25/10/2024
For the past 12 months, aku dok follow some people who are are active in startup scene in Indonesia on LinkedIn. This writer is one of them. Menarik apa yang dia tulis ni. I felt the same way too since 2019 about Indonesia startup scene.
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written by
Leigh McKiernon
StratEx | Indonesia Headhunter | C-Level Recruitment | ex Korn Ferry
There’s an old saying: "If you give a man a fish, you feed him for a day. If you give a random person on the streets of Jakarta a bag of cash and a term sheet template, they’ll probably outperform the country's most esteemed venture capitalists." Okay, maybe that’s not a saying yet, but it should be. After all, with a 90% failure rate, VCs don’t exactly set a high bar.
You see, the world of venture capital has long thrived on mystique, heavy jargon, and stories of “visionary” bets on the next big thing—bets that conveniently forget to mention how most of them turn out to be duds. It’s as if venture capitalists operate on the philosophy that if you throw enough spaghetti against the wall, eventually one strand will stick, and then they’ll call it a gourmet meal.
So, why not hand that random person a big bag of cash and see what happens? Armed with a vague understanding of what a pitch deck even is, they’d probably do just as well—if not better. Statistically speaking, if nine out of ten companies fail anyway, how hard could it be to accidentally stumble upon a winner? It’s a model built on luck, and anyone can be lucky, right? Even the guy selling satay on the corner.
- Investment Analysis: The Myth of Expertise -
Venture capitalists love to talk up their so-called "investment analysis" skills, which they claim involve complex, data-driven evaluations of founder passion, market dynamics, scalability, and other buzzwords that sound like they came straight out of a TED talk for aspiring tech moguls. But when 90% of those carefully analyzed investments crash and burn, you have to wonder if all this “expertise” is just the investments world’s equivalent of freestyle jazz—sure, it looks sophisticated from a distance, but up close, it’s mostly just making things up and hoping for the best.
Come on, lets admit it. Any random person with a bag of cash could achieve the same results by embracing the “spray and pray” investment strategy that VCs have all but perfected. Throw money at ten startups, and statistically, at least one will stumble its way into success. It’s not that different from playing the lottery, except in this case, you get to call yourself an “angel investor” and talk about how you’re “disrupting the ecosystem” at cocktail parties.
Most so-called investment analysis boils down to one basic formula—find a founder with the right pedigree. Elite education? Check. Work history at a well-known tech company that’s still licking its wounds from a spectacular collapse? Perfect. Apparently, having experience wasting other people’s money is the most crucial qualification. Who needs a proven business model when you can say you once sat in the same office as someone who went on to launch a billion-dollar flop that never made a single rupiah profit?
At the end of the day, his so-called expertise is just a series of well-rehearsed rituals: nod thoughtfully at buzzwords, check if the founders went to the right universities, and make sure they’ve had at least one job at a unicorn that imploded. That’s what they call "experience." At least then, you know what not to do, right?
- 90% Failure Rate: It’s Not a Bug, It’s a Feature -
In the venture capital world, failure isn’t just an occupational hazard—it’s a rite of passage. A 90% failure rate isn’t merely tolerated; it’s practically a badge of honor. If you’re a VC and you haven’t seen most of your portfolio crash and burn, are you even trying? This industry is the only place where failing nine times out of ten doesn’t get you fired—it gets you featured in a Forbes “30 Under 30” list.
If you applied this same logic to any other profession, you’d be laughed out of the room—or possibly sued for malpractice. Imagine a doctor saying, “Sure, I botched nine out of the last ten surgeries, but hey, that tenth one went great!” Or a chef proudly announcing, “90% of my dishes are inedible, but the other 10%? Michelin-star quality!” In venture capital, though, this kind of track record isn’t alarming; it’s just another day at the office.
Given that even the pros are essentially playing a high-stakes guessing game, why shouldn’t our random Indonesian street investor give it a shot? The bar is set so low that all they’d need to do is toss money at ten startups, grab some snacks, and wait for the magic to happen. When one of those startups finally lucks into a viable product and scores an acquisition, our impromptu investor will be hailed as a visionary with a “sixth sense” for spotting the next unicorn.
In venture capital, it’s not about consistently picking winners; it’s about finding one big win that can erase all the embarrassing losses from memory. It’s a business model based on the principle of “one hit wonder,” except the stakes are higher, and the songs are startups.
