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Why do you deserve to invest in my company?

mcherm 8y ago
That is also a good question to ask and to answer honestly.
trcollinson 8y ago
That’s a fine question to ask if the investor comes to you. If you are coming to the investor asking for money, you are not profitable and spending way more than your income, then I’d suggest not asking this stupid question. I consult for VCs on a technical side and I sit in on many series A pitches. It’s funny how often when you ask a struggling startup why you, as a VC should invest millions into their business, they give the question like this back. “Why do you deserve to invest in my company?” “What are you as a VC bringing to the table?” “What kind of acceleration will you bring to my startup?” The answer is “Millions of dollars in cash you just asked for” and in our minds we say “you stuck up asshole, you came to us.” At that point we often look for different investments. And we never go looking for companies to invest in. They always come to us.
- rdlecler1 8y ago
  >And we never go looking for companies to invest in. That’s pretty arrogant. I can tell you from first hand experience that the best VCs are vigilant and don’t just expect people to get referred to them. a16z rates themeselves by the % of their competitor’s deals they had seen. You don’t optimize that number just from waiting for the phone to ring.
  - trcollinson 8y ago
    All I can say to this is they are rather arrogant. They like the success they have with the methods that they use I guess. Ultimately, I think every VC is arrogant in their own special way!
- rahimnathwani 8y ago
  "And we never go looking for companies to invest in. They always come to us." Unless you're one of the ~10 most well-known VCs in the world (or in your region/niche) it stands to reason that proactive search could yield additional high quality leads. Why forego this? There's a parallel in recruiting: applicants on your web site might include many, many candidates who don't meet the minimum requirements of the role, such that even the top 10% include some that don't warrant a phone screen. So companies target passive candidates via LinkedIn, to find the gems who aren't currently even considering a new job. (And it's not just small companies that do this. Even companies with a top-tier employer brand, which receive many thousands of applications, will actively source candidates this way. Why doesn't the same apply to the VC firms with which you work (wrt potential investments)?
  - trcollinson 8y ago
    Truth be told to get an actual answer to this you’d have to ask the partners. I do know that there are different funds within the VC and they may go seeking investments. I honestly don’t know. What I am sure of is that they don’t go looking for investments in the part of the fund I consult for. Those potential investments come to us in huge sets that many analysts have to narrow down into viable investment options. Could it be better? Maybe. I mean they aren’t the largest VC in the world. Nor are they the smallest. But for a small number of partners they do quite well. I guess they like their methods. They would probably say if you have a different idea and the funds for your VC, by all means go for it.
- staticautomatic 8y ago
  The point I was trying to make is actually entirely unrelated to the issues you've raised. My goal was not to turn the tables so much as to illustrate that the use of the word "deserve" in this context makes the question inane because it's moralistic. In any event, the fact that beggars can't be choosers does not obviate the importance or utility of posing some form of the question to the prospective investor.
  - trcollinson 8y ago
    That makes sense and those are good points. I think it’s about tone all the way around. It’s entirely fine and beneficial to both parties for the startup to ask questions. But there are some distinct differences in how people ask these questions. Some really are stuck up. It’s shocking how deeply people can believe the stories they’ve made themselves about how good they really are when in fact they failing miserably. Some of the better questions I’ve heard are prefaced with comments like “we’re aware we’re having troubles in this operational area, would you be able to offer guidance and advice to get us out of this sticky situation?” Self awareness seems to be a sign of a great and investable company.
  - mwseibel 8y ago
    For many of the founders I talk to would say their startup "deserves" more money because of what they have accomplished. I'm simply trying to use the same language founder use with me.
kyleblarson 8y ago
https://www.youtube.com/watch?v=N6Zz-Nkkaxc https://www.youtube.com/watch?v=N6Zz-Nkkaxc
speby 8y ago
Of course a worthwhile question. Really, the same question can be asked of any party in any transaction in a company: employees, investors, customers, vendors, and so forth. Virtually anyone exchange or transacting with the business could ask (and be asked) this kind of question.

