6 ms·

The problem is that investors are too easy when it comes to giving second, third, fourth, fifth, sixth chances... And they absolutely suck at giving first chanc

The problem is that investors are too easy when it comes to giving second, third, fourth, fifth, sixth chances... And they absolutely suck at giving first chances to the right people. Investors just sit there and assume that the right people will find them, but they don't. The right people are too busy working to be chasing down investors 24/7. The first-timers who end up getting funded over and over again are usually the ones who network 24/7 and their only real talent is seducing investors who confuse their well-rehearsed talk for passion and intelligence.

BatFastard 9y ago
Speak it brother!
tlogan 9y ago
And why that is a problem at all? You can optimize your time to find one customer (read investor) which will give you $1M or to find 10K customers which will give you $100 each. Pick your fight.
- gobengo 9y ago
  yeah but the investor is a customer of your equity and the other is a customer of your product. Both ways you get $1M, I guess, but in the long run it's completely different visavis sustainability. A goal of 'getting' $1M is really short-sighted IMO.
- dilemma 9y ago
  investors are owners not customers
thowaway222 9y ago
Look, let me explain this as someone who's seen a lot of this: VCs make money on, approximately, the 2&20. 2% of the deposit and 20% of the exit. Here's why that matters: Most VCs will NEVER EVER SEE THE 20%. Most VCs suck, and they don't have any good exits, or often any exits at all. So they know they'll never get the 20%. Therefore, being rational optimizers, they try to suck that 2% dry by creating new funds (for their firm) and new funding rounds (for their investments). The investment is always just about to get big, we just need another round for more runway! HN tends to focus on the like 5 VC firms that make money as opposed to the 995 that don't. All kinds of shady stuff happens to these investments on life support, like kicking back money to the VC, paying for "business" travel for the VC, yadda yadda. The founders have no incentive at all to talk about it, since they need to get money for the next idea and it's all a reputation thing.
- godzillabrennus 9y ago
  Don't forget the .001% of VC funds that are fraudulent. As an entrepreneur, you should vet your investor as much as they vet you. I've seen someone claim to be a General Partner in a VC Fund that had $50M in capital. They ran around offering to sign investment deals with companies that had terrible ideas. Only later did it surface that the person was GP in a fund with no money. The agreements signed weren't worth the paper they were printed on. Entrepreneurs taken by this person invested in things like legal fees to negotiate terms and lost all that cash. Couple that with the fact that most Venture Funds don't give their LP's a return and venture funding is a terrible business to be in if you are smart. More and more people are waking up to this. I've seen people go from thinking they want to start a VC Fund to starting a business like a Venture Studio. A Venture Studio typically forgoes the 2% management fee's for managing the fund and deploying capital. However, the Venture Studio will usually own a dev shop or marketing agency that they do all the work through. They make their money on the professional services side. Not sure if this will be more successful but it's something I see increasingly common.
  - tchock23 9y ago
    I'm intrigued by this "Venture Studio" model, but a quick Google search didn't net much in the way of good examples or a precise definition. Can you share some examples you've run across? Thanks!
    - godzillabrennus 9y ago
      http://www.coplex.com http://www.coplex.com http://builders.vc/ http://builders.vc/ Those are two of them. Email me hn (at) strapr dot com if you want to chat regarding details on how do a venture studio.
  - sevenfive 9y ago
    Wait, how do the fraud VCs make money?
    - cyberferret 9y ago
EGreg 9y ago
This. "The right people are too busy working to be chasing down investors 24/7." Over the years, we have done a lot on less money than most successful startups raise. We have revenues and now may not need to raise more. Not by choice - but because many investors look for things that honestly are just showy, and then wind up backing companies that fail.
mmmpop 9y ago
> The right people are too busy working to be chasing down investors 24/7. Speaking from experience, I feel like there are a great many smaller-companies with successful, profitable products that are just fine with a 40hr/week team of 7 people clearing around a million USD/year in income. It's not too hard to find them but what incentive could possibly make it work out for at least more than the key stakeholders, say 2 or 3 in this company? I would never stay put in an aqui-hire and 6 weeks severance or whatever is a shit deal IMO. Maybe we've reach peak cynicism and investors just can't find the smartest people to invest in because the smartest know better are shying away? As an aside, It's funny how this phenomena seems to be observable in becoming President of the USA, I think. Too much of becoming president in the past ~60 years (I think back to Kennedy/Nixon debate) is based on a candidates EQ, persona, and even fundraising abilities, which effectively eliminates tons of highly-qualified potential candidates who may outright suck at those sort of things, but "count the beans" really nicely. I believe it was John Dickerson who went at length on this very topic somewhere in a his Whistlestop podcast.
- jondubois 9y ago
  I agree about presidents. If modern presidents were capable of thinking, they wouldn't need think tanks - Without think tanks, companies would have very little control over politicians.
nostrademons 9y ago
I think this is a problem, but I also think it may be less of a problem than it seems to be. There exist VC models like SignalFire or Sequoia's talent-scout program that pro-actively go out and try to find entrepreneurs who are focused on their customers & their business rather than ones that pitch them. However, since these scouts are too busy working to be dominating the press cycles, and since they go out and find entrepreneurs instead of hoping the entrepreneurs come to them, there is little incentive for them to have a big public presence.
WalterBright 9y ago
If everyone else is doing it absolutely wrong, there's a great deal of money to be made doing it better.
austenallred 9y ago
Genuinely curious: do you think you could do a better job?