- Gut Feelings vs. Data-Driven Decisions: Trusting Instincts (or Dumb Luck) in a World Obsessed with Unicorns -
When you ask a venture capitalist how they pick winners, they’ll proudly tell you about their “data-driven” approach, as if they’ve cracked some secret code. But let’s not ignore the elephant in the room: with 90% of their investments flopping, it seems like their magic formula for success might be more “close your eyes and hope” than “calculated strategy.” One has to wonder: is it the data or the intuition that’s broken here? Perhaps it’s neither, and they’ve simply mastered the art of being wrong in a very expensive way.
Enter our street investor, blissfully unaware of the latest blockchain craze or whatever trend TechCrunch declared “the next big thing” last week. This person hasn’t been contaminated by investor groupthink or brainwashed into believing that a $1 billion valuation is somehow justifiable for an app that delivers artisanal coffee to your door in under 10 minutes. Instead, they’d be using a much simpler strategy: “Does this idea make sense, and could it actually, you know, make money?”
The randomness of their approach might even be a strength. While VCs are busy herding together, chasing unicorns—startups that burn through piles of cash while endlessly postponing profitability—our random investor might stumble upon a few zebras. These companies don’t dazzle with flashy valuations or buzzword-laden pitches but have the audacity to generate actual revenue. What a novel concept.
If we’re being honest, there’s something refreshing about an investor who’s not mesmerized by jargon like “disruption” or “scalability,” and who might accidentally invest in something useful for once. If Warren Buffet can build his empire by sticking to things he understands, maybe our clueless amateur has a shot, too. Even a broken clock is right twice a day, and those are better odds than most VCs are working with.
- Templates, Term Sheets, and Other VC Wizardry: Let’s Not Overcomplicate Things -
Venture capitalists love to project an air of mystique around their work, as though they’re concocting investment strategies in a secret lab filled with bubbling cauldrons and ancient scrolls. But the real "secret sauce" of VC is much simpler: templates. That’s right, those sacred documents covered in phrases like "drag-along rights" and "pre-money valuation" can be downloaded online faster than you can say "Series A." You could print one out, add a few phrases that sound vaguely important—like "full ratchet anti-dilution"—and congratulations, you’re practically a partner at a top-tier firm.
The truth is, term sheets aren’t some kind of ancient text that can only be deciphered by a cloaked VC with 20 years of experience and a golden abacus. The jargon might look intimidating, but in practice, it’s just an elaborate way to say, "We’ll give you money now, and if you succeed, we’ll take a lot more later." Whether you're talking "cap tables" or "convertible notes," the strategy remains the same: pretend you know what’s going on, nod wisely during meetings, and occasionally say something about "protecting downside risks" to sound extra smart.
For the average person, this actually presents an advantage. They’re not weighed down by years of listening to startups pitch about "disrupting markets" or "leveraging synergies." They can approach deals with the refreshing honesty of someone who just clicked on the first result for "term sheet template" in Google. With no reputation to worry about, they can hand out cash with the carefree attitude of a game show host. They’re just sticking to the 90% failure rate model that VCs themselves proudly embrace. So why make it any more complicated than it has to be? In venture capital, confidence and a well-placed buzzword are as good as any strategy.
Giving a random Indonesian a huge bag of cash might not be the most conventional way to spur innovation in the country, but it sure would shake things up. Would they outperform the current crop of VCs? Maybe. At the very least, they couldn’t do much worse. If their investment decisions seem amateurish or irrational, well, so do a lot of the companies getting funded by "professional" investors.
It’s not that the people in venture capital are incompetent, but rather that the entire system is built on chance disguised as insight, gut feeling disguised as analysis, and failure disguised as a feature. In this world, expertise is just a shiny badge and a fancy LinkedIn profile; what really matters is whether you’re holding the bag of cash.
Maybe it’s time to admit that investing might not be that complicated, and that when it comes down to it, anyone can play the game—as long as they have a big enough pile of chips. As the old saying goes: "If you can’t beat them, give a bag of money to a random bystander and let them try."
Original article:
There’s an old saying: "If you give a man a fish, you feed him for a day. If you give a random person on the streets of Jakarta a bag of cash and a term sheet template, they’ll probably outperform the country's most esteemed venture capitalists.
