Venture Capital Does Not Scale (Sort Of)

[This post is pure speculation.] Common phrase in venture capital is that “VC doesn’t scale.” Having worked with a lot of firms and just reading the news and tea leaves, I’d agree. One interesting firm, GGV*, is a fully-integrated partnership across China and Sand Hill, investing out of the same fund — so, they scaled their model according to their strategy, and that took a long time and a gutsy bet. Most VC doesn’t scale.

Yet, again, a16z draws that maxim into question. Today, they announced another “Board Partner” to join the firm, this time Boris Wertz who operates out of Vancouver. In the recent past, they added Shana Fisher from NYC, a well-respected angel investor. It’s hard to keep track of venture firm semantics and roles these days, but let’s say these folks act as “Venture Partners” for the firm. All of a16z is located on Sand Hill (and it’s a big team), but how do they scale geographically as technology and entrepreneurship becomes more pervasive? Well, adding “Board Partners” with a track record of investing and a reputation for having a good nose doesn’t hurt. These people get to keep their day job, get to continue to invest, and get to leverage the a16z brand and network on their home turf. I’d guess they will also suggest a16z to their most promising portfolio companies, and I’d guess a16z wouldn’t mind making everyone whole if a deal is sourced through such a channel. For instance, think of Wattpad in Canada. Great company. Now, a direct line to a16z if and when the need arises. Let’s expand this a bit — other emerging tech centers could also provide opportunities for more Board Partners — say in Berlin, or Boston (especially now that every MIT student gets $100 in Bitcoin), or Los Angeles, or maybe even places like Singapore, China, and beyond. These folks can be like eyes and ears on the ground and send intelligence back to the partnership, scouting for the most current information, founders, and ideas. So, while VC itself doesn’t really scale, brand certainly does, and that’s what may be happening here. (* I work with GGV as a consultant.)