20VC: 27 Years of Investing Lessons on Picking Founders, Price Discipline, Reserves and Selling Positions | Can Seed Investors Compete with Multi-Stage Venture Firms | Why Returns Will Not Worsen Moving Forward with Peter Wagner, Founder @ Wing
Mar 6, 2024
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Peter Wagner shares 27 years of investing lessons, discusses venture market trends, and reflects on investing in capital-intensive businesses. He explores the evolution of venture capital at Accel, the significance of pattern recognition in investing, and market dynamics. Wagner also delves into liquidity management in venture capital, investor behavior in a zero interest rate environment, and building a supportive ecosystem for founders.
Passion and discontent drive successful founders to create innovative solutions, indicating high potential for success.
Adapting investment strategies to market trends and seizing key opportunities significantly impacts investment outcomes.
Price sensitivity reflects investment conviction, emphasizing the importance of understanding underlying factors beyond price.
Deep dives
Key Point 1: Identifying Successful Founders
Successful founders often exhibit a strong passion stemming from discontent with current approaches, leading them to create innovative solutions. This drive to address glaring deficiencies can be a key indicator of founder quality and potential success. The engagement and collaboration between founders and investors play a significant role in achieving success.
Key Point 2: Lessons from Investment Misses
Reflecting on missed investment opportunities like in the case of Snowflake's Series B highlights the importance of understanding market trends and adapting investment strategies to changing contexts. Capitalizing on key investment opportunities and ensuring adequate funding can significantly impact investment outcomes.
Key Point 3: Balancing Price Sensitivity in Investing
Price sensitivity in early stage investing can indicate the depth of conviction in an investment opportunity. While price is a factor to consider, an excessively low or high price should not be the sole determinant of investment decisions. Understanding when price concerns signal underlying conviction issues is crucial in navigating investment choices.
Importance of Taking Time for Investment Decisions
The podcast discusses the importance of taking time for investment decisions, emphasizing the need for founders to thoroughly understand and build relationships with potential partners. By sharing an example of a successful long-term investment in Pinecone, the speaker highlights the benefits of patience and due diligence in decision-making processes. The conversation delves into the significance of avoiding rushed investments due to time constraints, advocating for a comprehensive understanding of one's business partners as a crucial aspect of successful investments.
Challenges of Scale in Venture Capital
The episode touches on the challenges of scale in venture capital, reflecting on the impact of excess capital flow into the industry. The discussion raises concerns about inexperienced investors and the detrimental effects of indiscriminate capital deployment on the market. By analyzing historical trends and behaviors in the venture capital landscape, the podcast warns against the negative consequences of mismanaged capital deployment and calls for a balanced approach that prioritizes excellence over excessive scale.
Peter Wagner is a Founding Partner of Wing. Peter has led investments in dozens of early-stage companies including Snowflake, Gong, Pinecone, and many others which have gone on to complete IPO's or successful acquisitions. Prior to founding Wing, Peter spent an incredible 14 years at Accel, starting as an associate in 1996 and scaling to Managing Partner, before leaving to start Wing.
In Today's Episode with Peter Wagner We Discuss:
1. From Associate to Managing Partner to Founding Partner:
How did Peter first make his way into the world of venture as an associate at Accel?
How important does Peter believe it is to have early hits in your career as an investor?
What is the biggest mistake Peter sees young VCs make today?
2. The Venture Market: What Happens Now:
Does Peter agree with Roger Ehrenberg that venture returns will worsen moving forward?
How does Peter answer the question of how large asset management venture firms co-exist in a world of boutique seed players also?
Does Peter agree with Doug Leone that "venture has transitioned from a high-margin boutique business to a low-margin, commoditized industry?
3. Investing Lessons from 27 Years and Countless IPOs:
What have been some of Peter's single biggest investing lessons from 27 years in venture?
Why is Peter so skeptical of capital-intensive businesses? Will defense and climate startups suffer the same fate as clean tech did in the 2000s?
How does Peter reflect on his own relationship to price? When does it matter? When does it not?
What have been Peter's biggest lessons on when to sell positions vs when to hold?
What has been Peter's biggest miss? How did it impact his mindset?
4. Building a Firm from Nothing:
How was the fundraise process when leaving the Accel machine and raising with Wing?
What have been the single hardest elements of building Wing? What did he not expect?
What advice does Peter have for someone wanting to start their firm today?
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