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Investors don’t want to meet you. They wanted to be introduced to you

155 pointsby jaf12dukeover 11 years ago

20 comments

pgover 11 years ago
I&#x27;m impressed with Jason&#x27;s posts. He seems to be methodically working through all the misconceptions of inexperienced founders. This is an important and subtle one. Investors assume that if they&#x27;re hearing about you first from you, you can&#x27;t be any good. If you were good, they&#x27;d already have heard about you, because you&#x27;d have found a way to get introduced to them by someone they trust.<p>Even if investors didn&#x27;t start out with this bias, they&#x27;d soon learn it from experience.
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AndrewKemendoover 11 years ago
Ooh, this one is really good. Also heartbreaking as someone who invested a TON of time into making personal investment calls. I definitely learned this one the hard way.<p>One thing that I would add also is that investors don&#x27;t seem to want to be introduced to you by their non-investor&#x2F;non-business contacts, so their friends and acquaintances. I learned this one also because I figured that would be a good approach. What seems to happen in this case is the &quot;stink&quot; on you gets transferred to the intermediary and the investor picks up on it.
lquistover 11 years ago
<i>If you’re working in any startup hub, you almost certainly have friends that are working on their own startups. Ask them to help you. The first question should be, “Am I ready to fundraise?”</i><p>I would actually phrase this another way, &quot;Be honest with me: If I asked you to refer me to one of your investors, would you recommend me to him&#x2F;her or is my startup not there yet?&quot;
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JoeAltmaierover 11 years ago
Argues its impossible to find the needle in the haystack, so VCs use other founders to sift the chaff.<p>But a VC was quoted that they funded zero cold contacts. That doesn&#x27;t sound like its hard; it sounds they&#x27;re incapable of evaluating cold contacts at all. I&#x27;m guessing they use contacts for their expertise, because VCs lack any.
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sonecaover 11 years ago
So is it the same meritocracy(1) of being accepted on a top university?<p>(1) <a href="http://www.justiceharvard.org/2011/02/episode-08/" rel="nofollow">http:&#x2F;&#x2F;www.justiceharvard.org&#x2F;2011&#x2F;02&#x2F;episode-08&#x2F;</a>
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tsumniaover 11 years ago
As someone on the East Coast, I feel this is the main reason everyone wants to immediately leave our town to go to the West. We have plenty of VC&#x27;s around our area, but the network hasn&#x27;t been built so only the very high up know anyone.
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jb007over 11 years ago
Forget about investors. Bootstrap your Company. When you are successful, don&#x27;t mind them. They like to reap where they have not sown.
littlecritterover 11 years ago
I was at an event with VC Peter Thiel (founders fund) over the weekend. Someone asked him to contribute to a charitable event during the Q&amp;A. He made the point clear: If you want me to do something for you, come through a trusted friend. I only invest personally if you&#x27;ve been recommended by a trusted friend.
ig1over 11 years ago
I think Jason is overly focusing on one side of the relationship (i.e between the startup and the introducer) when I&#x27;d argue in actuality a lot of the value of the introduction depends on how well placed the introducer is to evaluate you.<p>For example I would rank introducers as:<p>1) People who are superstars in your field (i.e Peter Thiel if you&#x27;re a payments startup) or have great track-records in backing super-star companies across fields.<p>2) People who are experts in their field and the VC trusts. For example if you&#x27;re in an adjacent space to a current portfolio company, getting an introduction from that portco (or even a reputable non-portco) carries a lot of weight. Or investors who have a track record in your field.<p>3) People who are customers of your product and the VC trusts. If your customers are gushing about you that makes for a great intro, if a portco emails their VC saying &quot;there&#x27;s this product that we use and love and the company is raising money&quot; that&#x27;ll get attention.<p>4) People who are well placed to evaluate your product&#x2F;startup and have some relationship with the VC. Similar to (2)&#x2F;(3) but they don&#x27;t have to have a strong relationship with the VC. The VC trusts them because of their expertise not because of their relationship.<p>5) People who are well positioned to evaluate you and your team personally and the VC trusts. So for example people you&#x27;ve worked with in the past who will personally vouch for you.<p>Below that you basically have introductions from people who (a) Aren&#x27;t in a position to evaluate your business and (b) Aren&#x27;t in a position to evaluate your team. So it&#x27;s basically a case of &quot;we met these guys the other day and they seemed smart and had a nice demo&quot; - i.e. the VC might spend a bit of extra time looking at it as a favour to the introducer but it&#x27;s unlikely to be significantly better than meeting at an event, etc.<p>At that level a bunch of other factors come into play. If an investor is super-into your space or if you&#x27;ve got a strong resume&#x2F;team they&#x27;ll likely look at you regardless of how you came to their attention.
graycatover 11 years ago
&gt; This is an important and subtle one. Investors assume that if they&#x27;re hearing about you first from you, you can&#x27;t be any good. If you were good, they&#x27;d already have heard about you, because you&#x27;d have found a way to get introduced to them by someone they trust.<p>Yes, the investors do &quot;assume&quot;, but, for information technology investing, their ROI for the past 10 years sucks (details in a Fred Wilson blog).<p>VCs don&#x27;t know the right people to know a significant fraction of people who are really &quot;good&quot;. A really &quot;good&quot; startup entrepreneur likely won&#x27;t know anyone a VC will &quot;trust&quot;.<p>If a VC can&#x27;t evaluate my work from what I write, then they won&#x27;t be able to be effective on my Board; I won&#x27;t be able to hope to be successful with them on my Board; and I won&#x27;t be able to have them on my Board or have them invest.<p>I want to be successful in business, but on average VCs are not very successful. Khosla had some recent, sharp remarks on VCs.
brosco45over 11 years ago
It&#x27;s not what you know, but who you know.
