12 ms·

“Yes” means “no”: The language of VCs

239 points by jakey_bakey 3y ago

victor9000 3y ago
Money means yes, everything else means no.
- jakey_bakey 3y ago
  This is a solid 7-word tl;dr
  - quickthrower2 3y ago
    Money talks, bullshit walks
- deleted 3y ago
  [deleted]
lisper 3y ago
It's not so much that "yes" means "no" but that VC's never actually say no, and it's easy to understand why. Whether or not they actually fund you, they always want you to think that they are going to fund you because that way they hedge their bets in two ways. First, if they learn new information (like if you suddenly start to get traction) they can change their minds without losing face. Second, and more importantly, as long as the answer is actually no you are potential competition for some other company that is actually in their portfolio, so they want you to think that you have a shot with them so you won't pursue other opportunities as aggressively. The only thing that actually means "yes" in VC land is when the check clears.
- jakey_bakey 3y ago
  Solid summary tbh. It's all about incentives really.
- hinkley 3y ago
  If they run down your clock because you think a check is coming, their other company can hire your former employees.
  - maccard 3y ago
    I'm not going to say this has never happened, but I think it's a little naive to think that this is the common path. In my experience, the first option OP presented (hedging bets and wanting to save face) are incredibly common.
    - hinkley 3y ago
      Naïveté is when someone assumes good outcomes from bad situations. What I'm exhibiting is probably more correctly described as cynicism. I've worked for a few startups that were sure they were hearing 'yes' from VCs and we ended up running out of money thinking a check would come any day now. There's an old saying, "I'll believe it when I see it." Cynics and startup employees expanded this to, "I'll believe it when the check clears." And then there's me over here, who knows you can claw back a check that has 'cleared' for about 30 days, saying "I'll believe it a month after the check clears."
- marcell 3y ago
  Disagree, I’ve heard “no” from dozens of VCs. They sometimes even give a post hoc rationalization.
- personjerry 3y ago
  That's what the article says
- Aurornis 3y ago
  Top tier VCs will definitely tell you “no” and they’ll often get there quickly. It’s more often the small funds, the inexperienced family offices, and the junior associates that don’t have authority who string companies along forever. They don’t have as much authority or funds to actually work with, so they have a lot of time to string you along. Lumping all VCs together really doesn’t lead to accurate descriptions of how the industry works.
  - FreakLegion 3y ago
    This is the most accurate comment I've seen here. Sequoia, Benchmark, Kleiner, etc. will all tell you "no" and why with minimal turnaround time. The same is true for second-tier players like Craft, smaller shops started by breakaways from the big firms, and scouts. Good VCs are professionals and have no interest in wasting your time or theirs. A "no" now never precludes future participation anyway; they don't need to string you along for that.
    - mbesto 3y ago
      Which actually reinforces the grandparent's point. Sequoia, Benchmark, Kleiner, etc. can say an actual "no" and you'll still go back to them because they're...Sequioa, Benchmark, etc. You'll go back to them, because its a huge signal to prospective buyers, potential acquirers, partners, etc. that you're being funded by a top tier VC. > Good VCs are professionals and have no interest in wasting your time or theirs. "Good" VCs has less to do about professionalism and more to do about pedigree. Professionalism and "good"/"bad" VCs are not mutually exclusive things.
      - FreakLegion 3y ago
        The grandparent said "VC's never actually say no". I did the opposite of reinforce that. Every good VC will give you a version of the following if it's a "no": 1. It's a "no". (Clear, unambiguous.) 2. Here's why. (E.g. not believing in the space, issues with customer background or another part of due diligence.) 3. We make mistakes all the time and hope you prove us wrong. (I've pitched the partner at Sequoia who invested in FTX. His name's Alfred, super nice guy and fully aware that screwing up is part of his job. "No" isn't a value judgment.) 4. Happy to talk again for the next round. (If they're a multistage fund, e.g. you won't hear this from First Round.) It's all very predictable. The one real "why" you won't typically hear back on is strength of the founding team. They won't tell you when they think you're the problem. But product, space, GTM, basically anything else they're happy to dissect. This is true for all of the firms that people have heard of. Of course there's a long tail of bad VCs, too, generally podunk firms few people ever encounter anyway. Avoid TechOperators out of Atlanta, for example.
