Sang Ha Park

Few weeks ago, I took some time to go through all the recent investments from top US venture capitals like a16z and Accel that are publicly available (I will write another time to discuss where I think they are headed). Glossing through hundreds of their investments, some looking interesting, some looking rather odd, I couldn’t stop resist thinking, “Oh this company looks good. Wish I had participated in it. At least the chance to meet them”

Then it dawned on me that nothing stopped me from “imagining to have invested in them” and tracking their performance for myself. In other words, similar to public equities, I can run my little simulated portfolio.

Of course, there are many reasons why no one (as far as I know) haven’t explored such idea. Some of them are:

1. Venture investments do not provide concrete information to outsiders to reason about or build their own rationale for making the investment unlike public equities. Hence simulated practice can be rather hollow with little justification.
2. Identifying opportunity is not enough since you are not guaranteed an allocation to invest. More often than not getting allocation is much harder as everyone would want to invest in the hottest startups. So knowing is one, getting the deal is another, and putting in the money is another.
3. Meeting and getting to know the team is such an essential part of the evaluation process. Even with a seemingly great product and huge market, “bad team” won’t go far. The earlier company is at its course, the more significant team’s influence would be on its all the more unpredictable path. Thus, bad team will be a dealbreaker.
4. Venture investment is not a 1 – 2 year process. You can’t validate your belief in a short time frame. Hence, you won’t be able to readily invest upon your validated belief, even if you are lucky enough to have it, and make a quick buck, since opportunities are private.

Yes, there are a lot. And I can go on. However, when we want to do something, we actually just need one good reason 🙂 So here’s why I think simulated VC can be meaningful despite its many shortcomings

1. It’s enormously fun (self-explanatory)
2. Lot more information about a company is available compared to even early 2010s when internet ecosystem hasn’t fully matured. As internet became the de-facto channel of business, we now have company websites, apps, social media pages & activities such as # of LinkedIn hiring posts, start-up focused media, and various analytics platform such as AppAnnie that track company’s online performance. In short, if company is doing something online, we can almost track how they are doing, or at least surely find a proxy.
3. It serves as a very effective tool in promoting long-term thinking (since it takes years for companies to come into fruition, and I would have to check on and log their performance periodically) and validating (and constantly fine-tuning) one’s insights publicly. Don’t forget that your insights will be valid only if you had done something about it. In our case, writing about it.
4. You may not nail the exact company. But you can nail in predicting a trend, market, and the future. And you can prove that you were right about it. This is a reward that you cannot get easily elsewhere. If you are actually putting in money, get the right market, but miss the right company, you might easily regret it for the rest of your life 🙂

So that’s more than one great reason. Good! Now we are going to set some ground rules to make this exercise as meaningful as possible. Aforementioned constraints serve as perfect parameters in designing our mandate for the simulation fund.

1. Only one “investment” per quarter
2. The portfolio cannot have raised more than 3 months before the time of writing based on the dates published in Crunchbase or equivalent platform in other countries
3. Only rely on publicly available information
4. Only invest in seed to Series B rounds as since financials (which I don’t have access to) would mean little anyways
5. Continue for 4 years (average time for usual fund’s deployment into new deals) without any follow-on investment. So in total I would have 16 portfolios.

I may come back some time to make the system more rigorous by adding more rules. But this 5 will be what I start with. So here goes. Hopefully I will not only be a little bit older, but also wiser.

Sang Ha’s Simulated VC Fund 1’s first portfolio will be Hash.