The VC Cop Out - No

Without getting all mushy about it, I greatly admire Paul Kedrosky both as a blog writer and Venture Capitalist.  He blows away everybody when it comes to finding amazing stats and documents all around the Internet. 

Paul commented on my previous No post basically pointing out the saying, sorry too busy, can actually be a cop out.  Sometimes it really is a resource, I'm busy thing, but he rightly points out the other side.

I thought about this for a couple of days because I'm trying to give the start up types as much insight into the VC game/business as possible.  In thinking about Paul's comments, there is much truth to the notion of the cop out.

So, here is some extended no commentary. It applies to me and maybe other VCs out there.

The Easy No: We don't do that.

My firm doesn't do drugs, wet lab, medical devices, real estate, brick -n- mortar commerce or chip/foundry work. If you show up with a new CPU, GSM, 1XRT, EVDO, Math Co-Processor combination with pre-orders of 5 million dollars, I'd pass.  I put the pre-order comment in there for a reason: Discipline.  We don't do this stuff and regardless of the status or opportunity, we'd say no.

The Market Size No.

This is "the come back when you have traction" no.  I think just saying that we pass because we don't believe the business can grow to create an IRR for the firm is an open, honest no.  When I give this reason, I usually say "and I could be wrong."   I believe the inability to just say no or be wishy washy gets people these please show us some traction or whatever vs. the straight up, we don't believe the market is there.   And this should be a fast no.  It takes a minimal amount of time to make the call. The start up shows up with market size information and you can verify it, believe it, or not.  In the end, the point is to say no if you don't believe. They can come back, sure, but they know where they stand.

The Team No.

This is a cop out alert and I freely admit that if I don't like a team or I don't think I can work with a team, I simply pass with some vague not for us commentary.  There has been two times recently where the CEO was brilliant but I didn't like/trust others around them and I said so.  I said, go forth and find a VC that will love all of you, it isn't me, sorry.  I did not say drop the CTO or CFO, etc, rather I just said I can't work with your team, no.  But, generally speaking, I won't trash people for all the obvious reasons. 

The I Don't Get It No.

Here's an example. Fred Wilson has been putting up some posts on Twitter.  Dave Winer has (as Fred said) a thoughtful post on what it could be. Right. I don't get it (or the more obnoxious big freaking deal).  If the founders walked into my office tomorrow, I'd say, pass.  I have on many occasions said thanks, sorry, I don't get it.  The point is that I believe you should say I don't get it vs. some other vague non-answer just in case.  Maybe that's how the big, wildly rich VCs did it. They played in the non-no/non-yes world of let's continue the dialog just in case.  Maybe.  I believe, for sure, I will be wrong a whole bunch of times but at least there is a straight up answer given to the entrepreneur.

It's Not For Me No.

There are a lots of great investments that simply aren't for me. I get excited about many things, not so excited about others.  If it is something I'm not excited about, I simply say so.  It was this 'no' that got me thinking with respect to Paul's commentary.   When b5 media came rolling along, I made the time to work on it because I was/am all over this social media stuff (Note: I DO get Twitter, it was just an example).  We were in the middle of a road show for another company as well as closing two other things. Didn't matter, I wanted b5 in the house and I made time.  So, no resources or sorry busy, Paul is right, it can be a cop out.  I hope I can avoid doing that because being as transparent as possible should always be the rule.

My thanks to Paul for causing me to think about this even more.

Comments

[fewquid]

Great post. Couldn't agree more regarding Paul Kedrosky. His sense of humor cracks me up too.

I'm finding that the VC market is _very_ much like my prior experiences in Hollywood.

What puzzled me back then was why we weren't getting no's. I didn't expect yes's left and right, but not getting firm no's seemed odd.

But here's the thing: in Hollywood the only thing worse than saying Yes to a turkey is saying No to a hit. So the ideal position for a studio exec to keep you in is "maybe" until it becomes utterly clear that the idea is good or bad.

Seems the VC world is much the same. Plenty of "maybe" space, just change the language -- throw in words like traction, team and go to market strategy, and you're all set.

Thanks for the candor :-)

[dahamsta]

I wish people wouldn't 'get' Twitter. There's nothing to get, it's idiotic.

[Louisville Real Estate]

I enjoyed the post and the candor. It's much better, in my opinion and obviously yours, to let people know one way or another as quickly as possible. Sure, you might make a mistake here and there, but you don't hold people up in their dream chasing. It keeps all parties from wasting time.