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

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Good morning 👋

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

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.

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.

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

Read the full post below, and explore all investor deep dives here.

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They changed their pricing structure, we’re looking at a $15k bill, and we’re trying to find middle ground so we don’t have to change our community messaging platform.

If you know anybody, would love an intro.

Lessons

• 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.

Quotes

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Reading

Confluence.VC Private Investor Community

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- Clay and Tyler