- _heimdall 3y ago
  Serious VCs often will say no, and they'll say it quickly. Honestly I prefer the approach of being extremely straightforward with expectations. Make your pitch, but also make it clear that you aren't interested in playing games and would prefer a clear "no" if that's the decision.
ldjkfkdsjnv 3y ago
Rubrik for early stage: 1. No product: -> went to stanford or harvard -> funded (no questions asked) -> held director level at faang -> funded -> everyone else -> probably not funded 2. Have product: -> not prestigious -> need real ARR with good growth -> prestigious -> need a product -> everyone else -> not funded
- jakey_bakey 3y ago
  It's the whole fairground saying, right? (I'm definitely in the middle-class bucket)
- zomglings 3y ago
  This is almost accurate. I would add one more thing: -> Have previous success (as founder or as employee) in same space -> funded
  - ldjkfkdsjnv 3y ago
    Yeah i was more so thinking of first time founders. Second time founder is a different thing, though I dont think early employees ("founding engineers") get much respect.
    - jonathankoren 3y ago
      “Founding ____” is not “founder”. It’s just a fancy way of saying “employee”. This is always been the case.
      - ldjkfkdsjnv 3y ago
        Never said it was, its a scam title. Only time it holds relevance is again if the founder already had a success. Then the chances of the equity being worth something are higher
      - ShamelessC 3y ago
        Seems sort of clearly misleading at any rate.
aussieguy1234 3y ago
"Everyone wants investment from venture capitalists". I have a bootstrapped side project, Tunnelmole, turning a small profit and growing at a slow and steady rate on its own. I'm the engineer so I only really pay hosting costs, which are covered by the revenue, although in the early days I had to cover this. While venture capital is an option, if it continues to grow, it's entirely possible the venture capitalists may not be needed.
- djbusby 3y ago
  The longer you go w/o raising money the better your position can be.
  - ant6n 3y ago
    Unless you run out of cash
- smurda 3y ago
  I work at a VC firm. If the business can finance itself, you absolutely don’t need VC cash. Ultimately, that’s the goal - build a profitable business.
  - aussieguy1234 3y ago
    The only reason I'd consider it, is to accelerate the current growth, beyond what I can drive myself. But it depends how my own efforts go, there's still a long way to go before my current methods become ineffective.
- jakey_bakey 3y ago
  I address this in the second sentence when I explain that this puts you in the same category as many famous grifters. The ending of the piece helps to confirm exactly what you said - really, you want to bootstrap unless you are going so gangbusters that a lack of quick cash is damaging your ability to grow.
- striking 3y ago
Sytten 3y ago
"Everyone wants investment from venture capitalists." Am I the only one not living in this bubble. I cofounded a boostrap business. Having cash to hire and not have to work two jobs would sure be nice, but if I am raising it would not be to be on Forbes list, it would be to build an actual business. The vanity of those people sometimes.
- jakey_bakey 3y ago
  I really hope you read the second sentence and understood I was trying to be a little satirical here
  - quickthrower2 3y ago
    I did, I enjoyed reading that, from ire to wry smile, in a sentence.
    - jakey_bakey 3y ago
      I'm very glad my structure worked as intended :) Can you f*cking believe that the publication on Medium I originally posted this to edited that sentence out!?
  - tkgally 3y ago
    I enjoyed that sentence, too. It may be what led me to keep reading to the end of the piece.
- kybernetikos 3y ago
  I listened to an interview with Ivan Kuckir who created Photopea with an old laptop and a cheap webhost. It runs in the users browsers, so his costs are extremely low. The interviewer asked him about taking VC money, but he didn't seem keen. It's a runaway financial success as it is, and there isn't really anything that taking a bunch of money would allow him to do that he can't already do.
djbusby 3y ago
It's a good retrospective. It's clear the author learned, and improved. I didn't find anything new, it's got commentary on three common failure-to-raise modes. One thing I noticed about the tale was lots of focus on the product and MVP things. I think more efforts on Customer Development before MVP can provide a lot of traction signal to VC.
