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Summary:

Hunch.com co-founder and angel investor Chris Dixon has some advice for big venture capital firms: Try to think more like, and behave more like, the startup companies you invest in. That includes cutting down on excessive management fees and not tweeting about your golf game.

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Hunch.com co-founder Chris Dixon has some advice for big venture capital firms: think more like, and behave more like, the startups you invest in. In a blog post, the startup CEO listed suggestions for how major VCs might want to approach their business — based on how he would approach it if he was running a big VC firm — including “have fewer meetings” and “have everyone at the firm blog/tweet.” Dixon’s post comes amid an ongoing debate about the benefits and virtues of so-called “super angel” investors and the flaws and weaknesses of traditional VC firms — not to mention the question of whether there is a seed-funding “crash” looming.

Dixon has multiple perspectives on the venture-capital scene: one comes from his day job, which is running the New York-based startup that he founded with Flickr co-founder Caterina Fake: an attempt to create a recommendation engine that learns from users’ answers to a series of questions. The second perspective comes from his side gig as an angel investor, and as one of the partners in a seed investing firm called Founder Collective, which includes a number of other startup founders and angel investors such as Vimeo co-founder Zach Klein, Mark Gerson of Gerson Lehrman Group,  and Fake.

One of the main takeaways from Dixon’s post is the idea that venture firms should act more like the startups they invest in, right down to his suggestion that they “have offices that look and cost like startup offices — or better yet, don’t have offices at all [and] spend your time visiting companies.” He also recommends that VCs should not “talk/tweet/blog about your vineyard, yachting, golfing etc. while you tell your CEOs to work non-stop and be frugal.” Whether anyone on Sand Hill Road or elsewhere takes Dixon’s advice remains to be seen, but there are bound to be a lot of struggling startups who will be cheering his recommendations. Here are a few of the other suggestions from his list:

  • “Lower management fees so that they cover necessary expenses an reasonable salaries [and] basically be like a startup and only make real money when your investors make money.”
  • “Stop kidding yourself that you add a lot of value beyond recruiting/intros/governance/financing/selling companies.”
  • “Change the accounting so you can start caring about IRR more than just amount of money returned.”
  • “Say no to companies. Saying “come back later” feels like a free option to you but actually hurts you and the startup in the long run.”

Om recently spoke with Dixon about his perspective on startups and venture capital, and part two of that interview is embedded below:

Related content from GigaOM Pro (sub req’d): What the VC Industry Upheaval Means for Startups

Post and thumbnail photos courtesy of Flickr user vlauria

  1. Dixon and his previously teeny weeny exit is at it again with more blowhard drivel.

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  2. It would be really interesting to recalculate the negative venture returns of late by reducing the management fees to reasonable salaries, i.e. low to mid six figures max, not the high sixs or the low sevens that some of these VC frauds are getting. While you’re at it, get rid of those broomstick-up-the-ass “executive assistants” and costly offices.

    Paying attention, LPs?

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  3. there are probably two diff strategies that could work here:

    1) dial back on ALL excess overhead & infrastructure, just focus on deploying capital to worthy startups, and get out of the way on most all else (the “no office” approach chris mentions)

    OR…

    2) dial UP the resources and infrastructure based on needs as expressed by startups, and/or as might benefit IRR. this approach is more in line with YC, Techstars, or Betaworks, and doubles down on cost structure in ways that hopefully increase chances for startup success.

    personally I think both can work. the former was most of what I did as a personal angel investor the past 4-5 yrs. the latter is what I’m working on with an incubator / accelerator program now.

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