“Great Groups are not realistic places. They are exuberant, irrationally optimistic ones.” Warren Bennis and Patricia Ward Biederman, Organizing Genius: The Secrets of Creative Collaboration
In the 2008 Summer Olympics, Jason Lezak anchored the gold medal winning US 400-meter freestyle relay team. Winning gold seemed improbable, especially when Jason dove into the pool a full second behind Alain Bernard, the French anchor and world record holder in the 100 meter freestyle. Lezak swam a personal best 46.06 seconds beating Bernard to the finish by eight-hundredths of a second. Two days later Lezak swam 47.67 …
by Paul Asel
In the past year we have developed a proprietary framework to assess Product Market Fit (PMF). Marc Andreessen asserts PMF is “the only thing that matters for a new startup” and that “the life of any startup can be divided into two parts: before product market fit and after product market fit.” Having found that investment risk changes markedly once on the other side of product market fit, so, in line with the industry norm, NGP Capital has demarcated growth stage as post-PMF investing.
By Paul Asel
Six venture backed companies filed for IPO on Friday, November 13, including Doordash, C3.ai and Pubmatic — about 20% of the annual rate for US venture backed IPOs in recent years filing in just one day. With the recent spate of IPOs, many venture firms will soon make discretionary sale decisions on public stocks. This is a high class problem as venture firms typically enjoy solid returns on investments that reach the public markets, yet few are well equipped to make judicious decisions on volatile stocks whose price swings may materially impact fund performance.
Achieving escape velocity is essential for startups to deliver venture returns. Escape velocity is a compelling image for an entrepreneur, as it refers to the speed — 25,020 miles per hour — required to exit the earth’s gravitational pull. A startup faces its own gravitational pull. Startups that go too slow get pulled back into the peloton (what a great finish to the Tour de France last week!) and subsumed by incumbents. Startups must innovate quickly to overcome incumbent advantages afforded by its installed customer base and organizational resources.
Achieving escape velocity is a formidable task. Startup successes…
Last week I introduced twenty biases that influence investment decisions. Over the next couple weeks, I will discuss methods proposed by Charlie Munger and Warrant Buffett from Berkshire Hathaway to reduce or mitigate the impact of biases. The first of these is the combination of investment filters and the circle of competence.
Investment filters and the circle of competence share a common purpose: to work efficiently and reduce errors. NGP Capital applies these concepts by targeting “core investments” within our investment themes.
Berkshire Hathaway applies five filters:
1. Industry — Circle of Competence: Do I understand the business…
“Tell me where I will die so I don’t go there.” Wingmen cover blind spots; offer perspective; provide an informed, arms-length view; and coalesce team views to help the sponsor engage effectively with all stakeholders.
Our Wingman process at NGP Capital derives from a process advocated by Berkshire Hathaway Vice Chairman Charlie Munger based on his aphorism: “Tell me where I will die so I don’t go there.”
Berkshire Hathaway Chairman and CEO Warren Buffett acknowledges that emotional and psychological biases erode prudent investing principles. Buffett has built personal defenses against deal bias: he avoids shopped deals and…
Venture investors deal daily with imperfect, asymmetric information. Seeing the present is sometimes harder than it might seem.
Our world is pell-mell gripped by a pandemic, political unrest, and a global trade war — all of which have created more economic uncertainty than at any time since the Great Depression. Divergent views convulse our communities. In response to the pandemic, South Korea implemented draconian lockdowns while Brazil permitted unfettered movement. Global responses among other countries spread across this continuum. Though COVID-19 has disrupted the US more than Europe, key indices are up 15% in the US and down…
There are times when silence makes one complicit. As American novelist James Baldwin said, “Neither love nor terror makes one blind: indifference makes one blind.”
Politics is increasingly impacting our business. The trade war erodes the global consensus built over the past 70 years and NGP Capital’s global platform built over the past 15 years. The US has long stood for civil liberty and equal freedom, yet race riots this past week lay bare injustices that have become intolerable for many.
Globalism and diversity are two of NGP Capital’s founding principles. Our global platform is central to who we are…
Jack Ma applied for thirty jobs and was rejected for all of them. He later said, “I even went to KFC when it came to my city. Twenty-four people went for the job. Twenty-three were accepted. I was the only guy who was not…” His first company, Hangzhou Haibo Translation Agency, failed in 1994. In 1995, he launched China Pages, one of the first Internet companies in China, which later became Alibaba.
In 1898, Henry Ford developed a self-propelled vehicle he called the Quadricycle. He launched Detroit Automobile Company in 1899 with angel funding, but the car was…
“The significance of crises is the indication they provide that an occasion for retooling has arrived.” Thomas Kuhn, The Structure of Scientific Revolutions
Recent news is encouraging. China has emerged from 76 days of lockdown and business is returning to normal. In Europe, the slope is declining for new COVID-19 infections and mortality. In the US, stocks have surged 26% in the past month and plans to reopen the economy abound. As warmer weather bathes the north, the worst appears to be behind us and the path to recovery seems imminent.
Let’s hope so…yet the fundamentals tell a…
Managing Partner at global VC @ngpcapital $1.2 bn AUM. Portfolio: Xaiomi, Deliveroo, Lime, etc. Writes about smart mobility, entrepreneurship & venture capital.