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lquistover 11 years ago
<i>another top tier VC once told me that out of the thousands of business pitches he receives in his office every year, his firm has never funded one that came in completely cold.</i><p>Referring to Chris Sacca (<a href="http://lowercasecapital.com/prospecting/" rel="nofollow">http:&#x2F;&#x2F;lowercasecapital.com&#x2F;prospecting&#x2F;</a>) perhaps?
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graycatover 11 years ago
Investors can want whatever the heck they want, but wanting is not getting.<p>I know plenty of people high up in US business and academic research, but those people and the VCs don&#x27;t know each other.<p>VCs and I don&#x27;t know the same people.<p>Bluntly, the VCs are a bit below my &#x27;circle&#x27; of business acquaintances.<p>In particular, the fraction of VCs I would hire into my company is tiny, so small to be nearly invisible. Why? Because their technical qualifications in information technology, etc. in a word suck.<p>I mean, would you hire a VC? For what, <i>BizDev</i>? What if a VC gave you advice on how to invest your IRA?<p>How many VCs can code, productively with today&#x27;s technology? How about be a system administrator for a high end server farm or network?<p>&quot;The single most important decision you will ever make is with whom to do business.&quot;<p>Extra credit for the source.
vinceguidryover 11 years ago
This is the sort of thing you need to be aware of, in all areas of life, if you want to be successful. People have filters, and you&#x27;re fighting a stupid, uphill battle if you want to get through them. Spend that time going around them. It doesn&#x27;t matter if you&#x27;re looking for funding from that top firm, a date with that gorgeous woman, a job in that blue-chip, or a visa to visit a post-Soviet wonderland.<p>Everything worth having comes from others, and a confrontational attitude is the worst one, if you&#x27;re trying to get through filters, that&#x27;s how they perceive you. If at any time it feels like you&#x27;re beating your head against a wall, that&#x27;s because you are. Take a step back and figure out what you&#x27;re doing wrong.
phylosopherover 11 years ago
Thank you Jason. I direct a not-for-profit foreign government and private foundation incubator based in San Francisco. We just completed a one-month quasi-accelerator for companies that came to the US. None were ready for VC funding and we made this clear. Despite our best effort to get the entrepreneurs to focus on customer development, many spent their time on VCs and angel networks. They got meetings but not much else. We are going to make sure that all new companies participating in future accelerators read your post.
speederover 11 years ago
This leads me to the question: How you get networked with people that know investors, when your startup is in a non-hub place? (like, not in United States or Europe)
avifreedmanover 11 years ago
Another thing you can do if you are are a practitioner in a particular domain is to let your vendors and partners know that you&#x27;re open to doing due diligence calls on their behalf. Then if you do take a call, be circumspect but honest in your advice&#x2F;feedback.<p>That can be great for building your network for the day when you might want funding, advice, or 3rd party intros.
jsebanover 11 years ago
So many hoops you have to jump through to &quot;do a startup&quot; (I want to differentiate between starting your own company).<p>It&#x27;s starting to look like less freedom and more BS compared to working for BigCo.
graycatover 11 years ago
The actual sense of the title of this thread is just not true. My experience is that plenty of information technology (IT) VCs are plenty eager to talk seriously without any introduction except an e-mail from a startup founder.<p>What I learned, to my great surprise, is that apparently the VCs are under some quite severe constraints. So, they are forced, from whatever, to ignore essentially everything about a project I learned doing projects in business, academic research, and for the US DoD.<p>Instead, for an IT project they want to see, as about the second thing, some running software. That there might be a lot of crucial work before such software, work that makes the software itself trivial, just is not in their experience and is nearly always way beyond their nearly always rather meager technical backgrounds.<p>So, for the running software, they want to &quot;play with it&quot;, likely essentially to look at the user interface (UI) and estimate how well many users will like it.<p>For more, they want to see some forms of &#x27;traction&#x27; which apparently they use as a surrogate for accounting data traditional in commercial bank lending or private equity investing.<p>For a deeper look, they like simplistic &#x27;patterns&#x27; based on past history of IT VC taken fairly narrowly. So, they have a fundamental problem seeing or evaluating something that is really new, even if, say, the US DoD problem sponsors could see the power and value.<p>So, I have a list of 40+ VCs eager to &quot;play with&quot; my software when it goes live. I got an introduction to none of them and for each of them just sent e-mail. They responded with e-mail and at least one phone conversation. They are impressed enough with the &#x27;market&#x27;, the &#x27;technology&#x27; to the (meager) extent they and value it, and the goals. Then they just want to see it working, hopefully also with &#x27;traction&#x27;. How much? One VC firm said 100,000 unique users a month. With my site that might be $12,800 a month in revenue at which time, with my low &#x27;burn rate&#x27; of a sole proprietor solo founder, I should be on a nice path of &#x27;organic&#x27; growth and still 100% owner.<p>Yes, my situation is not &#x27;standard&#x27;, but neither are successes in the VC business.<p>The VCs need to learn how to look at and reliably evaluate work that is new, typically just on paper; US research academics and high end US DoD problem sponsors can; VCs cannot. So far maybe that lapse has not much hurt them. But, generally, gotta tell you, the VCs are way, way behind the <i>leading edge</i> of US science, technology, and entrepreneurship.
michaelochurchover 11 years ago
Not to kill the messenger-- OP is right-- but that &quot;only our kind, dear&quot; stance is an arrogant attitude for people who are spending <i>other people&#x27;s fucking money</i>.<p>Fuck all of those emasculated half-men who can&#x27;t bite down on a decision themselves, but must slurp down the pre-chewed, half-digested chyme of social proof.<p>I could say a lot more but it&#x27;s already obvious where the good people stand.