Changing gears -- smoothly and at the right time -- is something that the best venture capitalists do extremely well. By changing gears, I mean shifting from one investment theme to another.
After building expertise in big box retail investing, for example, it's no easy feat to abandon that knowledge to pursue something totally different like communications investing. Yet that is precisely what BVP partner Felda Hardymon accomplished a couple of decades ago. He led Bessemer's early stage investments in companies such as Staples and Sports Authority in the 1980s, but when he felt the trends supporting retail investments were no longer favorable, he pursued other roadmaps. He started learning about networking and communications technologies and used that newly developed expertise to invest in companies including Cascade, Sahara and Sirocco, all of which were phenomenal successes.
It's a daunting task when faced with learning about a new area, but it's a critical part of the venture capital process. Without expertise, it's impossible to make good investments (without getting very lucky), so that means you have to make bets on areas to investigate before making bets on specific teams and companies. Pick the wrong area, and you're screwed. Pen computing in the early 90s is nice example of a bad area to have selected as there isn't a single success to come from that wave of innovation despite quite a few contenders.
My own investments have spanned a number of areas, and each one has required a meaningful amount of study before I felt comfortable making a related investment. I've spent time in the world of consumer electronics (Gracenote), information services (Gerson Lehrman Group), data security (eEye and Determina) and the consumer Internet (Yelp and Wikia) to name a few. I have been working hard on a couple of new roadmaps over the past 6 months, and I hope to blog about investments in those areas later this year.
Many months ago, my colleague Justin Label began pursuit of a roadmap in clean technology. He just started to describe the transition in his new blog Venture Again. I intend to add it to my RSS reader once he gets around to setting up a feed. Justin, here's a hint!
Update: An RSS feed for Venture Again is now live here.