… Is No Indication of Future Returns

About 25 years ago, not long after I started my first venture fund, I had a memorable dinner with the very patrician founder of one of the most successful venture franchises in the world.

He listened politely while I explained my investing strategy.  Swirling a glass of 1967 La Tâche in his hand (which he had brought to the dinner), he pronounced:

“Pascal, institutional investors don’t give a shit how you make the money … They don’t want to know how the sausage is made. As far as they are concerned, if you deliver a 3x cash on cash return or better from your fund, you can go play golf four days a week … They don’t care about how hard you work, how many management teams you saved from failing, or how many first-time entrepreneurs you mentored. And they definitely don’t care about your strategy. ”

Sadly, what he said is as true today as it was then. The vast majority of institutional VC investors shop for performance, they are massively risk averse and career conscious.

Very few institutional investors take to heart the meaning of the Risks section of every Agreement of Limited Partnership, where it is prominently written, “Past performance is no indication of future returns.”