:: Tasting Strategy ::

Though widely abused, strategy is one of the more important things in life. It is not necessarily something one has to think about or declare. A strategy is a pattern of behavior, and if you look, it shows.

Venture Capital Funds all have strategies they composed and posted on their web-sites, but those are usually neither inspiring nor important. What is important is how they behave, and I have recently came to understand some of the strategies they follow. 

The first one to review is the one I call a "tasting strategy".

The strategy stems from an old story. You are probably familiar with it but for the sake of those who are not let's tell it.

So these two guys walked down the street when they accidentally stepped on a pile of something. The one guy immediately said: "whaoo, some jam spilled on the road", the other guy didn't hesitate and said: "no, it's not jam it's shit". So the first guy tasted a small amount and said: "oh, you are right it's shit".

When VCs follow their "tasting strategy" the decisive criteria is "am I the only one looking at this company or is there someone with me" and they work according to the same rational. In today's market they assume they don't have time to smell the pile, to examine the offering, to understand. They have to make up their mind fast. And they do.

Those who walk away from the deal declare it's not worth it, those who do not, put their money in. They will know what they invested in only after the deal is done.

Now, though most will think this isn't smart, it's a strategy that might pay. In some cases there is no other way to close deals. And at the end of the day, if your stomach is strong enough you can eat a lot of shit until you hit the jam.

Just another reason why it is called Venture Capital. I think.

Wadi Writer #1 (Gray )
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