The Well Known Secrets of the VC world (Part 1)

The news are all grim about VCs recently. They can’t raise money, they don’t invest…While it is not the best time for VCs and startups (and for the rest of us), money is still invested.  I spent the last 6 months as an EIR (Executive In Residence) with a venture capital firm, classically located on Sand Hill road. Destiny (and network) got me to spend my winter with Storm Ventures, one of the finest VCs I got to know. During this time I saw dozens of startups, attended many internal discussions and learned a lot. And, as my old grandmother used to say: “learning is solidified by writing”. So here are some of my learnings that many people know, but more don’t…

  • What’s a good VC?: seen all entrepreneurs will say that a good VC is a one that gives you money. Fancy entrepreneurs will not want to work with any VC which is not tier one. Most will fail to remember that one individual  will end up seating on their board for the next 3-7 years and will make their life great/miserable… My suggestion : add one more angle to the way you look at VCs- the partner side. Instead of thinking of the VC as a whole, find a partner you think will mesh well with you and try to make your entry through him/her. You are more likely to end up working with the partner that saw you first so try to aim for the one you want to see on your board. It will also increase your chances to get a second meeting…
  • Getting a meeting is easy, so try to get as many as you can: most VCs want to meet you. How else would they find good companies? I am sure you don’t assume they will be out there hunting for you… So, most VC partners and employees will happily spend an hour with any credible entrepreneur.  What can you do with this knowledge? don’t try only one VC that happens to know you- try many so you can improve your chances to get a positive reaction.
  • No one gets it in the first try: Just like in Baseball, you need to swing more than once to win a game. VCs are triage experts: they are designed to make a decision within one hour and just like in real triage, they may end up missing the one patient that could have been saved. The lesson is: try often. One try, two or even ten may not be enough. Nonetheless, try to get honest feedback from the people you met, before you get to the next meeting, so you can improve your pitch.
  • VCs hardly pass on deals: most people think that a meeting with a VC will end up with a yes, we want to learn more or with no, we are not interested. Actually most of them end with nothing. No phone call, no reply. Radio silence. It is not that the people you met are rude- they are just not interested enough but don’t want to close the door. Don’t wait for ever, follow up and ask for the status, but when you do so, try to present  some new data, like a major customer win. Without new data you are unlikely to get a better answer.

Up next– what VCs care about when they meet you. It is all about market size, successful companies in the space and the team…

The Well Known Secrets of the VC world (Part 1)

5 thoughts on “The Well Known Secrets of the VC world (Part 1)

  1. The title was the best part of the post… I wrote it because it seems like everyone knows how it work, but there are so many first timers that are surprised every time I talk about these things…

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