BatFastard 9y ago

Speak it brother!

tlogan 9y ago

And why that is a problem at all? You can optimize your time to find one customer (read investor) which will give you $1M or to find 10K customers which will give you $100 each. Pick your fight.

gobengo 9y ago
yeah but the investor is a customer of your equity and the other is a customer of your product. Both ways you get $1M, I guess, but in the long run it's completely different visavis sustainability. A goal of 'getting' $1M is really short-sighted IMO.
dilemma 9y ago
investors are owners not customers

thowaway222 9y ago

Look, let me explain this as someone who's seen a lot of this: VCs make money on, approximately, the 2&20. 2% of the deposit and 20% of the exit. Here's why that matters: Most VCs will NEVER EVER SEE THE 20%. Most VCs suck, and they don't have any good exits, or often any exits at all. So they know they'll never get the 20%. Therefore, being rational optimizers, they try to suck that 2% dry by creating new funds (for their firm) and new funding rounds (for their investments). The investment is always just about to get big, we just need another round for more runway! HN tends to focus on the like 5 VC firms that make money as opposed to the 995 that don't. All kinds of shady stuff happens to these investments on life support, like kicking back money to the VC, paying for "business" travel for the VC, yadda yadda. The founders have no incentive at all to talk about it, since they need to get money for the next idea and it's all a reputation thing.

godzillabrennus 9y ago
Don't forget the .001% of VC funds that are fraudulent. As an entrepreneur, you should vet your investor as much as they vet you. I've seen someone claim to be a General Partner in a VC Fund that had $50M in capital. They ran around offering to sign investment deals with companies that had terrible ideas. Only later did it surface that the person was GP in a fund with no money. The agreements signed weren't worth the paper they were printed on. Entrepreneurs taken by this person invested in things like legal fees to negotiate terms and lost all that cash. Couple that with the fact that most Venture Funds don't give their LP's a return and venture funding is a terrible business to be in if you are smart. More and more people are waking up to this. I've seen people go from thinking they want to start a VC Fund to starting a business like a Venture Studio. A Venture Studio typically forgoes the 2% management fee's for managing the fund and deploying capital. However, the Venture Studio will usually own a dev shop or marketing agency that they do all the work through. They make their money on the professional services side. Not sure if this will be more successful but it's something I see increasingly common.
- tchock23 9y ago
  I'm intrigued by this "Venture Studio" model, but a quick Google search didn't net much in the way of good examples or a precise definition. Can you share some examples you've run across? Thanks!
  - godzillabrennus 9y ago
    http://www.coplex.com http://www.coplex.com http://builders.vc/ http://builders.vc/ Those are two of them. Email me hn (at) strapr dot com if you want to chat regarding details on how do a venture studio.
- sevenfive 9y ago
  Wait, how do the fraud VCs make money?
  - cyberferret 9y ago

EGreg 9y ago

This. "The right people are too busy working to be chasing down investors 24/7." Over the years, we have done a lot on less money than most successful startups raise. We have revenues and now may not need to raise more. Not by choice - but because many investors look for things that honestly are just showy, and then wind up backing companies that fail.

mmmpop 9y ago

> The right people are too busy working to be chasing down investors 24/7. Speaking from experience, I feel like there are a great many smaller-companies with successful, profitable products that are just fine with a 40hr/week team of 7 people clearing around a million USD/year in income. It's not too hard to find them but what incentive could possibly make it work out for at least more than the key stakeholders, say 2 or 3 in this company? I would never stay put in an aqui-hire and 6 weeks severance or whatever is a shit deal IMO. Maybe we've reach peak cynicism and investors just can't find the smartest people to invest in because the smartest know better are shying away? As an aside, It's funny how this phenomena seems to be observable in becoming President of the USA, I think. Too much of becoming president in the past ~60 years (I think back to Kennedy/Nixon debate) is based on a candidates EQ, persona, and even fundraising abilities, which effectively eliminates tons of highly-qualified potential candidates who may outright suck at those sort of things, but "count the beans" really nicely. I believe it was John Dickerson who went at length on this very topic somewhere in a his Whistlestop podcast.

jondubois 9y ago
I agree about presidents. If modern presidents were capable of thinking, they wouldn't need think tanks - Without think tanks, companies would have very little control over politicians.

nostrademons 9y ago

I think this is a problem, but I also think it may be less of a problem than it seems to be. There exist VC models like SignalFire or Sequoia's talent-scout program that pro-actively go out and try to find entrepreneurs who are focused on their customers & their business rather than ones that pitch them. However, since these scouts are too busy working to be dominating the press cycles, and since they go out and find entrepreneurs instead of hoping the entrepreneurs come to them, there is little incentive for them to have a big public presence.

WalterBright 9y ago

If everyone else is doing it absolutely wrong, there's a great deal of money to be made doing it better.

austenallred 9y ago

Genuinely curious: do you think you could do a better job?