VC Batting Average

In late December, I called Dave Carlick and suggested a meeting over golf. I’d enjoyed our previous outings and wanted to hear of his experiences at Vantage Point. Apparently he’d hit enough payouts to promote himself to VC status. We met in Marin and began that “ball and stick” game that continued to perplex.

“So how’d you end up with I/Pro?” I asked. The merger with Engage and its subsequent IPO had changed the troublesome outlook to a rosy one. Dave added value as a confidante, investor, and board member, so I assume he had lots of stock.

As he shot onto the green in one, he told me. “I sold 80%.” Shaking his head, he added, “I made more on the twenty I still have than on the eighty I sold!”

Wow! Such was the volatility of this rogue market. When timing was this important, how solid were these businesses? How reliable was this market? I proceeded to shoot a twelve on that hole, unsuccessfully fighting the gravitational forces that pulled my drives into the lake. So maybe golf would never be my game. I reverted to my theory of “enjoy the green beauty and forget the score.”

On my long drive home, I thought more about the investment side of this Internet economy in the context of another game, the American classic of baseball. Consistency seemed to be the distinguishing factor between speculative investors and VCs, the latter having a better batting average.

Or was it? Two real successes out of ten meant a batting average of 200. Dave’s 20% was in line with that. Two of ten might recover their investment, but not represent a win — a hit on base, no scoring. That could up the average to 400. But really, the win for VCs was one or two homers that brought their average up to a 10X return. The important thing wasn’t the batting average but home runs.

Were other investors that bad at the game, or were the VCs just heavy hitters: swing hard, don’t be afraid to strike out, and connect once every so often to knock it out of the park? In the history of the game, Babe Ruth’s legend didn’t lie in his batting average, but in hitting homers and running across the plate! So too, it appeared, for the firms on Sand Hill Road.