- jakey_bakey 3y ago
  Thank you for saying! Certianly the post is primarily aimed at wide-eyed first-time founders like I was to help temper some of the naïvete
CPLX 3y ago
I've never understood the cult around tech VCs, the ratio of self-regard to actual value delivered to the world (or even their own firms) has always seemed staggeringly out of scale with reality. And that's even true in a world that seems to have no shortage of unearned self-regard. I guess if you play the game you can get your hands on a lottery ticket with pretty good odds. But seriously fuck these people and their egos. I'm pretty sure if you build really solid tech or a growing company they'll come chase you, so I am really hard pressed to figure out why people should pay all that much attention to who they are and what they think at all.
- jakey_bakey 3y ago
  In terms of prestige finance, I suppose they probably deliver more value than private equity. In terms of everything else...
- hgomersall 3y ago
  VCs are just a different target market. Similarly, you can build a business with grant awarding bodies as your customers. The problem with both is that generally you have to pivot to selling to customers who actually want the product you've been pitching.
daft_pink 3y ago
Maybe it's my business major background and my skepticism of all these tech companies that have no reasonable business model to make $'s, but unless there is an obvious need for investment like buying a large amount of real estate or machinery, why would you need VC money to build an app after you've already spent several months doing it? It should run on it's own and not need investor money. You shouldn't be focused on getting VC's, you should focus on developing an app that actually turns a profit. It's not that difficult. Anyways, I found your story really interesting. Good story :)
- jakey_bakey 3y ago
  Appreciate it :) But yes, after learning a lot from my various startup scars, I don't believe I'll be seeking VC dollars for an app unless: - I am creaking under success with an impossible cloud bill - I am a late-onset cofounder of an already successful co that needs and app
- deleted 3y ago
  [deleted]
- RobRivera 3y ago
  > It's not that difficult. Who is going to tell him/her?
- wavemode 3y ago
  The goal of most Silicon Valley founders isn't profit, but growth. Quickly increase users, quickly increase revenue, quickly increase headcount. Quickly become a large company which can be sold for billions. Or, never reach sustainability and eventually go bankrupt - this outcome is actually still good for the founders since they probably walk away with millions in their pockets (from paying themselves seven-figure salaries).
  - eastbound 3y ago
    It’s growth… until the “plateau” phase of the Schumpeter economic cycle (~60 years), where entrenched actors raise prices and customers lose choice.
caesil 3y ago
>“Talk to us again when you have traction.” >In our first-time founder naïveté, we took this to heart. Our startup lived or died on whether we had traction. Ummm... this seems pretty genuine, as opposed to a polite no? If you don't have something compelling to differentiate you from the cacophony of other founders who want preproduct dollars, then of course you need to demonstrate the viability of the product.
- jakey_bakey 3y ago
  Oh, it's absolutely genuine, but there is a contradiction in a VC (inherently risky endavour) requiring you to de-risk their risky investment If you already had traction, you wouldn't need to kiss the ring
  - JumpCrisscross 3y ago
    > If you already had traction, you wouldn't need to kiss the ring They’re telling you you’re pitching at the wrong stage. Growth and early stage doesn’t invest before traction; that’s the purview of angels and possibly seed investors.
    - skrebbel 3y ago
      Nah, they're just politely saying no. Lots of (pre) seed investors, who supposedly actually really invest before tangible proof, don't actually do this. Their MO is to hope to talk to early stage founders who are doing amazing before said founder realize that they can raise at way better terms. It's the "win by doing lots of cold sales" model, but for VCs: if you talk to enough founders eventually a startup that does way too good for your seed/preseed ticket size will actually accept your terms and give you 25% of their company for next to nothing.
daniel-cussen 3y ago
[dead]
m3kw9 3y ago
When you say yes, they value their time/energy like money, it gets you to shut up so they can move on, and delay the explanation later on why they “reconsidered”, it’s passed to the assistant for the reply. Now when they don’t say yes/no abruptly and just asks more questions, they are interested and that’s a better gauge
logotype 3y ago
Oh, I’ve heard many No’s. So many No’s that I will never, ever try to work with VC’s ever again. Fuck them. There’s a very high probability that you won’t need them either. In my case, I just kept going. If you have a good product then you will succeed. With VCs or not!
