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Mark Suster’s article: Strategizing for Long-Term Success in Venture Capital



Why Playing the Long Game Benefits Investors and Founders in Silicon Valley

The culture of Silicon Valley and the surrounding media industry is rooted in youth and a “David vs. Goliath” mentality where irreverent 20-something founders with technical expertise take on the industry titans and win. Traditionally, VC firms were more inclined to invest in companies with the promise of 100x returns, even with little revenue, rather than companies with steady growth and $20+ million in sales.

However, markets have evolved and playing the long game can benefit investors, founders, and executives looking to join later-stage startups. By considering the potential value created by independent companies like Snap versus Instagram selling to Facebook, it’s clear that playing the long game can be advantageous for all involved.

Investing for the Long Haul

Investing in enterprise software can also benefit from playing the long game. Take Procore, for example. The company went public with an $11 billion valuation, having been first financed in 2004. If Autodesk had purchased it in 2009 for $100 million, they would have missed out on significant growth potential.

More companies, worth $10 billion or more, are emerging, providing more opportunities for investors and founders to make larger returns and have a greater impact. The abundance of late-stage capital is advantageous in funding the long game and allowing companies to remain independent, potentially leading to an IPO.

Investment Success Stories

Of the four investments made in 2009, two exited, and two (Invoca and GumGum) remain independent and likely to produce billion-dollar outcomes. Maker Studios sold to Disney for $670 million, but the former CEO believed that the creator economy would eventually be significant, and companies that built tech and processes to serve these creators would be valuable.

Sometimes taking the intersection of great founder, great idea, and good timing can produce a multi-billion outcome. For example, although Adly ultimately failed, its founder and CEO went on to create Tinder. On the other hand, Invoca and another company remain independent and have the potential to generate $++ billion outcomes.

The Role of Long-Term Capital

The laws of large numbers, strong growth compounding off of large numbers, plus long-term investment, all contribute to the potential of long-term capital producing higher returns. Interim liquidity and long-term capital gains can provide significant benefits to investors, founders, and executives, all while providing necessary funding to let companies remain independent.

The LP community is often focused on top-quartile benchmarking in the near term, which can lead to newer VCs demonstrating quick returns. However, playing the long game benefits everyone involved, resulting in higher returns and greater impact.

Final Thoughts

In conclusion, Silicon Valley and the media industry it encompasses value youth, but the market has changed. Investors, founders, and executives must consider the benefits of playing the long game. By taking this approach, there is more potential for higher returns, greater impact, and increased success stories. The abundance of late-stage capital further supports the long game, allowing more companies to remain independent and potentially leading to successful IPOs.



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