Charles Hudson argues that venture capital chases hot companies instead of analyzing fundamentals like revenue and margins. LPs want recognizable names in their portfolios, creating pressure that kills patience. Fund managers face a bind: deploy capital fast to impress investors, or wait six to seven years for companies to actually mature.
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Whenever I ask people like, hey, bubble, or some of this stuff, they go, but look at the revenues. I go, look at them, actually look at them. Look at like what underlies them, whether they're going to persist, whether there's any margin potential there along. And there's almost no appetite for that conversation. And I think we live in this feedback loop where a lot of LPs, venture is a part of their portfolio. It's not the whole thing. And in many cases, I meet limited partners who's Primary interest is, are you in the hot companies? And I think in some ways it's because the hot companies are easy to understand if venture is one of 10 things on your plate, which means if you're gonna pursue that strategy, you need patience yourself. You need fortitude, and you need people who will help keep you in business for that good news to turn out to be true.
Well, you get the opportunity to be patient in the time required for you to kind of end up 6, 7 years later, and perhaps you're right. That's what I think about a lot. Like, who's the patience? Yes. I think like if everyone could just take a beat and be like, wait, should we just take stock into what we're actually deploying into? I think most people would say yes, that's a reasonable thing to do. But you have to deploy money. Fund managers need to recognize, or LPs would like to recognize and showcase the great portfolio they have. So do you get that chance and leisure to be patient? I think sometimes is the question in my mind.