- jakey_bakey 3y ago
  I kinda feel for the people who are desparate to be the big cheese rather than have their own thing that's sustainable
  - Aeglaecia 3y ago
    wonder how they would feel squashing your business in the same industry
    - jakey_bakey 3y ago
      It's the only thing that makes them feel something
dhash 3y ago
This article is kinda silly, but very true. I have a LUT in my notes that is “VC says” “they actually mean”
ChuckMcM 3y ago
They miss my favorite: "Yes, we'll invest we just don't want to be 'lead'." That is code for: "You aren't going to find anyone who shares your idea of what your valuation should be so we are safe telling you we'll invest if you find a 'lead investor' because that person doesn't exist." It gets funny/twisted when you do find a lead and go back and now there is some other goal post that is keeping them out of "this round."
- pnw 3y ago
  Not necessarily. It could also be code for "We can't write a check big enough to lead your round". E.g. a seed fund who writes $1m checks isn't going to lead a $5m round. The VC would be putting themselves out of a job if they wrote a $5m check when they told their LPs their fund target was $1m checks.
  - tptacek 3y ago
    "We're in if you find a lead" is kind of notoriously code for "no".
    - omeze 3y ago
      If its a fund that has led rounds before then yes, but if its a new fund or small fund then it might be part of the GPs proving they can get deal flow to their LPs before raising a larger fund
      - tptacek 3y ago
        I mean, maybe, but (a) I've been told many times that it's code, and it's like a running joke in the industry, and (b) if you have a lead, you're not worried about reading tea leaves anymore. Saying "we'll invest if you have a lead" is like saying "we'll invest if you put a successful round together". Who wouldn't? The point at which you have a lead for your round is often the point where you start turning them down.
        3y ago
vram22 3y ago
I wonder how many here got the second paragraph of the OP. Second sentence of second paragraph, actually.
- mdekkers 3y ago
  I hope nobody needed pointing out that it is (obvious) satire
  - vram22 3y ago
    I didn't, at least. That's what I implied by my comment.
thwarted 3y ago
For our two-sided marketplace startup, this meant Android and iOS apps for customers, and another pair of apps for mechanics. 6 months later, we released our fully-fledged MVP to a deafening silence from customers, mechanics, and investors. It's probably really hard to get traction when it's not obvious who your customers are, and this description reveals that. Your customers are the entities that are paying you. Is this supposed to be an app for mechanics to find work? Is it supposed to be an app for people with car problems to find someone to fix it? Those looking to get their vehicle serviced aren't going to want to pay the finders feed on top of the cost charged by the mechanic, which means those people are not your customers. What are the cases where someone would pay for your app? Are mechanics having trouble finding work? Are the mechanics the customers of Fixr? Do people with car trouble have it often enough that they'd pay for such a service vs whatever else they'd do? "Talk to us again when you have traction" indeed. Or "Talk to us again when you know how to recognize traction."
- fonix232 3y ago
  Yeah, I was thinking the same. Fixr seemed like a solution looking for a problem, without having an even borderline clear idea on what it is supposed to be. No wonder it failed.
  - marcus_holmes 3y ago
    I've seen hundreds of startups like this. Literally talking to someone last week who was developing an app but had no clear idea who their customer was or why they would buy it. There's so much survivor-biased bullshit in the industry, though. Founders who raised millions on an idea with no MVP, no customers, no traction. Everyone laps it up and repeats it on social media and then there's another 100 founders who are wasting their time and savings on ideas with no clue. The ecosystem soaks up their savings and spits them out disillusioned and drained of cash.
- jakey_bakey 3y ago
  100%. I was a little embarrassed to include it but the first-time-founders' naïvete was an important, and hopefully quite relatable to many people, part of the story
a1371 3y ago
I played the VC game. We were attending every opportunity to give 10% of our business for $200K. No one would bite. Gradually, it felt it was easier to land customers than VCs. Then there came a moment that I wish for every founder. Our revenues started not only paying the bills, but also fueling growth. It felt as if a veil was lifted from my eyes. Now, it feels like all those pitches were a waste of time.
- featuregag 3y ago
  And if you make your success public enough in the right circles? Those same VCs will be throwing their panties at you. It’s the game.
  - blitzar 3y ago
    “I LOVE THIS FOUNDER" ... "I am a 10 out of 10"
    - throwaway2037 3y ago
      Hat tip for the SBF VC quote. If anyone else doesn't know these (now truly meme-worthy quotes), stick the quote in Google to see VCs gushing about SBF & FTX.
