Founders, VCs, Bankers: Breaking Down Value-Creation in Tech

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When I was working in investment banking, my team was focused on understanding the needs of internet, software, hardware and semiconductor companies. We would look for creative ways to help them improve their financial health.

In the process, we would learn a ton about their market, their products and the people on their leadership team. We would know a ton about them before they ever saw a single one of our slides.

Over the months, I started realizing these companies were the ones doing the real work. They were innovating and creating new things that people were willing to pay for, with either time or money. Without the companies, there would be zero value. The majority of the value was clearly created by the founders, the operators, the product folks, the biz dev teams, etc. These were the people who did the work that got the company to where it was.

Less valuable than the operators, but still more valuable than us finance folks were the early stage investors. Their risk appetite and advice on maneuvering the dangerous waters of starting up were rewarded with large chunks of the companies we analyzed. When companies go public or get acquired, the VCs often make as much money as the founders do.

Creating least value in tech is Wall Street. It’s also the most commoditized piece of the tech value creation chain. Goldman Sachs, Morgan Stanley, JP Morgan, etc. They all offer essentially the same service.

I love being in the midst of true problem solving. This means really drilling into operations and understanding the piece of the value creation where the rubber meets the road. I have tons of respect for those who participate in the other pieces of the ecosystem but they’re simply not creating as much value as operators.


Originally published at www.viabilify.com.