A self-reflection for us, Venture Capitalists

The modern Venture Capital industry is relatively new, the first VC in the US was America Research and Development Corporation (ARDC), founded in 1946. In Brazil, the key VCs started operating less than 20 years ago.

Although it is a sophisticated asset class, I believe we all agree that we've been operating in an old, broken, and lazy fashion. It seems that In the early stages, the herd mentality contaminated the sector, and the average funds' performance delivers more "Beta" than "Alpha".

We know the same people, attend the same events, use the same services, rely on referrals, and we’re most of the time “too busy to meet”. There is a huge systemic risk through the lack of diversity.

We kept old habits but often just threw out our investment fundamentals. The founder friendly in a competitive environment became “quick to commit” because someone will be "playing different games". We talk about co-investors like it’s our track record.

Disasters such as Theranos and FTX will continue, and they’ll continue to get worse. It’s time to rethink VC.

Study the fundamentals and throw out old assumptions. Young analysts today are mimicking what they hear from their firm partners, who learned from their senior partners in a context compared to what we have.

Go beyond first-level thinking and exercise second-level thinking (Question everything, involve others, think long-term, and don't discount options too quickly) so that your decisions are backed by reliable data. Stop relying on referrals, it’s 2023!

If you’re not reaching out to founders, then you’re being lazy. Shorten the feedback loop with better data collection and diligence beyond gathering opinions from other VCs. Craft your own conviction and bear in mind LPs are paying for unique perspectives.

Not just about companies, but about the world, markets, and our own industry. Build tools, publish your thoughts, and study adjacent history for each given opportunity. Periodically, self-question the way you source, invest, support, and operate. Make sure you have it all documented.

Hold yourself to the same standards you would your founders and become the best VC that only you can become. Individually, there are a lot of great talents and hardworking VCs that have been forging this path, but collectively, we’re still far behind.

If you've been observing from the sidelines, now is the time to step up. Discard old habits and challenge your assumptions. Don't be lazy or scared, and avoid blindly copying what others have done. Instead, make thoughtful decisions that feel right for you and your unique perspective.

As each of us carves out our own path in the venture capital landscape, we contribute to a systemic diversification of thought and approach. This variety and adaptability are crucial for creating a dynamic, forward-thinking industry that embraces change and innovation.

So, let's do it?