hot deals" and are willing to over pay to get these. Assuming it’s a momentum play, the ‘add’ will stimulate the eco system.
Most funds, however, function more like talent agents, and only sometimes like a club owner. Money is the primary driver, but fame is always welcomed. Deals are done based on how “hot” they are and the level of fame of the participants – the hotter the better and the more famous the bigger the draw.
What can we learn from it? It’s all about people, egos and keeping the eye on the ball. Determine what is really important to you and score!
