The Gringo Zoom Venture Capitalist and the New Spray and Pray

This "entrepreneurial friendly" environment means not only frothy valuations, but founder choice in whom can help them build an enterprise for the ages

Here is a small sampling of many observations I’ve heard from American investors who have recently woken up to new opportunity in rising markets.

“I missed getting into Latin America early, I’m not going to miss getting into Africa early.”

“I wish I had invested in everything I passed on in the last three years. They all have up rounds and I’d look golden.”

“I’ve never been to Pakistan, but I have a friend who can get me into a dozen early deals and no doubt one of them will hit.”

“I’m trying to get into anything in emerging markets that has gotten into  Y Combinator in the last two years. Valuations are absurd but if one works, who cares.”

There are a few common threads here.

Note that many of these investors have never been to these parts of the world. Note the use of the word “I” throughout. Note that they all effectively argue for spreading a wide portfolio as opposed to analysis of the entrepreneurs, and sectors, and THEIR needs.

This, for me, is simply a new kind of zoom-enabled spray and pray.

My friends bristle when I have suggested this. They note, fairly, that they do have some sector expertise and do aim with greater precision than the above suggests. They note – and evidence is absolutely on their side in the last two years – that a wide portfolio overall is a good indicator of finding success in subsequent rounds.

I come at this a differently because I think a great portfolio starts with what is best for the entrepreneur on her terms. And the best entrepreneurs are building companies for the ages, and not for the next round. In fact – and I say this to entrepreneurs daily – I know you’d love X brand name on your cap table for future signaling. But the best signaling of all is… over performance.

In these frothy days where everyone thinks they are a venture capitalist, where great wealth are showing up everywhere, doing little due diligence, willing to pay almost any cap - I’m sensing the best entrepreneurs don’t love it. They believe that while the branded names can help them with their next rounds - they too often bring little substance to their specific needs. In fact, they often offer counter-substance because they still think any market from Colombia to Pakistan is some new version of an older version of the Valley.

So the smart founders are doing something incredibly obvious but which I don’t hear expressed often enough. It was said to me perfectly this summer by one of the greatest entrepreneurs I know from Latin America. When he was raising, early on and before anyone knew who or what he was, he first did a deep assessment of his own weaknesses personally and as a manager. He similarly did a blunt assessment of what he needed shoring up operationally to expand rapidly in the areas he was focused upon.

He created a list NOT of the obvious brands every one checks, NOT of some individual that carries buzz and a popular podcast. The list was all about shoring up those weaknesses and opportunities and being with investors for the long haul. He then focused on execution. By the way, over time some of those investors barely known at the time are now running billion dollar funds and are as committed to the entrepreneur as ever. And not only did the best funds come in later, but the best INDIVIDUALS in those funds most helpful to the next stages of what he was building.

The most exciting part of today’s entrepreneur-friendly investor environment is not that a ton of capital is available at frothy valuations that minimize entrepreneur dilution. The most exciting part is the entrepreneurs have choice with whom to surround themselves.

I may be old fashioned but I don’t think the new spray and pray sustains over time, especially in new markets leap-frogging models we gringos take for granted and made us wealthy here at home. Rather, it takes work to discover and be of service to the team that understands what others don’t about the ground and the scope of problems and opportunities on their terms.

“On their terms” is the watch phrase. Millions - I’d argue billions - of people are entering the new economy for the first time and almost overnight, and entrepreneurs don’t need money for the sake of money playing some kind of lottery. They need partnership and pattern recognition and, dare I say, a little humility.

They will do the rest unleashed with what they know and their unrelentingly passion to make something enormous that was never there before.

(a good bottle of wine to the first person who can identify the literary photo at the top of this post)….