The Baby is Never Ugly

One of the things I dislike the most about the Venture Capital business is the endless "Let's continue the dialog" nonsense that gets dumped on entrepreneurs.  Instead of just saying pass, this isn't for us, we get into sounds interesting, send me some data, let me kick it around, could I see the data in another way, let's continue the dialog. It sucks and is brutal on you.

The additional fallout from this is when you show up to my place and exclaim so and so at whatever venture partners is 'excited'.  You pitch and they loved the story and thought you told it well.  Can I call them to get some feedback, I ask. Sure, you say.

Me: Hey, how's things? Good to hear. Listen, I met with the gizmo guys and they indicated you are excited, love the story and want to dive in.

I then get the 50 reasons why the deal will be hard for whatever to do but they want to dig in anyway because the guys are smart and its good data for the files.  This happens, sadly, all the time.

With few exceptions, nobody will tell you your baby is ugly.  Instead we resort to the Chinese Water Torture approach to Venture Capital; endless dialog and no conclusions.  And full disclosure, I've been sucked into this myself. I've been in situations where I haven't really understood the proposition so I've asked for endless information in trying to get it.  With the benefit of hindsight, I should simply say, sorry this isn't for me and let everybody move on. My bad, I try to avoid this.

My tip, such that it is, is keep your cynic meter set to a ten until the check clears.  Talk to everybody and when asked simply say we've spoken to whatever and from our perspective we believe it went well.

Assume they didn't like the kid.

Comments

[Marcelo Calbucci]

Ok, you addressed the issue from a VC point of view, but what's an entrepreneur to do?

If you are talking with 5, 10 or 15 VCs, and all of them ask for more information, what should you do? The fact is that most (if not all) are BSing you. You just walk way yourself and say "thank you, but I don't think you can convince your partners, call me when you get more traction w/ the partnership"?

Or you indulge them and keep on an endless cycle of meetings, talks and emails, just because both sides want to keep door opens for current and future opportunities?

[mark]

In my experience, If a VC doesn't love the deal at 1st sight - there is very little chance of the deal actually happening.

Actually posted about this exact topic recently:

http://startupcfo.ca/2008/06/love-at-first-sight.html

Mark

[rick segal]

Marcelo,

Mark is right. All you can do, to address your question, is have a very organized set of materials before you go into the fund raising mode and stay focused on the business. I can't really tell if a request is legit or not, it will vary. In our office, for example, we do our own model adjustments or assumptions and don't have the start up revise their stuff. We take what we get and work with it. We are not the majority tho..

>R<

[Harrison Lung]

I totally agree with Mark. I liken this process to the dating/marriage process :) How many people does one date before marriage :)

[Braydon]

Thanks for this Rick, as always, refreshing.

From the entrepreneur's standpoint, and as Harrison says, it is a lot like dating. The challenge is in not being led on. The difficulty is that if you are dating, you tend to want to focus all your energy on that person and not keep playing the field. In raising money, that's clearly a mistake, but one I know I've made in the past....

And, I will speak for the vast majority of other entrepreneurs when I say this: just say no - and say it quick. Time is money and we don't have much of either. I'd rather deal with some hurt feelings, move on and be successful than feel good about my self in the short term and go out of business.

[Chris S]

I suppose there is limited cost to the VC not saying "no". But there could be downside to saying "no" too early. If another VC bites and they are still around the deal, they have the option of jumping in and co-investing.

Or is it they have fear of being wrong (saying no to the next Google)?

You would assume getting too quick of "no" would be the problem.

[Josh Neumann]

While I don't have a lot of expereince in the venture capitalist field, I can say from experience in netwok marketing that it is extremely frustrating to be led on by prospects, told they will show up at a conference call, schedule the follow up phone call, and then not have them pick up the danged phone.

I rerrange my day expecting them to simply keep their word, and 90% of the time they were just leading me on pretending they were interested.

If you aren't interested, just freaking say no-don't waste my time!

[Keith Glover]

We entrepreneurs need to be good at hearing the "no" as well. Recognizing what the "no" sounds like early, however develops over time.

It may hurt when we finally decide to cut that potential investor out, but the sooner we do it, the less of a scar they will leave. It also gives us more time to focus on the ones that are serious about learning more about our vision.