      - blitzar 3y ago
        Its even better that the quotes of VCs gushing about SBF & FTX is in a puff piece written by the VCs themselves about how special they were that they could identify the real thing.
- mrangle 3y ago
  Essentially, the market forced you onto the track that it wanted you to be in. Which, as you found out, is a good thing (and the only possibility). As the best time for VC investment is generally at the inflection point of the exponential growth curve. When revenue can't keep up with what it costs to supply the ever faster growing demand. Which, for many companies, will be shortly before an outright acquisition. And usuaully 5-10 years, minimum, after slow customer growth. Assuming a good business but not necessarily a unicorn in terms of market position. But at that point wily founders may instead look to keep their company and seek a loan.
xyst 3y ago
What you need to do is launder your “app/concept/vision” through “high profile individuals”. Ideally, get someone with a high level of influence to invest or just get them on your board. Having their name in the decks increases future investment by vulture capitalists by at least 420%. Once VCs see those names, their typical DD process goes out the window. All they see is the name and gamble millions/billions just because of this. Some notable examples of this are “theranos”, “ftx”, “frank”. Shit it even stretches back to the 1990s with infamous con artists like Jordan Belfort or Bernie Madoff. Remember those college frat bros that cheated off you? Those frat bros and sorority sisters are often connected to high wealth individuals. Higher chance of this at “Ivy League” universities. Remember. It’s not what you know. It’s WHO you know ;)
satvikpendem 3y ago
If you know marketing, you don't need VCs (unless you are in a capital-intensive business like rocket building). The problem is that most people who get funded are technical and do not know marketing and growing organically. However, there are lots of businesses that grow extremely well simply due to the cofounders having previous experience with marketing, often in a professional capacity. My go-to example is Lemlist (and their "Lempire" of related products). The founders built their own cold email agency, grew that to millions just through sheer labor, then built software to automate that process and now they're at a 200 million dollar valuation from more than 10 to 15 million dollars in annual recurring revenue. They have lots of marketing channels: organic SEO via content marketing, Facebook group with frequent events like interviews with other agency owners and salespeople, YouTube videos that are then recut and repurposed to TikTok/Instagram/Facebook videos, partnering with influencers, paid advertising, and of course, cold messaging other salespeople and agencies via LinkedIn and email. Most technical founders do not know or have the patience to do any of this. If they do, though, they could similarly grow to such an ARR in a few short years, as Lemlist started only in 2018. Similar examples include GoHighLevel and ClickFunnels which are almost at or over a 1 billion dollar valuation each, both bootstrapped. The ClickFunnels founder for example sold his software via live demos (both webinars and in person events) where you got X% off but only if you booked right at the end of the demo, which apparently drove quite a high percentage of their initial sales. I'd highly advise founders to start a marketing agency if only to understand marketing in a real capacity and how to deliver results to paying clients. I have done so via a cold email and paid ads agency for various niches before and I believe it's helped me immensely with future products. Best of all, you learn to be truly aligned with your customers and providing them direct value because they are paying you every month. If you make a mistake, you must fix it, you have no backup fund of venture capital previously raised in order to skate BY, especially now that ZIRP (zero-interest-rate phenomenon) is over.
- jasmer 3y ago
  [dead]
- 97-109-107 3y ago
  I'm not dismissive of businesses like Lemlist, but would propose another angle. I find that businesses that are spin out from agency models are particular, inherit a strong characteristic and outlook similar to agencies. This is not a critique of their model per say, but an observation that leads me to be hesitant to take advice from agency-born models and apply to more typical product-focused B2B or B2C settings. This leads me also to note that that the nature of content exposes us to a lot of people who believe in posting content. I'm not against it, but would like to fight the common urge towards content as the best strategy to go to market. However, given that the medium is message, we don't hear from people who don't need to post to do business.
threeseed 3y ago
Have actually read a few founders now who had no connections and just treated VCs as sales targets: 3000+ investor cold emails, 100+ meetings, 3 term sheets, 1 deal. Reading this it makes me wonder if this isn't the best strategy.
- pnw 3y ago
  I know several successful founders who had to pitch over 100 firms on their financing round. I would say the usual number is probably 30 to 50, but 100 isn't out of the ordinary, especially if you are doing something unusual or new.
