Arnon Kohavi Needs a Time Machine, and a Clue
My friend Arnon Kohavi is back in the news. (By "friend" I mean "guy I recently compared to Harold Hill in the Music Man" and "investor I said startups should never take money from and LPs should never give money to.")
In case you missed it, Kohavi pissed a lot of people off when he parachuted into Chile with all sorts of hyperbole, boosting the market and asking that locals invest in his fund. When they didn't, he pulled out like a sore loser, making all sorts of lame excuses why.
I've visited Chile, and I agree that the startup scene there is still pretty nascent. I'm not sure I'd invest millions there if I had them. But that's not the point. I didn't go there and promise them the moon, then throw them under the bus when they didn't give me what I wanted.
To boot, there were all sorts of holes in Kohavi's justifications for pulling out, particularly since he'd declared just months earlier that the next Facebook would come out of Chile.
Kohavi has since moved onto Singapore, where he seems better at managing the PR game this time around. He's cautiously said he's evaluating the country, rather than making silly bombastic statements about the next Facebook. "It's irresponsible for me after three-and-a-half weeks to have a firm judgement," he told the blog sgentrepreneurs.
Some of his advice in that post isn't bad, but he still defends his lame justifications for pulling out of Chile. He doesn't criticize Chileans for speaking Spanish this time, but he echoes his critique that it could take a whole ten years for things to get going in Chile. To which I say again, "What the hell did you expect?"
This was why I said no one should give Kohavi money: It betrayed his utter ignorance with how these ecosystems work. Ten years is nothing when it comes to building a startup ecosystem. Indeed, that's not even a long time for a single startup to mature. LinkedIn took about ten years from inception to IPO in the most mature startup ecosystem in the world; ditto Pandora. Silicon Valley itself took many decades to get to where it is now.
Anyone with a ten-years-is-too-long time-horizon shouldn't be in a risky business like venture capital, particularly in an emerging market. Emerging markets require investors with more patience, not less. It can take cycle-after-cycle of small gains and social change before entrepreneurs start to see even modest home runs. Ten years is the first inning. This is why most pioneering VCs in emerging markets are investing out of passion or local pride. Simply put, there are easier ways to make a buck.
The exception to this was Israel, which Kohavi keeps citing as a model for these countries, particularly Singapore, where he's now trying to raise money. Israel's ecosystem did show out-sized results pretty quickly, but Kohavi is ignoring that Israel was also benefitting from the great dot com boom of the late 1990s when a bull market and a greenfield opportunity for corporate computing and security gave Israel uncommon advantages. Israel's ecosystem-- while still full of cash and great talent-- has struggled to come close to those returns since.
To assume Singapore will capture that same lightening in a bottle in the middle of a choppy market and a global economic meltdown is bizarre. If that's the bar, he's setting Singapore up for failure, because it's unrealistic for any country today. And guess who he'll blame (again) when it doesn't happen instantly?
Kohavi says Singapore needs it's "ICQ moment." Well, then I suggest investing in a time machine first. I'll say it again: Anyone who listens to his tale and write a check will be disappointed, because there's no quick fix to building an ecosystem for entrepreneurship. If he asks you for money, ask Kohavi how long he's committed to Singapore this time.
(By the way, the blog post I linked to above said I called Kohavi a fraud in my first post. I did not. My comparison to Harold Hill was based on his promises that you could short-cut the development of a start-up ecosystem the way Hill said kids could learn instruments by thinking about it. I do not believe he is a fraud. I just think he's a lousy VC.)