That is also a good question to ask and to answer honestly.

That’s a fine question to ask if the investor comes to you. If you are coming to the investor asking for money, you are not profitable and spending way more than your income, then I’d suggest not asking this stupid question. I consult for VCs on a technical side and I sit in on many series A pitches. It’s funny how often when you ask a struggling startup why you, as a VC should invest millions into their business, they give the question like this back. “Why do you deserve to invest in my company?” “What are you as a VC bringing to the table?” “What kind of acceleration will you bring to my startup?” The answer is “Millions of dollars in cash you just asked for” and in our minds we say “you stuck up asshole, you came to us.” At that point we often look for different investments. And we never go looking for companies to invest in. They always come to us.

rdlecler1 8y ago
>And we never go looking for companies to invest in. That’s pretty arrogant. I can tell you from first hand experience that the best VCs are vigilant and don’t just expect people to get referred to them. a16z rates themeselves by the % of their competitor’s deals they had seen. You don’t optimize that number just from waiting for the phone to ring.
- trcollinson 8y ago
  All I can say to this is they are rather arrogant. They like the success they have with the methods that they use I guess. Ultimately, I think every VC is arrogant in their own special way!
rahimnathwani 8y ago
"And we never go looking for companies to invest in. They always come to us." Unless you're one of the ~10 most well-known VCs in the world (or in your region/niche) it stands to reason that proactive search could yield additional high quality leads. Why forego this? There's a parallel in recruiting: applicants on your web site might include many, many candidates who don't meet the minimum requirements of the role, such that even the top 10% include some that don't warrant a phone screen. So companies target passive candidates via LinkedIn, to find the gems who aren't currently even considering a new job. (And it's not just small companies that do this. Even companies with a top-tier employer brand, which receive many thousands of applications, will actively source candidates this way. Why doesn't the same apply to the VC firms with which you work (wrt potential investments)?
- trcollinson 8y ago
  Truth be told to get an actual answer to this you’d have to ask the partners. I do know that there are different funds within the VC and they may go seeking investments. I honestly don’t know. What I am sure of is that they don’t go looking for investments in the part of the fund I consult for. Those potential investments come to us in huge sets that many analysts have to narrow down into viable investment options. Could it be better? Maybe. I mean they aren’t the largest VC in the world. Nor are they the smallest. But for a small number of partners they do quite well. I guess they like their methods. They would probably say if you have a different idea and the funds for your VC, by all means go for it.
staticautomatic 8y ago
The point I was trying to make is actually entirely unrelated to the issues you've raised. My goal was not to turn the tables so much as to illustrate that the use of the word "deserve" in this context makes the question inane because it's moralistic. In any event, the fact that beggars can't be choosers does not obviate the importance or utility of posing some form of the question to the prospective investor.
- trcollinson 8y ago
  That makes sense and those are good points. I think it’s about tone all the way around. It’s entirely fine and beneficial to both parties for the startup to ask questions. But there are some distinct differences in how people ask these questions. Some really are stuck up. It’s shocking how deeply people can believe the stories they’ve made themselves about how good they really are when in fact they failing miserably. Some of the better questions I’ve heard are prefaced with comments like “we’re aware we’re having troubles in this operational area, would you be able to offer guidance and advice to get us out of this sticky situation?” Self awareness seems to be a sign of a great and investable company.
- mwseibel 8y ago
  For many of the founders I talk to would say their startup "deserves" more money because of what they have accomplished. I'm simply trying to use the same language founder use with me.

kyleblarson 8y ago

https://www.youtube.com/watch?v=N6Zz-Nkkaxc https://www.youtube.com/watch?v=N6Zz-Nkkaxc

speby 8y ago

Of course a worthwhile question. Really, the same question can be asked of any party in any transaction in a company: employees, investors, customers, vendors, and so forth. Virtually anyone exchange or transacting with the business could ask (and be asked) this kind of question.