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Advice regarding VCs: Don't ever talk to them if they randomly approach you saying they "really like what you're doing". They will gladly sent an associate to t

Advice regarding VCs: Don't ever talk to them if they randomly approach you saying they "really like what you're doing". They will gladly sent an associate to talk with you about your business in the greatest detail and ask you to share presentations, demos and metrics. Anything you give them will then get passed along to their own portfolio companies in your space. So don't feel flattered when they feign interest in your company, they're mostly just doing reconnaissance. Ignore it as chances are you're feeding them information they'll use to kill your company. If you're really interested in VC funding you should proactively approach VCs (ideally using introductions by your network) that seem suitable. And you should check beforehand that they don't fund your main competitor.

streetcat1 4y ago
The markets are huge (I dare to say endless). Nobody is getting killed.
james_impliu 4y ago
Had this happen (random outreach). Led to a series A. Respectfully disagree - I don't think competitors copying is a significant risk early on, compared to running out of money whilst trying to hit product market fit.
- ThePhysicist 4y ago
  Fair point, maybe I formulated that a bit drastically, though I have seen this kind of reconnaissance increase quite a bit recently, so maybe I'm just fed up with it.
- upupandup 4y ago
  based on your anecdote against hundreds of thousands of founders getting spied on. I've seen it happen. Basically if somebody wants to invest ask them: $ and t+ If they try to dodge or make up excuses, MOVE ON. IF they say if you give me A,B,C and then we can invest, ask them to put them in writing and put an exit fee. If they do not invest, they give you 1% of the proposed amount. Somebody who is serious and has the balls won't waste time. Unfortunately rare. I've wasted a two years of my youth because a VC on HN reached out to me, who ultimately just used my product/coding services. Any dumb fuck can be a VC if they can raise cheap capital. Remember, there is very small group of VCs that know what they are doing. The rest are just in the game to spray and see what sticks on the wall (most of them do not make it during a downturn)
- hklgny 4y ago
  While both are anecdotes, I think the original warning is the more important one as it's not the one new founders will expect to encounter. Nothing wrong with taking the call, but be aware of the risks and do a bit of homework before you share anything mission critical.
- rgrieselhuber 4y ago
  It's hard to draw conclusions one way or another because there are so many variables. A good heuristic is that if you aren't speaking with a partner, your risk of having your time wasted (at best) is far higher.
agrippanux 4y ago
I think this is an overly dire warning, but the core of it is correct. If you get a random reach out, it probably means a discussion with an associate who is building out their network/pipeline and doesn't have much, if any, sway within the company yet. It's not necessarily a bad thing to meet with an associate, and doesn't mean they are seeking to kill your company. An intro meeting with an associate will take time you could be spending elsewhere, so it's up to you to determine if it's a good use of it.
benjaminwootton 4y ago
I'll agree with both of the peer comments. Had a random contact and ended up securing funding. Had hundreds of random contacts with junior VCs who were just fishing and looking to fill their calendar. Nowadays I just decline these meetings as they are quite boring after the 10th time and have a low hit rate.
Schroedingersat 4y ago
Or better, tell them all the ideas that you've had that seemed great, but just cost you thousands of hours of pain before you found out why they were unworkable.
nxmnxm99 4y ago
If intel in your company will kill your business you don’t have a defensible business.
- hklgny 4y ago
  This may be true after a certain point, but is certainly NOT the case when you're just getting started.
- svnt 4y ago
  Basically no one has a defensible business prior to a funding round (or decent cash flow).
amacneil 4y ago
Your advice is correct, but the reason is wrong. If you want to raise money, then inbound VC interest is a great source of leads (led to out series A, similar to sibling comments). But VCs employ armies of people to trawl the internet for new companies, and as an early stage founder you are time poor. Tell them that you are focusing on building right now but would love to chat when the time is right, add them to a spreadsheet, and go back to work. The time to start taking calls is when you are actually ready to raise a pre-seed/seed, or ~6-12 months out from your series A (by this point you should have a team who can keep building while you are networking). Also as the author noticed, treat the VC calls like a phone screen, and ask questions to filter out bad matches. If they don’t lead rounds at your current stage, or don’t “get” your product or market, move on.
