Announcing Hindsight Ventures
By: Doc Brown
I’m excited to announce the launch of my new, completely hypothetical and satirical firm, Hindsight Ventures. You all probably know me from my years of experience in over-confidently predicting outcomes, most recently as the starting Monday morning quarterback for your favorite team that had an absolutely terrible head coach, and previously as the tarot card reader that successfully predicted you would have something bad happen to you in the next year or two (tough 2012 wasn’t it!). And I hate to repeat myself, but I am the guy that called the stock market crash “in the near future” in 2004, 2005, 2006, 2007 AND 2008!
Enough about me — let me tell you about our firm! Like everybody else, we invest in the best founders, the biggest markets and the most innovative technologies. Unlike everybody else, our deals always crush it. How? Instead of relying on luck, we have an uncanny ability to pick the best outcomes, using the benefit of hindsight.
What is hindsight exactly, and how does it play out in venture capital? Hindsight means understanding of a situation or event only after it has happened or developed, and we use this to give us the ability to go back and make the right decision ex post facto. While most VCs rely on varying combinations of skilled foresight and plain luck, even the strongest predictive ability doesn’t stand a chance against the perfect information found in hindsight. And because we can see outcomes all the way through exit and liquidity, we don’t make the mistake of putting money in seemingly obvious success stories like Theranos’ Series C or Yik Yak’s Series B. It’s investing, without the “oh geez, I wish I hadn’t done that” nor the “if I would have known that, I would never have invested” and not even the “everything was there — he just got unlucky.”
So how does this affect our strategy? Basically this allows us to:
- Take concentrated positions — really the smaller portfolio, the better! Everyone knows all the best funds ran concentrated strategies (nevermind the fact that all the worst funds also have concentrated strategies). Imagine if you had a fund that was just WhatsApp. That’d be like a 100x fund. Well yeah — we don’t have to imagine it, we just do it!
- Plow all our money into our biggest winners. This seems obvious — because I know which companies in our portfolio are going to crush it, all I have to do is continue to invest in our rising stars. Why take a flyer on an unknown when I have a guaranteed return with my existing budding unicorn?
- Pay whatever valuation the company demands. Here’s the brilliant thing — if we only invest in unicorns (which we do), then as long as the company’s post-money valuation is <$1B, we will make money! This allows us to outcompete the rest of the foresight-oriented VCs. Heck, we’ve even been known to issue blank term sheets and boldly declare to the founder “you name the valuation”. People may call us crazy, but if we know beyond a shadow of a doubt that the company will be wildly successful, it really doesn’t matter what the initial valuation is.
Sometimes people ask me how I would run a VC firm if we didn’t have the power of hindsight. Well, I can tell you it’d be a lot different. If there was substantial risk of an investment not turning out as well as I’d want it to, I’d have to hedge in a lot of ways. I’d have to invest in enough companies to decrease my portfolio variance. I’d need to give up ownership and decrease follow-on investing in order to spread my capital across more companies. And I’d probably need to negotiate valuations that factor in the risks commensurate with the stage of the company.
Boy does that sound BORING! Glad I was smart enough to have the benefit of hindsight, otherwise I’d have to pursue a more cautious, risk-adjusted strategy. So I’ll let all of you completely sane foresight-oriented folks figure it out while I go back to relaxing with my favorite South Park character in a pool with these guys…
About the Author
Doc Brown is the alter-ego of Victor Gutwein, founder and managing partner of M25. A Kauffman Fellow (Class 22) and former leader in Hyde Park Angels, Victor founded M25 in 2015 and quickly grew it to become one of the most active venture firms in the region. Victor lives with his wife and daughter on the South Side of Chicago and loves staying active with running, biking, swimming, backpacking and any team sport you’ll let him join. If he can’t convince you to break a sweat with him though, he’ll usually succeed in getting you to try out a Euro-style board game (like Settlers of Catan) with his friends.
M25 is a Chicago-based Midwest-focused venture capital firm run by Victor Gutwein and Mike Asem. Since the firm’s inception in 2015, M25 has invested in over seventy early-stage tech startups in over 20 cities across 11 states in the Midwest. M25’s objective, analytical model and collaborative, forward-thinking approach creates a large portfolio spanning several industries across the entire region, allowing them to establish M25 as a key node in Midwest startup ecosystem.