The VC Toliet

The S.H.I.T.S

I read this in a blog entry from Brad Feld so he gets credit for bringing this up first.  SHITS. (Signal High Interest Then Stall.)  Hmm.

Here’s what I’ve told the CEOs running companies in our portfolio about this tactic.

First, it sucks, it is rude, and it is a shining example of why the VC world gets some of the bad rap we do. 

Whenever a call from another VC firm comes into one of the companies that I manage, I’ve suggested they pass the call over to me.  If somebody is on a fishing expedition, it stops really fast. They typically will stammer on the phone, ask some fairly lame questions and then head for the hills.  If it isn’t a fishing expedition, a professional conversation happens and we figure out if there is something the company can do with respect to addressing a particular request. If the company is not fund raising, we say that and tell the truth which gets us a truthful response. If the VC firm in question has an idea for a merger or some other play, they tell us and we discuss it.  But I try very hard to keep the fishing nonsense off the CEOs plate.

There are arguments to be made that a fair percentage of the CEOs time in a start up/growth company is working on fund raising for some next round and this is just part of the overhead.  I don’t have an issue with the CEO working with ‘interested parties’ rather I have an issue with the SHITS process that many firms like to use so they can keep their office up to date on a particular market segment on my start up’s nickel.  Homey don’t play that.

I believe a well performing company, growing, hitting milestones will get noticed and funding opportunities will be there.  Companies that already have VCs in and sitting on the board, should be using those people to filter this stuff and help with getting others to the party.

Maybe this is an outgrowth of all the come to the mountain (aka Sand Hill Road) kind of stuff that goes on in the valley, I’m not sure. I can only tell you that on the east coast of the U.S., there some some professionals that engage in this weird practice of honesty and being straight up.

Two notable examples are Updata Partners (Coner Mullet/Richard Erickson) and JMI (Joe Deal). Both of these firms (and these individuals) are class acts.  In looking at a couple of our portfolio companies, they had specific interest in the space and were very honest about the process they were going through, keeping expectations set correctly and being respectful of the CEO’s time.  Both firms clearly impressed our respective portfolio CEOs and our firm as well.  East coast? Call these guys, they are very professional. West coast? Make the trek on JetBlue or some such and talk to these guys, they are very professional.

So, instead of the S.H.I.T.S., it is quite possible to be N.I.C.E (Never Invite Crazy Expectations). Many of my brethren should learn to be NICE.