1Mby1M Virtual Accelerator Investor Forum: With Jason Cahill of McCune Capital (Part 4)

Sramana Mitra: So what is the best and easiest way for me to do this? I would like to acquire another product that is relatively cheap to acquire and be able to put it through my channel and just go from $1 million to 200 in million in revenue. That with the $700 million to $800 million is perfectly doable.

Jason Cahill: It’s funny because when you watch movies and they show the Wall Street banker, you’d think about the super cut-throat competition. When I think of a West Coast VC, I actually think people don’t collaborate on deals. By and large on the East Coast, especially in New York, there’s this very collegial environment where we share deal flow just because we tend to elevate things that we find interesting. The reason that I mention that is, if I’m only investing in unicorns and really chasing those, then I have to have a sharp elbow because there simply aren’t that many of them.

Sramana Mitra: That’s where the dynamic comes from. The West Coast VCs believe that there are maybe 5 or 10 deals in the whole industry a year that they have to get into to be able to say “We’ve put in an investment in the top deals of the year.” They’re very competitive. That’s how the whole over-bloated evaluation phenomenon has happened. It’s actually very problematic.

What that has created is a lot of Death by Over funding and many losses. There are problems that the New York Times article refers to of excess funding and excess pressure to grow at an unhealthy pace. We see them probably like no one else because of where we sit in the value chain. There are very good investments that will make very good money if they are shepherded in a capital-efficient manner with all the parameters being kept in mind instead of mindlessly funneling cash into them.

Jason Cahill: Yes. You were saying that the West Coast has a more competitive mindset. Just to be frank, in this industry, we get paid out in fees. So the more money we raise, the more fees you get. Even for us, our second fund is for $50 million. We thought a lot about it. Is this the right number? If we’re smaller, we’re under constraint. If we’re larger, what is the signal we send out?

Because I love getting in the conference room with the founder and map out what the next three months look like, who are the next customers you need an intro to, and how do we find you the right senior developer you need. Of course, we have to make money. Ultimately, investing in companies that are making a real change in the world and then meeting the founders behind it, that’s the rare air that I could breathe every day.

Sramana Mitra: If you talk to the people who have been around and who share that philosophy, venture capital works best in the sub $300 million fund size level. Then you get into all this management fee scam and try to force feed cash into companies and all this unhealthy stuff. Something to keep in mind is that the smaller funds have a much more interesting role to play in the real venture capital.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Jason Cahill of McCune Capital
1 2 3 4 5