Suzie, my favorite (and should be yours) start up friendly, Toronto based lawyer, has a post up about meetings with VCs and why we do it. Some of the items on the list annoy me while at the same time I know she is generally dead on.
She tries to make a good case about asking the hard questions:
"You should never take a meeting with a VC until you've determined whether there is a likely fit between the two of you. Where is the VC in its fund cycle - is it at the beginning of a new fund? Is it about to start raising its next fund? Is this VC raising a fund now, and having difficulty? The answers impact your ability to build an investment syndicate (who wants to co-invest with a lame duck fund?), and suggest how you need to adjust your pitch to fit the circumstances."
My first reaction to this was, yeah right. I can just see the conversation:
Hopeful: "Thank you for taking this call, I wanted to set up a meeting as funding is at a critical stage. Can I ask a few questions?"
VC: "I know what you wanna know. Look kid, generally we are at the last part of the fund's life, we've screwed off most of this cycle, missed the good deals, acted like a bunch of lemmings chasing "social Webcasting for monkeys" and now my limited partners have our domain name in their collective spam filters with caller ID preventing us from begging directly into the speaker phone. So is 10a good for you?"
I've generally found that, over the short period of time I've been doing this gig (7 years), the amount of, what's the word I'm looking for, right; LYING, that goes on is amazing even for a guy that used to work in Military Intelligence where lying wasn't just a job, it was an adventure.
My point? You'll almost never get a direct, totally transparent answer to this stuff. Most funds will not tell you where they are in the funding cycle, Google them and check the press releases on closings in order to back into a close guess. How they doing? All VC firms are in the top quartile, silly, everybody knows that, just ask a VC.
In doing the 30 minute no harm, no foul meetings, I've seen all kinds of interesting businesses. Everything from fireplace cleaners to, well, Webcasting for monkeys. To prep for those meetings, I ask for a one page summary of the idea or what the company does. Then, before they show up, I try to be clear in our intentions. If there is no chance, I say that, giving the person an opportunity to bag the meeting. If they want to come in anyway, I try very hard to give feedback that makes the time spent a decent investment for the guest in my office.
In my view, there are three types of VC meetings:
The no harm/no foul thing. I have a more formal process but many VCs do this. Fred Wilson takes random meetings, Brad Feld does as well as Jeff Clavier. Each of these guys (and others) takes the time to help out a start up with some friendly advice, suggestions, feedback, whatever. Fred has impromptu meetings when he tells people where he is via Twitter, Paul Kerdrosky let's people know where he is at for the stop by, say hi stuff, etc, etc. If you 'get' one of these meetings, get in front of these smart people, your only objective is to practice your elevator pitch. 90 seconds of Paul, this whole beanie baby thing is in the crapper and we've solved the problem of getting prices back up. Do they get it? Tense up? Look for the exit or security? That's the best you can hope for, everything else is gravy. "Love to hear more" with a business card is a polite way to get this into email and you moving on. If they/we really do want to hear more, you'll get specific instructions on who to call, what to do, etc, in order to get to the next 'real' meeting. But, again, assume you are practicing the elevator pitch and watch the reaction for learning.
The favor. There is a fine line between somebody doing a favor for somebody else and a genuine, "you need to see this" type of introduction. Both are 'favors' in the sense that we/I am doing a favor for the person who introduced you to me. The latter is more compelling, for sure. If this is a formal pitch for cash, spend the prep time with the person who introduced you. I'm shocked at how many people convince "Joe" to do an introduction to our firm and then "Bill" doesn't spend any time with Joe on how to best interact with whomever you are meeting. If you know, for example, Scott Pelton over at Growthworks is an uber-geek, married to a double secret uber-geek, opening up the conversation with some boring marketing slop is not a plan. With Scotty, "cool", demos, something for him/his wife to play with, source code, blinking lights, etc, all get him going. (Don't let the suit fool you, it's rented from Goodwill.). Prep for the meeting.
The formal one. This is where we asked you to come in. Maybe a ton of Suzi's items are in fact the case. We're trolling for talent, market data, filling the day, etc, but I'd like to believe that more often then not, we (JLA) are interested in learning more about you and your company. Prepare, practice, rinse -n- repeat. And here's a tip if you really want to do extra credit homework: Speak to people who have pitched and gotten a formal no. Ask them about the experience as that data is even more telling then the funded CEO who is (duh) singing the high praises of the VC firm.
And you don't have to buy lunch.
Getting friendly advice from people of such high caliber is a wonderful thing... but ... In my experience they usually think you want something more from them then just the advice (because most people do) so they tend to be stand offish. It would be nice to see some sort of mentoring program (online even) where the mentors could pass down their years of knowledge without feeling pressured like they were committed to investing financially. Blogs are a great start, but budding entrepreneurs need a little more coaching perhaps 1 on 1. Heck I'd be willing to pay for this service.
Posted by: Keith Glover | June 02, 2007 at 09:27