- sirspacey 4y ago
  Great advice on parent and this one. If ever founder followed this advice, there would be a revolution in the funding landscape.
stewx 4y ago
What's stopping you from asking them to sign an NDA before disclosing any details of what you are doing?
- Swenrekcah 4y ago
  How are you going to know they betrayed you? If you know, how are you going to prove it? If you can prove it, how are you going to litigate it? NDAs only real usefulness is for big players to legally bribe and contain small fry.
- tofuahdude 4y ago
  They literally won't sign an NDA, especially at that early of a stage.
  - stewx 4y ago
    Why not?
    - pirate787 4y ago
      Because your ideas might not be unique at all but signing an NDA will expose them to litigation if they launch or fund a competitor.
    - throwaway98797 4y ago
      cause that’s the way the world works
- miladmalek 4y ago
  Asking for an NDA from an early stage VC is likely to actively hurt as it can make you seem inexperienced in the realm of startups/venture capital. A decent amount has been written on this. Here's a couple examples, but there are others: http://www.paulgraham.com/start.html http://www.paulgraham.com/start.html https://feld.com/archives/2006/02/why-most-vcs-dont-sign-ndas/ https://feld.com/archives/2006/02/why-most-vcs-dont-sign-nda...
AlwaysRock 4y ago
Yup. In general anytime someone is approaching you, unless you are specifically seeking their services out, its probably for their benefit and not yours. A VC seems impressive but they are just another company trying to make money. It's the founder version of getting LinkedIn Recruiter Spam.
- justinclift 4y ago
  > A VC seems impressive Err... why?
  - AlwaysRock 4y ago
    *to a lot of people who have never interacted with vcs before It feels like a stamp of approval even though its mostly meaningless. Like getting recruiter spam from a fang company. It feels like you must be doing something right or its a sign you are a good X. In reality it just means you're in someones marketing/outreach funnel.
j45 4y ago
Brain rape is definitely a real thing: https://youtu.be/JlwwVuSUUfc https://youtu.be/JlwwVuSUUfc People with money don’t usually know where to put it but can buy the time of many people in their 20s to roll the dice with their time. It can be a mutually productive relationship if eyes are wide open. If it’s one way it can be tough. Mentors/Investors have always said to me to seek investors (or individuals who care about you and your mission (before being part of a VC portfolio) and can help you navigate a world that is going to be foreign. VC portfolios are focused on their return or outcome in a specific timeline. Decisions may need to be made as a result that might be the wrong ones because of that pressure and not enough insight from the market. Still it can be positive and productive in a healthy relationship.
tomnipotent 4y ago
I think you're overestimating how effective gossip is. Because that's what it is, when I chat with a VC and they're telling me something about another company they talked to. It's great gossip, don't get me wrong. It can even sway decisions. But a fifteen minute call between two people about another call one of them had isn't really the tell-all people might think. At best I learn that so-and-so is using this tool, or spending money with this vendor, or do such-and-such process in-house. If gossip about another company convinces an executive to make big moves, the gossip was a very small part of that energy.
- JacobThreeThree 4y ago
  >But a fifteen minute call between two people about another call one of them had isn't really the tell-all people might think. You can also just promote your business without disclosing your secret sauce. If you can't handle a meeting with a VC without accidentally handing over company secrets, you've got bigger problems.
  - tomnipotent 4y ago
    Founders are excited to talk about their business, and like with any skill it takes practice to learn what and how to share.
phendrenad2 4y ago
But isn't the conventional startup wisdom "Don't worry about people stealing your idea, if your idea is any good you'll have to shove it down people's throats"? If your idea can be so easily stolen, no one will want it because others can also steal it. Also, someone has probably thought of it and tried it. Also, it probably means your vision not ambitious enough to be a unicorn, and you would have better spent your time climbing a corporate ladder. That said, there's wisdom in not assuming that VCs want your company to succeed, even if you get funded by them.
- cloverich 4y ago
  Its not sharing your idea thats the problem, its sharing your data, implementation plan, research results, which features are getting traction, etc.
  - jka 4y ago
    If you believe in the product/service that you're creating, should you worry about someone else building it more effectively? (self-response: maybe, if they're going to cut corners in some areas to provide a more popular but somehow value-compromised alternative)

streetcat1 4y ago

The markets are huge (I dare to say endless). Nobody is getting killed.

