Fred Wilson Says He Prefers to Invest in Startups that Sound Stupid
Union Square Ventures chief Fred Wilson has some big notches on his bedpost: Tumblr, Twitter, and Zynga (cough). But if you look at USV's portfolio page, you'll see a lot of chaff. Bad ideas that will probably go nowhere. This is the case with most VC firms. But unlike most investors, Wilson actually tries to chase down laughable ideas. Suddenly it all makes sense.
"I have found that return and ridicule are highly correlated over the years," writes Wilson in a new blog post. " We have made more money on things that were highly ridiculed than on any other cohort. When I see people laughing at ideas and companies we have backed, I smile. It means we are going to make a lot of money on that investment." Sure, that was probably the case with Zynga—but that company's dismal condition post-IPO shows that bad ideas might make money for its early backers, but remain bad ideas.
Emphasis on might. There are some serious duds in Wilson's basket: GetGlue, the ephemeral Turntable, and something called KitchenSurfing, "an online marketplace that connects cooks of all kinds with people who love to eat." It's hard to imagine Wilson having the last laugh on goofball startups like these. [Fred Wilson]