Baseball is my favorite sport. I was fortunate to be living in NY during the later half of the 1980s. I was even more fortunate to have witnessed Game 6 of the 1986 world series with my own eyes. I also played baseball in high school. I was a mediocre hitter, to be honest, not really disciplined and with some technique flaws. My batting average was ok, but I had too many strikeouts (patience!) and too little home runs (technique!). However, I was a great fielder. I played a mean shortstop (great glove) and was often used in center field as well (good sped and arm). Not a trivial combination. At 36, I still reminisce on the few home runs I managed to pull 20 years ago. I follow the game closely, I have written about it and I still get heartbroken every time the Mets collapse.

Which is why I almost get angry when I see baseball being abused.

Shai Tsur, in his recent posts, has taken a brave swing at explaining the VC model. While Shai has done well explaining the rational of VCs, he has brought to my attention a Marc Andreessen’s post in which he compared the VC model to the game of baseball:

“The whole structure of how the technology industry gets funded — by venture capitalists, angel investors, and Wall Street — is predicated on the baseball model. Out of ten swings at the bat, you get maybe seven strikeouts, two base hits, and if you are lucky, one home run. The base hits and the home runs pay for all the strikeouts.”

In other words, it’s about slugging percentage.

Yeah well.

That’s the only similarity I can find. The differences, however, are more striking. the game is so fundamentally different I don’t really know where to start.

First of all, a baseball hitter doesn’t choose his at at bats. When you’re up to the plate you have got to face the pitcher, be it Johan Santana or Roger Clemens. You can choose your hitting strategy - wait off some pitches and see if you can get ahead in the count, or be aggressive and jump on the first pitch - but in each case you HAVE to perform. VC’s choose their pitchers, pitches, teams, fields, leagues, arenas. Imagine what kind of batting average a decent Major League would pile up if he had such privilege.

The second difference is even more fundamental. In baseball, your goal is to win as many games as possible during the season. Not a single game or a single at bat, but a pennant. This is the source of terms such as pitching rotation, sacrifice, intentional walk, middle relief, etc. Slugging percentage is nice, but it doesn’t really say that much. Barry Bonds had a great slugging percentage but San Francisco hasn’t won anything in who knows how many years.

The third difference is with the true meaning of stats. Baseball is all about stats. If you hit .320 with 35 home runs this season, chances are you’ll hit more or less the same next season. In the start up industry your last at bat doesn’t mean much. In baseball terms, you can have an MVP season and then follow up with a sub mandoza line season. You can find yourself with seed stock at Google and be considered a genius. You can pass on the opportunity to have invested in Facebook and go down as a fool. It’s much more about the guts than about the stats.

VC’s are not baseball teams. A typical VC is a group of talented individuals who work at a firm whose sole purpose is to wisely invest other people’s money. Everybody likes hitting home runs, but striking out in this case could mean hurting someone else’s pension fund. It’s different than waiting for your next at bat. It’s different than losing today and winning tomorrow. In this case, sadly perhaps, every loss counts. You could argue that the law of averages takes care of that, but in reality when it comes to making decisions about investments VCs are much more risk averse than baseball players. The think many times before they swing, a privilege a 95 MPH fastball doesn’t grant.

I’m not saying the models don’t count. They do. VCs do try to make intelligent investments and earn the highest returns they can. But human factors count just as much, which is why people tend to invest in entrepreneurs they already know from past experiences. Images count, which is why VCs look to invest in big names. Job security counts, which is you need to be safe when its time to explaining killing a portfolio company. Nobody knows which company is the next Google and honestly, very few people trust their own judgment when it comes to making such predictions. In the end, the system works its way to its own optimum. It’s only natural, but don’t compare that to baseball.