Why I Love Capitalism (and Canada)

By Dennis Phelps, General Partner

As a later-stage venture capitalist based in Silicon Valley, I have a unique vantage point into the world of technology start ups. My firm, Institutional Venture Partners (IVP), has been fortunate to work with some of the leading technology and digital media companies of the last decade, including Dropbox, HomeAway, Marketo, Netflix, RetailMeNot, Supercell, Synchronoss, Twitter, and Zynga. In reflecting on these multi-billion dollar success stories, it is often easy to forget the humble beginnings of these journeys, the personalities that are involved, and the obstacles that must be overcome along the way.

It is also easy to forget how the sacrifices of previous generations have led us today to a society where the rule of law, the support of free markets, and business-friendly tax policies have encouraged an environment where entrepreneurs, dreamers, and investors are (sometimes) willing to take on very large risks in the pursuit of very large rewards – both societal and economical. Regardless of one’s political or idealogical perspectives, it is hard to ignore that impact that Silicon Valley has had on the world… and that the world is now starting to have on Silicon Valley.

From Dublin to Seoul to Bangalore, budding entrepreneurs and emerging venture capitalists are studying our “Shining City” on Sand Hill, eager to learn from our successes and capitalize upon our failures. Fortunately for us, it is not a zero sum game, as the spread of “Silicon Mojo” from Valleys to Alleys to Beaches to Swamps to Deserts to Gulfs to Glens around the world means that the invisible hand of capitalism is alive and well, and that entrepreneurship is flourishing despite the challenges of the global economy.

On Thanksgiving this year, I was forwarded a letter by a young start up entrepreneur based in Vancouver, Canada, that reminded me what has made “Silicon Valley” – the ideology, not the place – so successful. For someone in his early twenties, this founder has remarkable insights and perspectives. I hope you share his letter with many people as possible.


Hi everyone,

Today is Thanksgiving in America, or as we in Canada call it – Thursday. I thought today was a perfect opportunity to send a note that I’ve been saving for a while.

If you’ve ever read any of Peter Drucker’s work, you will appreciate how incredible the concept of a corporation actually is. I think we take that for granted most days. For thousands of years, we did economic things as individuals, mostly because there was nothing binding us together towards a common goal. With the invention of the free market and basic corporate structure, people began to come together to work towards a common, shared vision. People roll this up as capitalism, but really it is a transformative way to shift human capital and resources around the world.

Each of the individuals receiving this email – whether they be investors, team members or partners, are a part of this tiny little random corporation called XXXXXXX. We are bound together by an economic structure that allows for this to happen. It has been said that the best bonds between people are actually created because of shared economic ties. I found this very strange at first (and counterintuitive to what a friendship generally is), but when you actually think about it, it makes sense. Economics are simply the vehicle that allow like-minded people to come together and work on something that they all have a passion for.

There are 35 people on this email. Just think about that for a minute. Two years ago, none of these people were on any common email thread. And two years ago, you had a lot more time to yourself because you didn’t have to read my essays! That is the power of a corporation and a shared vision, and I think that’s incredible. More-so, it is the power of the individual people involved with such a venture. Taking a chance on a random Canadian kid and a vision about helping people find their calling in life may seem rational to you now, but that’s because the reality distortion field hasn’t worn off yet 🙂

I just wanted to write a note to say thank you. Day to day, I take for granted the immense amount of time, effort and opportunity cost that people put into this business. You are all taking chances on me, on our vision, and our ability to do what we say. This is a privilege, not a right. Most entrepreneurs I speak to treat stakeholders as just that, stakeholders. There is never a human element injected into the process. What a ridiculous concept. Life is a series of choices. Each of you choose to invest your time with us. Each of you could be doing any number of things with that time. You do it, not only because it would be nice to make some kind of return at the end of this, but because you believe that we are worth it. What a gift.

In summary, I am thankful for your time. I am thankful that you feel this is valuable enough to warrant your most important resource. You can always make your money back, but you can never get your time back. We would not be here if it were not for the team building this amazing product, the investors funding the long-term, mission-driven vision we have, and the partners that make the business go round.

I hope you are having a great holiday. Or, for those of you located in the Commonwealth, I hope you can project out three weeks and pretend it is a holiday.

Talk very soon,