June 22, 2005
Bagging the Rare MOTU -- VC Fantasy Life Part I
The Motu is the rarest, and most highly prized, of all species of venture deals. While I intend to discuss each of the species popular to venture investing over the next few months, it makes sense to start with the king of all venture deals — the MOTU.
The Motu is legendary in the world of venture capital. It is the fabric of VC fantasy life and VC wet dreams. However, unlike a Unicorn, the rare Motu is actually caught from time to time. Much like a gambler’s addiction is nearly impossible to extinguish because it is intermittently reinforced by the sudden ecstatic manifestation of a “jackpot” winner, so too are VC behaviours reinforced, and hard to extinguish, because of the wild celebration and rejoicing that ensues in the village after the return of one of it’s hunters with a prized Motu. Around the campfire, fishermen have “Big Fish stories,” hunters have “Rhino stories,” and VCs have “Motu stories” to recount.
“Bagging Your Very Own Motu” is the ultimate badge of honour in the venture capital world. What separates the few celebrity “super-star” VCs from their more prosaic venture brethren is that they have all “bagged their very own Motu” at one point in their professional lives. In fact, the Motu they bagged often defines them as VCs from that point on in their careers. Bagging a Motu divides your life into two parts — “Pre-Motu” and “Post-Motu.” And it’s not just the money, it’s the fame that really sticks. Your name becomes inextricably entwined with your Motu. And anything that happens to your Motu — good or bad — somehow reflects on you — long after you’ve moved on to other game. And then there are all of those presentations, meetings, and speeches where you will be introduced from now on as John “Motu” Investor. So you better like your Motu — unlike marriage — “for better or for worse,” you can never get a divorce from your Motu.
Although only one VC can really discover a Motu, it’s amazing how many VCs will lay credit for “bagging the same Motu.” Even having caught a glimpse of that Motu in it’s natural habitat (before it was captured) is suddenly considered an event possible “only for the worthy few” — an event which will be retold ad nauseum to their future staff, colleagues, and great great grand children. VCs may have a tendency to share deals, but they don’t like to ever share credit for “bagging their own Motus”. When VCs search tangled brush, scavenge desolate landscapes, cast over-fished streams, it is always the rare Motu that they are on the look out for. It is the ability to distinguish the rare Motu from the more common Metoo, that is the secret skill aspired to by all VCs.
So much for our fantasy life.
So what’s a Motu?
A Motu is a “Master Of The Universe” company.
It is the legendary 100+ x investment. It is often the bellwether company in an emerging industry. It usually becomes the big guerrilla of it’s market and garners 30+ % marketshare of that market worldwide — a market which it pioneered and has remained the leader of. The Motu becomes the arbiter of all innovation for that industry. The Motu is the standard, and the standards-bearer, by which all of the other companies in that industry (the “Metoos”) are, and will be, compared. It is the keeper of the dominant paradigms for it’s industry. And it is the Motu that becomes the top dog, THE gunslinger that all “wannabe Motus” (the Metoos) are now gunning for.
Early on, Motus and Metoos are indistinguishable, graze in the same fields, and often compete for the same food. But once a Motu becomes established in a flock of Metoos, it’s principal diet shifts — from competing with other Metoos for their food — to eating the other Metoos — an exclusive supply of delicious Metoos for a hungry Motu. (Hey, life’s not always pretty in the Kalahari. This isn’t about basking in the sunlight after a full meal — it’s about who won’t be basking in the sunlight after a full meal.)
So, for the Motu hunter in us all, it is important to distinguish the rare Motu from the much more common Metoo.
The Common METOO
The Metoo, while much more common than the Motu, is still a highly desirable catch. Many VCs, who have dreamt of catching a real Motu throughout their entire professional career, have still managed to build a respectable track record, and a good living, capturing the occasional Metoo.
Metoos are an interesting species in that they are all “Wannabe Motus”. In any industry there is really only one Motu but that Motu is surrounded by a flock of Metoos. In fact, early on in the evolution of an industry, the real Motu is indistinguishable from the crowd of Metoos. Most early stage investors aren’t really sure they have actually “bagged a Motu” until much later. A typical venture fund is packed with deals which are all “Motu hopefuls.” Over time, some of these “Wannabe Motus” turn out to be Metoos — or more commonly, one of the numerous lesser creatures which become the financial burden borne by stellar Metoo, and occasional Motu, investment returns.
Some examples of this flocking behaviour of Metoos around Motus? eCommerce players flocking around eBay. Hardware manufacturers flocking around Cisco. Software companies flocking around Microsoft. Biotech companies flocking around Genentech. Search portals flocking around Google. Need I mention more?
The bread and butter deals for venture funds are Metoos — NOT Motus!
The bread and butter deals for venture funds are Metoos — NOT Motus! In fact, a fund which “bags a Motu” is not necessarily a top performing fund. The funds which bring home a steady stream of Metoos are usually the top performing funds. (The principle at play here: It’s not the occasional home runs but the consistent base hits that win the game.) Still, the psychic draw of “bagging your own Motu” is irresistible to a VC. If it weren’t for Motus, most VCs would be doing something else for a living — not because they can catch one — but because they might catch one.
Congratulations for finishing this post. In future posts I’ll be referring back to Motus and Metoos from time to time. But you now know the secret —
Most VCs will gladly describe in detail the ideal company profile for their fund. But what they won’t tell you — and what they may not even admit to themselves, except in their dreams — is that there is really only one prize that counts —
“Bagging the Rare Motu.”
MOTU (aka Grand Slam) many a people have gone broke (or should I say many a fund has gone broke) trying to land one.
These days, I live in a non fantasy world, so I am happy hitting singles!
Posted by: josh kerbel at June 23, 2005 09:19 PM
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