Half in jest and half to spur my thinking about our business, I’ve found it convenient to think of venture capital as a manufacturing business.

Most people in and around the venture business think of venture capital as a services business.  Our “customers” are our backers – Limited Partners – whose money we invest (hopefully) profitably.  Nothing wrong with that point of view, except it doesn’t lead you to think outside of the box.  And it’s wrong.

Our backers are, more accurately, our shareholders or our investors.  A limited partnership doesn’t work exactly like a joint stock company, but close enough, and certainly closer than thinking of them as customers.

OK, you might say, if you’re in the manufacturing business, what do you manufacture?   Very simply, we take raw materials – ideas, entrepreneurial talent, intellectual property, and so forth – and turn them into companies that can be sold profitably to a buyer, an exit.  We manufacture exits.

Our customer, then, is the buyer for our exits.  And they come in two forms.  In the B2B form of the venture business, our customers are major M&A acquirers.  Cisco is a VC customer.  IBM is a customer.  Google is a customer.

In the other form of sale, the B2C form, we “sell” the company to the public.  This is a “channel” sale because we use channel partners – otherwise known as investment banks – to distribute our “product” to the consumers.

How does this affect your thinking?  Very few VCs pay much attention these customers or channel partners, and the few who do reap outsized returns.