james_impliu 4y ago

Had this happen (random outreach). Led to a series A. Respectfully disagree - I don't think competitors copying is a significant risk early on, compared to running out of money whilst trying to hit product market fit.

ThePhysicist 4y ago
Fair point, maybe I formulated that a bit drastically, though I have seen this kind of reconnaissance increase quite a bit recently, so maybe I'm just fed up with it.
upupandup 4y ago
based on your anecdote against hundreds of thousands of founders getting spied on. I've seen it happen. Basically if somebody wants to invest ask them: $ and t+ If they try to dodge or make up excuses, MOVE ON. IF they say if you give me A,B,C and then we can invest, ask them to put them in writing and put an exit fee. If they do not invest, they give you 1% of the proposed amount. Somebody who is serious and has the balls won't waste time. Unfortunately rare. I've wasted a two years of my youth because a VC on HN reached out to me, who ultimately just used my product/coding services. Any dumb fuck can be a VC if they can raise cheap capital. Remember, there is very small group of VCs that know what they are doing. The rest are just in the game to spray and see what sticks on the wall (most of them do not make it during a downturn)
hklgny 4y ago
While both are anecdotes, I think the original warning is the more important one as it's not the one new founders will expect to encounter. Nothing wrong with taking the call, but be aware of the risks and do a bit of homework before you share anything mission critical.
rgrieselhuber 4y ago
It's hard to draw conclusions one way or another because there are so many variables. A good heuristic is that if you aren't speaking with a partner, your risk of having your time wasted (at best) is far higher.

agrippanux 4y ago

I think this is an overly dire warning, but the core of it is correct. If you get a random reach out, it probably means a discussion with an associate who is building out their network/pipeline and doesn't have much, if any, sway within the company yet. It's not necessarily a bad thing to meet with an associate, and doesn't mean they are seeking to kill your company. An intro meeting with an associate will take time you could be spending elsewhere, so it's up to you to determine if it's a good use of it.

benjaminwootton 4y ago

I'll agree with both of the peer comments. Had a random contact and ended up securing funding. Had hundreds of random contacts with junior VCs who were just fishing and looking to fill their calendar. Nowadays I just decline these meetings as they are quite boring after the 10th time and have a low hit rate.

Schroedingersat 4y ago

Or better, tell them all the ideas that you've had that seemed great, but just cost you thousands of hours of pain before you found out why they were unworkable.

nxmnxm99 4y ago

If intel in your company will kill your business you don’t have a defensible business.

hklgny 4y ago
This may be true after a certain point, but is certainly NOT the case when you're just getting started.
svnt 4y ago
Basically no one has a defensible business prior to a funding round (or decent cash flow).

amacneil 4y ago

Your advice is correct, but the reason is wrong. If you want to raise money, then inbound VC interest is a great source of leads (led to out series A, similar to sibling comments). But VCs employ armies of people to trawl the internet for new companies, and as an early stage founder you are time poor. Tell them that you are focusing on building right now but would love to chat when the time is right, add them to a spreadsheet, and go back to work. The time to start taking calls is when you are actually ready to raise a pre-seed/seed, or ~6-12 months out from your series A (by this point you should have a team who can keep building while you are networking). Also as the author noticed, treat the VC calls like a phone screen, and ask questions to filter out bad matches. If they don’t lead rounds at your current stage, or don’t “get” your product or market, move on.

sirspacey 4y ago
Great advice on parent and this one. If ever founder followed this advice, there would be a revolution in the funding landscape.

stewx 4y ago

What's stopping you from asking them to sign an NDA before disclosing any details of what you are doing?

