Twitter
LinkedIn
Reddit
WhatsApp
Email

17 Lessons From Arthur Patterson (Co-Founder @ Accel)

This week’s deep dive is on Arthur Patterson, co-founder and lead investor at Accel.

Β 

Arthur is one of the godfathers of Silicon Valley. He started Accel with Jim Schwartz back in 1983, and he has grown it quietly since then into one of the most-respected funds in the world.

Β 

Similar to some other investors we have studied, Arthur is not very loud online (noticing a trend?), and he has been selective with when to do public speaking appearances.

Β 

Here are some of our favorite lessons, quotes, and additional reading from studying Arthur.

Arthur Patterson - Accel

Lessons from Arthur Patterson

  • Nearly everything exists in cycles. Each cycle becomes bigger than the last, and the winners get larger as a result.

Β 

  • Company valuations are a function of anticipation. Larger valuations equate to larger expectations, and if those expectations are not met, somebody is on the hook for the let down.Β 

Β 

  • Chance only favors the prepared mind. Luck exists, but lucky people are always prepared for it.

Β 

  • In early-stage venture, there is a capacity problem (too much money chasing too few quality deals). Capacity problems create adverse selection, and adverse selection creates underperformance.

Β 

  • Don’t spread yourself too thin. Focus one one-two services that you can offer better than anybody else.

Β 

  • Pain is instructive and expensive. Operating and investing in startups requires pain and failure. All paid brings wisdom.

Β 

  • When a company is taking off on exponential growth, your role as an investor is to get out of the way. Don’t add more to their plate.

Β 

  • Funds that have raised enormous amount of money are at a disadvantage of doing good early-stage investments. Generally speaking, higher acceptance rates means lower quality. This is what has happened to early-stage investing.
  • The more you spray-and-pray, the less you protect your franchise. In other words, your brand becomes diluted, and your capital becomes worth less.

Β 

  • The best founders are usually controversial individuals. Trying to draw conclusions on what makes a good founder is an impossible exercise.

Β 

  • The best ideas don’t need to begin with the best individuals. The best ideas are usually attracted to the best ideas though.

Β 

  • Low-performers can’t be allowed. Take an up-or-out approach internally as a fund and with your portfolio companies.

Β 

  • Software is malleable; hardware is not. There is less risk in making mistakes in the software world. If you get it wrong in hardware the first time, your company fails.

Quotes

"Being first does not mean things will necessarily fall into place."

β€œThe venture business has a pattern of roughly eight years of growth followed by six years of retrenchment.”

"Best venture investors are those that form partnership relationships with entrepreneurs and help them avoid a lot of mistakes. Doing this reinforces naturally good analytical judgement."

"At the early stages, unless you run a very tight experiment, you don't learn anything from it."

One Place to Learn the Different Parts of Venture Capital

Β 

We started our careers in venture. After about a week, we had a realization.

Β 

We had no idea what we were doing.

Β 

Turns out, we weren’t alone.

Β 

Junior VCs don’t get training. You’re forced to figure it out on your own.

Β 

Learning the rules, tools, and players takes FOREVER to learn. That’s why we made the ultimate VC resource library to speed up the learning curve.

Β 

Confluence.VC Resource Library

Our best VC resources … FREE