Simon’s Blog

A few blogs really made me smile in the past couple of days. People are talking about how (and how not) all the really interesting innovations on the Web these days are being created by “young whiz kids”. The thing that really amused me is when the VCs started chiming in.

Fred Wilson said,

The truth is that some of the most interesting things I’ve seen this month and this year are the creations of kids who barely shave. And it’s not an accident.

In a nutshell, Fred was suggesting that the reason for this trend is that “young people” understand the Net better than “old people” because they’ve grown up on-line; they’re “net natives”. Why did this make me smile? Because Fred’s thought processes seemed just seemed so ultra-typical of many VCs.  It’s not a bad thing, by the way, it’s just something I’ve observed over the years.

I’m not singling Fred out here, he just happened to write the blog I read. Here’s how it often seems to go…. VCs love looking for patterns in things. They spend lots of time thinking about patterns, looking for trends etc. However, the kinds of patterns they’re looking for are often rather hard to spot. That’s because the human brain can be really bad at this kind of pattern recognition. I won’t go into the details why, but the fact is that it’s easy for the human brain to be quite “sloppy” in its thinking… latching on to all sorts of irrelevant details, and seeing patterns that don’t exist. And that’s what often happens in these kind of situations.

Now, the way to avoid this kind of sloppy thinking, when attempting any kind of post-hoc rationalization of observations, is to apply Occam’s Razor. Frankly, unless you do this, you have little chance of ever understanding anything properly.

So, allow me to suggest what I think the true pattern is here. It’s really simple. Why are tech VCs seeing more young entrepreneurs around than ever before? It’s simply because so many young entrepreneurs are starting tech companies these days. That’s because it’s so easy, and so inexpensive, to start a tech company today; and just as importantly, it’s easy to access good information that helps inexperienced entrepreneurs make theirs a credible company. I would assert that it’s almost nothing to do with “young people” being Net natives; although, of course they understand that space well (just as anyone else who’s used the Net for a long time does).

The thing is though, that despite the great opportunities that young entrepreneurs have in 2007, there’s one thing they lack - broad experience. I sold my first piece of software when I was 14. Pretty cool it was too, if I may say so; but, was it a potential billion dollar idea? Nope. Even if it had been, could I have turned it into a billion dollar company? Nope. And, would I have had any idea how to create a billion dollar company, and keep a resonable amount of the equity for myself? Nope.

The truth is, potential billion dollar ideas are ten a penny (barely a day goes by when I don’t see one of these, or even have one of my own). The hard part is the execution; and for that, you need both experience and the right personal network to open the right doors. And, by the way, VCs know that really. That’s why VCs love serial entrepreneurs so much. The thing is, though, they just can’t seem to resist looking for (and sometimes missing) those darned patterns…