Swenrekcah 4y ago
How are you going to know they betrayed you? If you know, how are you going to prove it? If you can prove it, how are you going to litigate it? NDAs only real usefulness is for big players to legally bribe and contain small fry.
tofuahdude 4y ago
They literally won't sign an NDA, especially at that early of a stage.
- stewx 4y ago
  Why not?
  - pirate787 4y ago
    Because your ideas might not be unique at all but signing an NDA will expose them to litigation if they launch or fund a competitor.
  - throwaway98797 4y ago
    cause that’s the way the world works
miladmalek 4y ago
Asking for an NDA from an early stage VC is likely to actively hurt as it can make you seem inexperienced in the realm of startups/venture capital. A decent amount has been written on this. Here's a couple examples, but there are others: http://www.paulgraham.com/start.html http://www.paulgraham.com/start.html https://feld.com/archives/2006/02/why-most-vcs-dont-sign-ndas/ https://feld.com/archives/2006/02/why-most-vcs-dont-sign-nda...

AlwaysRock 4y ago

Yup. In general anytime someone is approaching you, unless you are specifically seeking their services out, its probably for their benefit and not yours. A VC seems impressive but they are just another company trying to make money. It's the founder version of getting LinkedIn Recruiter Spam.

justinclift 4y ago
> A VC seems impressive Err... why?
- AlwaysRock 4y ago
  *to a lot of people who have never interacted with vcs before It feels like a stamp of approval even though its mostly meaningless. Like getting recruiter spam from a fang company. It feels like you must be doing something right or its a sign you are a good X. In reality it just means you're in someones marketing/outreach funnel.

j45 4y ago

Brain rape is definitely a real thing: https://youtu.be/JlwwVuSUUfc https://youtu.be/JlwwVuSUUfc People with money don’t usually know where to put it but can buy the time of many people in their 20s to roll the dice with their time. It can be a mutually productive relationship if eyes are wide open. If it’s one way it can be tough. Mentors/Investors have always said to me to seek investors (or individuals who care about you and your mission (before being part of a VC portfolio) and can help you navigate a world that is going to be foreign. VC portfolios are focused on their return or outcome in a specific timeline. Decisions may need to be made as a result that might be the wrong ones because of that pressure and not enough insight from the market. Still it can be positive and productive in a healthy relationship.

tomnipotent 4y ago

I think you're overestimating how effective gossip is. Because that's what it is, when I chat with a VC and they're telling me something about another company they talked to. It's great gossip, don't get me wrong. It can even sway decisions. But a fifteen minute call between two people about another call one of them had isn't really the tell-all people might think. At best I learn that so-and-so is using this tool, or spending money with this vendor, or do such-and-such process in-house. If gossip about another company convinces an executive to make big moves, the gossip was a very small part of that energy.

JacobThreeThree 4y ago
>But a fifteen minute call between two people about another call one of them had isn't really the tell-all people might think. You can also just promote your business without disclosing your secret sauce. If you can't handle a meeting with a VC without accidentally handing over company secrets, you've got bigger problems.
- tomnipotent 4y ago
  Founders are excited to talk about their business, and like with any skill it takes practice to learn what and how to share.

phendrenad2 4y ago

But isn't the conventional startup wisdom "Don't worry about people stealing your idea, if your idea is any good you'll have to shove it down people's throats"? If your idea can be so easily stolen, no one will want it because others can also steal it. Also, someone has probably thought of it and tried it. Also, it probably means your vision not ambitious enough to be a unicorn, and you would have better spent your time climbing a corporate ladder. That said, there's wisdom in not assuming that VCs want your company to succeed, even if you get funded by them.

cloverich 4y ago
Its not sharing your idea thats the problem, its sharing your data, implementation plan, research results, which features are getting traction, etc.
- jka 4y ago
  If you believe in the product/service that you're creating, should you worry about someone else building it more effectively? (self-response: maybe, if they're going to cut corners in some areas to provide a more popular but somehow value-compromised alternative)