Most VCs build portfolios of investments that number between 10 on the low end and 40 on the high end per fund they raise. This gives us diversification of risk and a host of other benefits. It is generally true that its hard to know which of the companies will ultimately provide the biggest gains and sometimes its the most unlikely ones that end up being the home runs.

The venture capital process is a long one that requires patience. Typical hold periods are five to seven years, but they can be much longer. A lot can change in that kind of time frame. Over the years, I've had three or four investments that were on deathwatch for a significant period of time only to emerge from that state and start taking off. My favorite cliche about that kind of turnaround is:

We just went from the outhouse to the penthouse

These investments are often the most gratifying ones. Because they require a lot of work on everyone's part, including the VC, and because they require a committment to making the investment work that is often lacking in the venture business.

That is not to say that the VC should try resuscitation on every investment. In fact, when something is not working and the reasons you made the investment are no longer valid, you must be able to walk away. But some deals just take longer and need to evolve before they start working.



Knowing the difference between a failed investment and a slow starter is one of the hardest things to get right in the venture business. It takes experience, intuition, patience, and a deep understanding of the business and the markets the portfolio company participates in.



But if you can identify the slow starter correctly and stick with it, the outcome can often be spectacular. Going from the outhouse to the penthouse is a great thrill and I recommend that everyone do it at least once.