Cirque Du Soleil humbled a VC — ‘returns’ are measured real time and they can’t afford to get just 5 of the 20 acts right!
Image clicked at Cirque Du Soleil Bazzar live show (themed after the Great India bazaar/market), last performance in New Delhi on 20th Jan 2019 before they take this show to its next stop Abu Dhabi
This was the first Cirque Du Soleil (CDS) performance I have ever watched. While my wife who was watching it the 3rd time tells me that the show seems more muted than previous iterations she saw in Vegas and DC, I walked away in awe. The VC in me had researched the company’s history, progression (from 1980’s theatrical performance from founders Guy Laliberté and Gilles Ste-Croix to being the world’s most celebrated circus performing globally), flattish revenue ($800M) last few years, interesting story of one founder buying the other; and finally the decision to remain private.
I am not going to let the VC in me dwell on why the revenue trajectory isn’t a hockey stick, or whether the product-market fit is right (at $100 a ticket, it was well worth it I must admit), or what the valuation of this company should be if someone was to attempt a buyout. Instead I am going to reflect on what was going through my mind as I watched this 1.5 hr. show, mesmerised and humbled.
CDS Bazzar performed about 20 acts ranging from super-human roller skaters, a circular acro-bike performer, a fire manipulator, 2 mallakhamb (Indian pole) gymnasts, many trapeze artists et al — actes parfaits, each act taking perfection to new heights. All t’s were crossed and all i’s were dotted as the 1500 odd audience clapped and cheered through and through.
I couldn’t help but compare the CDS performers with the performance of my industry actors i.e. venture capitalists (VC). This is what my mind was racing with as I watched the spectacular show:
- Cirque Du Soleil show does about 20 acts, similar to number of investments per VC fund
The traditional VC model (to a large extent US VC and to some extent Chinese VC’s as well) has been that perhaps 5 of the 20 companies yield good outcomes (multiple on investment 3x+, as much as 100x in the real outperformers) while the other 15 investments have a zero outcome, at-least directionally speaking. Top performing VC’s (top quartile as they are called in our industry) are able to get this math right and yield 3/4/5x blended multiple on their funds for which they get awarded a badge of success and monetary gains.
Unfortunately CDS performers can’t afford to do what a top quartile VC winner is expected or allowed to do.
Every time CDS performers are out on the stage, audience expects each of the performance to be picture perfect with no room for error. 5 good acts and 15 duds just won’t cut it
2. Cirque Du Soleil has a team of performers that trust each other and work constantly in tandem
None of the CDS acts had an individual performance. They were all team efforts in groups of 2 or 3 or more. While one witnessed individual acts of brilliance, there was a lot of falling backwards into a partner’s hands, jumping into the air to be caught by another team member seconds later, and working in perfect conjunction with colleagues to get the full act right.
A VC partnership works only to some extent the same way. Individual partners are out there chasing the best entrepreneurs, ideas; scripting an investment; doing value-add through the investment’s lifecycle; and finally harvesting an investment through an exit. Don’t get me wrong, this is a nerve-racking journey as VC partners need to trust each other in their judgement, operating models, and ultimately a fund’s success comes from the collective success of all the partners’ respective investments.
Having said that, VC firm’s partners aren’t necessarily risking their lives (or careers in their case) on their colleagues unlike what the circus performers are forced to do. It is possible that partner 1’s investments do very well while partner 2’s investments under-perform severely, but ultimately they emerge as winners collectively. Lets just say VC industry is a lot more forgiving for laggards than CDS could ever be.
While team-work makes the journey and success of VC’s sweeter, their situation doesn’t command even a blip of the mutual trust and dependence that CDS performers need to exhibit in their daily work
3. Cirque Du Soleil has more specialists than generalists
While the shows’ Maestro and some his clowns (literally speaking) didn’t exhibit any specialist skills in their general entertainment and crowd engagement role, the real stars of the show in my mind were the specialists. All the specialists had unique skills — like the Indian pole performers who were short, muscular and at-least medium level gymnasts; trapeze artists who were nimble, flexible and possessed high degree of gymnastics skills(not much less than what one sees at the Olympics); or the fire-manipulator who was a strong dare-devil with equal strength in his mind and body.
This is akin to VC partnerships. While all (good) VC’s have some generalist skills like ability to mentor (entrepreneurs), strategic evaluation of opportunities, eclectic network, and above all good listening skills and foresight; they possess specialist skills based on type (stage, sectors etc.) of investments they focus on. Here I found VC partners and CDS performers somewhat similar. It is quite common to have a partner in a VC firm focused on Enterprise’ sector investments, someone who can spot the needs of large and small enterprise customers, view on trends in Tech adoption by businesses around the world, or even a clear sense of product development cycle of next generation B2B products. Similarly, some partners are just outrightly built to be great ‘Consumer Tech’ investors — they can see their kids use a new app like snapchat and foresee that this will take over the mind-space of millennials away from everything else, or have the ability to back maverick sounding entrepreneurs changing consumer behaviour, consumption habits by looking at the same world with a different lens.
Both CDS shows and VC funds thrive on performance of specialists rather than generalists
As the show was nearing the end and I was continuously applauding one performance after another, I could feel a strong urge of respect for the Cirque Du Soleil artists. At the same time, I was thanking my stars that I was not in their shoes where I was being put to test under a lens of perfection everyday. To be fair, I have messed up some of my investments and yet emerged unscathed (and more importantly in one piece) because I have been right sometimes when I went out to invest (perform).
