Venture Capital Investing and the “Miracle on the Hudson”

For those intrepid investors who invest in seed, start-up, or early stage venture capital, their high wire investing act has similarities to Captain Chesley Sullenberger’s and Co-Pilot Jeffey Skiles’ controlled ditching on the Hudson River  on January 15,2009 saving 155 lives in one of the most heroic feats of aircraft piloting in history, the famous “Miracle on the Hudson.”

Their Airbus A320-214’s first report on becoming airborne was at 3:25:51 at 700 feet. At 3:27:11 the plane struck a flock of Canada geese at an altitude of 2,818 feet and, with both engines shutting down due to the bird strike, the plane was descending fast through 1,650 feet.  Quickly realizing that they could not make it to a nearby airport, Scully engineered a controlled ditch in the Hudson River saving 155 lives, if not more had the plane crashed in a highly populated area.  While this event in flight history was unprecedented, it was accomplished by a highly experienced pilot with 19,663 flight hours who is both a glider pilot and expert on aviation safety.

While not normally life and death, investing in seed, start-up, and early stage venture capital has some similarities to the flight and landing of U. S. Airways Flight 1549. For an entrepreneur and the venture capital investment partner, the experience of beginning and funding a new start-up company, often with the early support of family and friends, feels like pushing the throttle forward to takeoff with 155 souls on board and knowing with reasonable certainty that very soon the new company will suffer a catastrophic engine failure, hitting its own particular flock of birds, resulting in its own form of rapid descent.  As the company experiences that rapid descent, the entrepreneur, the company board, and often the venture capital investors must make rapid and critical decisions to keep the company from flying into a building rather than a surviving through a softer “ditching on the Hudson.”   Like the decision of Captain Sullenberger to immediately activate the auxiliary power units (APU) which provide back-up power during in-flight operations, enabling necessary full operation of essential systems, those guiding the development of an early stage venture capital-backed company often must make and execute the right decisions in the correct sequence under great pressure, if not within minutes, then within several intense days.

If the decisions and their sequence are correct, often the company can pivot, get back on course, fly right, and attempt a later landing (exit) under better conditions.  Even then, though, a successful exit, generally either through an IPO or the sale of the company, needs a “Miracle on the Hudson” landing to achieve an attractive return, as only about fifteen percent of all venture capital investments return any money at all.  In these often desperate situations when the company “hits the birds,” often not only once but many times in its development from takeoff to landing, a cool, competent pilot who knows how to glide, communicate, and incorporate the advice and counsel of all stakeholders in rapid decision-making and execution is often the difference between a hard fatal crash and a “Miracle on the Hudson.”