As a concept? Well, first, most of the public is not qualified to judge venture capital investments because either they don't know how to judge new technologies or business concepts or they don't know how to judge valuations and potential returns (or both). Second, "getting in early" as a VC would frequently requires active, not passive roles in the investee, guiding strategies, financial management, etc. and in some cases providing "adult supervision" (OK, some of this didn't happen for a while there).
OTOH, Bill's talking, at least as far as I can tell, about simple diversification of high risk investments, which is one tool of prudent VCs. A ten-bagger makes up for nine total losers.
Now, many of the hot stocks of a couple years ago probably should not have been public - they were very early stage (effectively pre-revenue in some cases) and in any other environment would have been looking to VCs rather than IPOs for funding. So, in that sense, Bill was "getting in early" like a VC.
The problem is that these "public VC" investments were not at VC-like valuations. Where Bill and I always disagreed was that he advocated buying these companies regardless of valuation because they were great ideas with supposedly unlimited potential.
A VC wants to see how he can get back 10x his money within 3-5 years, fully expecting that only a relative few of his investments will actually achieve that and some will be complete failures. He buys into these companies at a price where a reasonable set of assumptions and valuation metrics give him a terminal value that meets that objective. He doesn't buy without regard for valuation. Of course, many VCs either forgot this part too or were irrationally exuberant in their assumptions and lost their shirts just like the public.
Regards,
Bob
PS: There are probably lots of public companies today that are essentially late-stage ventures valued as early-stage venture investments, or less. I know one that even trades for <60% of cash. |
