Accidents in North American Venture Capital

As a member of the American Alpine Club I look forward each year to the arrival of my copy of Accidents in North American Mountaineering.  This is a book that the club publishes annually that documents climbing and mountaineering accidents that are reported each year in the United States and Canada.  The idea, of course, is to educate the climbing community on things that can go wrong in the backcountry in an attempt to make everyone safer (as if the threat of dying were not enough, we also have to worry about being written up in Accidents. . . ).  

A typical entry might be titled: Fall on Snow – Unable to Self-Arrest, Faulty Use of Crampons and would then go on to describe how someone fell on a snowfield (in this case not far from Boulder, CO), dropped his ice-axe and wound up breaking his legs when he inappropriately tried to stop himself with his crampons (ouch!).  Other titles this year were: Stranded, Exposure-Hypothermia, Inadequate Clothing/Equipment, Climbing Alone, Weather, Exceeding Abilities (apparently this guy got it all wrong); or my personal favorite: Stranded, Exceeding Abilities, Incompatible Partners – Poor Communication (I like that having crappy partners is an official designation of the AAC).

As I thumbed through Accidents this year it occurred to me that it would be great to have a venture capital version of this book.  Entries could be titled things like: Poor Sales Execution, Faulty Use of Partners, Inability to Raise Additional Financing. Or for a company from 1999: Inexperienced Management Team, Poor Market Timing, Superbowl Ad. Or perhaps: Product Shortfalls, Slow Customer Traction – Inability to Cut Costs Quickly, Inattentive Investors.  

I assume that most VCs think a lot about companies that didn’t work out and why – this would be a way to memorialize that effort and to share it across the community.  I’m actually ½ serious here – let me know what you think.

Comments

[Nivi]

Great idea.

[bo]

i'm all for it. need a co-editor?

[Dave Jilk]

This is a TERRIFIC idea. The trick is getting the true information -- if you ask the VCs, you'll get one story, CEOs/founders, another. So the same company story could be entitled: "VCs failed to support company" and "CEO unable to lead management team."

[Dorrian]

Valuable. I think it would be a ton of work to make it good though, in order to get the insights the target audience (entrepreneurs/vcs/the copyright lawyers for the Alpine Clu) would be looking for. So... my suggestion is that you create a category in your blog called "Accidents in North American Venture Investing" and every time you hear about or feel inspired to track down an interesting accident you do it, and blog it. Maybe make it a group effort & invite guest bloggers from time to time (entreprenuers/investors) - give the category its own RSS feed too so people can get into it (no need to make it a separate blog). You've obviously got the makings of a good network to get pointed in all sorts of directions to get started (I hate to admit I have a company that could be a candidate since we made it a successful business only after the, um, accident). So either in 3 years you'll say, look, it's a book! or you'll at least have some great blog posts.

[David Brode]

Seth--Great analogy. I totally know that fear of being written up in the accident report, which is a quite separate fear from dying. I think of the report as I double- or triple-check the system before rapping down in front of my children!

[Daniel Nerezov]

kehe, this might be interesting. Good idea Seth! As far as I remember, dot bomb accounts like Boo.com were really popular a few years back...I think it's an intriguing concept for most people in the Industry and very real value proposition for active entrepreneurs and vc's.

That said, even though I might not like to see my self written up in the venture accident report, there are a lot of startups, and I know many entrepreneurs wouldn’t mind volunteering information if asked. It might be a bit tricky, however, if the vc wants to go on record and one of the founders doesn’t. Unlike climbing- here the story needs characters to be identified, anonymity would take all the fun out of it….which then raised defamation issues. But I am sure there are clever ways to go around this.

Of course it won’t be easy to get it off the ground...here's the quickest way I can think off. Just send a survey to all the venture guys we stay in touch with, ask them to answer some questions, maybe follow up with a Skype interview, recruit John from podtech.net to help out, ask for a deposit for the delivery of the book and use the money to finance production, do distribution directly, through Amazon, or NVCA and the VC journal.

I say let's take a pointer from alarm:clock and really put an emphasis on ***dirt*** with these startup diaries (or venture diaries). Dirt sells. Plus it's fun, interesting and that's what I'd expect from this coffee table sort of publication.

Just send the surveys out and get the data and first person accounts for the book.

[John Thornborrow]

Seth,

Thanks for the blog thoughts -- just found yours' through Brad Feld's blog.

The FAA produces similar reports for general aviation aircraft accidents. There is a common reason listed for aircraft accidents (read company failures) as "Controlled flight into terrain"... or "Everything was fine until that big mountain jumped in the way."

i.e, Company burned through its cash with no corrective action before realizing in could not raise additional money.

An investor from a large Dallas-based fund told me recently that 60% of their portfolio company failures were attributable to market timing or inability to gauge customer adoption rate tuned with burn rate (they did an exhaustive internal study).

Love the idea, I'd like to see more.

[Davide Berruto]

Good Idea! Using a different perspective it could also be developed as a tool for entrepreneurs. "Accidents in Company Building". I agree that a blog category would be a great start