17 Lessons From Arthur Patterson (Co-Founder @ 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.

• 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. 

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

• 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.

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

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

• 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.

• 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.

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

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

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

• 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.