Sometimes I wonder if I'm writing blog entries on the wrong side of the table. Recently, a few of my portfolio companies as well as others who have popped into the office for a NHNF meeting, have entertained me with more fun VC death phrases. To my brethren, I apologize if I offend.
Let's go to the next step.
Lord, this phrase just blows. Every time a CEO comes in and tells me Bob's Big Boy Ventures told him/her that they want to go to the next step, I say the same thing: "Excellent! What step are we on?" That usually results in blank stares. Unless you have a VC checklist which outlines the steps that firm is taking, you are shooting in the dark and potentially wasting your time. Get the format, the checklist, the steps, whatever, so you can figure out where you are in the process. I've posted our process here. Every firm has something close. Get it and stay efficient.
Come back when you've got some traction.
Yeah, this makes sense, eh? As soon as I remove all risk, I'll put on my extra large knee pads and pucker up. Okay, a bit graphic, ignore the visual in your head right now. The real point I'm making is you should never put yourself in a position where you hear this. If you go to a firm which doesn't do seed/early stage, you will get something that is close to this phrase. The VC shouldn't have taken the meeting in the first place but since they did, you should at least know and all agree it is a conversation to establish a dialog for a future transaction when the company is more mature and looking for growth/expansion capital. If you are seed/early stage VC and you say this to an early stage/seed company, uh, please don't.
Another one that just sends newbies around the block, generally in the wrong direction. When you here this, somebody is being polite. That's it. They are being polite. "That's really cool" is a compliment, not a term sheet. "You've done an amazing job" is praise for your efforts, not a check. Don't get confused on politeness and people being nice.
This means, I'm not saying no just yet, I want to get more information so my no is more well informed and I can look like I spent time on this. I'm being harsh here, as well, because I say I'm interested a lot. This week, Tom heard it as did Steve and Nick. I had 14 meetings this week, including the two here in LA. Three people are still in the game, so to speak. I'm pointing this out because I'm interested is just that. An expression of interest to get more data before making the call. It is not a term sheet, a valuation, or a check. Watch your expectations.
We can close quickly.
Uh huh. In reviewing other VC firms in Canada and the U.S., I've found three "check on the spot" deals. Out of thousands looked at. Folks, there is a process. After you get the term sheet and the Due Diligence Checklist, you control the timing. Get the materials back quick; better still have them read in advance. Line up the customer calls, reference checks, etc, etc. Work out the details on terms before the legal clock starts running, etc. The norm, based on averaging out all the data I have is 93 days or so. The shortest was 24hrs, check on the spot and the longest is started in 2002 and is still being worked on between the lawyers.
There's more but I'm off to see a man about a steak.