  - mightytravels 3y ago
    I think people underestimate how hard it is to truly evaluate someone else’s business. Imagine you hear bullshit every day - you just can’t call people out on it. So in the end you go with something you can actually properly evaluate because of some inside you have as an investor. Of the this ends up being a theme.
- davedx 3y ago
  Sounds like a huge waste of time
  - blitzar 3y ago
    Sounds like 6 months in a regular cubicle job.
Joel_Mckay 3y ago
"Everyone wants investment from venture capitalists" No they don't, why should anyone sane pay for working capital with equity. If all a VC brings to the table is cash, than they are functionally a bank loan with really terrible terms. One can tell a bad idea when you have to explain its value proposition to people, at that point it is a vanity project already non-viable. Rule #14: "Never outsource economic control structures, or one may end up indentured"
moralestapia 3y ago
>In all honesty, you don’t want to take external funding unless you have intensely strong user growth; and being unable to hire becomes your bottleneck. 100%
conartist6 3y ago
Your title is one of those things that reminds me why our industry is so short of women
- jakey_bakey 3y ago
  Wait, really? Please explain this Also, the actual title or the one HN moderated it to?
  - conartist6 3y ago
    I understand it to be wordplay on "no means no", a well-known anti-rape slogan. In repurposing the lingo to be a statement about venture capitalism, there is a lack of respect for the need for such a slogan. I think men a tendency to trivialize that message because it scares us a bit. It's a message of rejection and shame so it's uncomfortable and we naturally to want to twist it around until it isn't threatening anymore.
pnw 3y ago
To be fair, none of those ideas seem like venture scale ideas to me. Maybe I'm missing something? If you are talking to just one investor, you are doing it wrong. It's a parallel process, not serial. Kissing a lot of frogs serially looking for Prince Charming will slowly kill your morale, waste your time and investors quickly learn that others have passed on your deal. Think of it more like drafting a football team. You want all the potential investors on the field at the same time. That's how deals close in weeks, not months. If your investment round is taking so many months, something is wrong. This is why YC and Techstars do a demo day. Parallel pitches to a large audience of investors is the technique to close a round quickly.
mightytravels 3y ago
Also watch Season 2 Episode 1 of "Silicon Valley" :) https://www.youtube.com/watch?v=857XqOoMm8c https://www.youtube.com/watch?v=857XqOoMm8c
- quickthrower2 3y ago
  Is that the brain rape one?
shermantanktop 3y ago
I’m not in this game, but it sounds like if there’s a condition, the answer is “no,” rather than great advice. All these anecdotes boil down to VCs saying “if (false),” where what drives the false proposition is your job to guess about and may be useless. And if that proposition were true, the startup might not need their money or contacts.
nextworddev 3y ago
What founders need to understand is that VCs are generally risk averse (which is surprising because they are supposed to be “venture”) and are momentum / fomo driven. Very few VCs think outside the box and can act independently (though they act like they can).
jedberg 3y ago
When I was raising funds, the thing that I hated to hear most was "We will give you $X as long as you find a lead" where $x was usually just less than 1/2 of what we were asking for. That was basically their way of saying "we don't believe in you but we don't want to miss out if someone else does". We didn't really want investors like that so we bootstrapped instead.
- marcell 3y ago
  You can collect these “soft commits” to make it easier to land a lead. You can tell the potential lead, “we have $X in soft commits, so if you become our lead, our company will have total $X + $Y funding.” It makes your pitch to the lead more compelling.
  - jedberg 3y ago
    I know we could have, but we thought it would be dishonest of us to do so since we had no intention of taking the soft commits. They were always from investors that had nothing to offer and apparently no conviction in their belief either.
  - tptacek 3y ago
    They'll ask who your "soft commits" are, and they'll read between the lines; if any of them are significant firms, it'll get read as "those firms refused to commit, there must be a reason". Michael Seibel had a video a long time ago from a YC VC class, and related his strategy to work around this, of setting a very short deadline --- like, do all the meetings inside of a week, and tell people "get your term sheets in by the weekend". The idea was: don't give investors an opportunity to stall, and, by stalling, send an adverse message to all the other investors. (I don't know if this works at all anymore, but it gives you an idea of what the issue is here.)
    - marcell 3y ago
      I heard the short deadline advice also, it’s nice idea but has flaws: - most VCs will have at least a few days delay on when they are willing to meet you - intros are required, and often intros come out of other VC meetings. This means you can’t shotgun everything - if a VC wants to meet after your “deadline”, will you actually say no? Who has more power? If you are a hot deal or Michael Seibel himself, the short deadline probably works. For mid level startups it’s not as easy.
hn_throwaway_99 3y ago
In fairness to the VCs, the 3 examples given in "The VC Codex" section seemed blatantly obvious to me. Here is the first one, for example: > When they say: “Talk to us again when you have traction.” > They really mean: “If you prove there is a market opportunity and that you can execute as a management team, then we might consider you. But because I don’t believe either of those things will happen, I will not be taking a risk on you”. I mean, the general tone of the article is "VCs speak an ambiguous language because they're doing a dance with founders." One hand, sure, of course, that happens in literally every sales negotiation. But "Talk to us again when you have traction" seems pretty clear that the VC doesn't believe in either your market thesis or team, and they're basically saying "prove us wrong". I just don't see any guile here.
- jakey_bakey 3y ago
  This is very true - the story also follows my maturing from extremely naïve to having my head screwed on a little better. To many people newly playing at startups, the traction comment is an invitation and not a rejection.
blindriver 3y ago
VCs are the biggest snakes in business. Until you actually see money in your bank account, consider every single thing they say as a no. No matter how much they kiss your ass, and no matter how much they throw term sheets at you, until you see money in the bank account, it’s a “no”. If they want to say yes, they will have the money in your bank account that day, but if you get any excuses, then it means they are stringing you along.
davecheney 3y ago
Two things: 1. Nobody is entitled to venture capitalist funding. It is not an oddly named and run social works program. 2. VC funding is not a home run. It is not free money. If the only way you can launch a tech business is venture funding with the hope of hitting it out of the park before the funds’ cliff, perhaps consider if the return justifies the effort.
- jakey_bakey 3y ago
  Hey, if the company's equity goes to zero then it was free money!
mrangle 3y ago
The show Silicon Valley well parodied this phenomenon. It implied that the evasive "no" is commonly because VCs don't want to be known for passing on an investment, outright, that then later takes off. Which would reflect negatively on their judgement, in more or less a worse manner than it would when risking money on something that fails. The implied choice then becomes to probably lose money but retain reputation, or to protect money at the possible cost of reputation. Funds can't invest in everything, even if passing on something borderline is a repuation risk. The "not a no but no" third option seeks to both retain reputation and protect money.
- Galacta7 3y ago
  > "The show Silicon Valley well parodied this phenomenon." Yup, often hilariously. Basically summarized in this scene (especially the very end of the clip): https://youtu.be/PdCoadVSfXg?si=VVwDsNw84WoZx8XD https://youtu.be/PdCoadVSfXg?si=VVwDsNw84WoZx8XD
  - mrangle 3y ago
    Great scene. The theme is repeated both when Monica reveals her shameful secret of having passed on Slack, and when Erlich turns down the ferret / pig startup: "I'm not passing, exactly, I'm just not saying yes" (paraphrased).
kshahkshah 3y ago
I thought all this type of stuff was true until I did a proper raise. They will absolutely tell you no and give you reasons why. You should heavily discount the reasons
camel_gopher 3y ago
I think it was Paul Graham who gave a good indicator if the VC was saying yes. “Look down. Is there a term sheet in front of you?”
- urbandw311er 3y ago
  I like that, but from my experience I’d go as far as saying “is their money in your bank account?” Terms sheets are not legally binding. Money talks.
wg0 3y ago
Regardless of yes or no, VC money is ludicrously expensive. 125k is barely one year's salary and your 7% of ownership gone forever and that's the deal for almost all accelerators. On top of that - the connections, reach, prestige might be meaningless or irrelevant to your particular product and market.
- vaxman 3y ago
  I think you like it, like it, to be told, what to do, ain’t that true? https://youtu.be/XbLKWm12yx0 https://youtu.be/XbLKWm12yx0
simonebrunozzi 3y ago
I was in tech and gradually turned to VC, now I have my own VC firm based in Italy (I live in Venice, the original one, not the fake LA one), and we invest everywhere in Europe, and occasionally in the US. I was also a founder a few times. I hated VCs most of the time. Now I'm trying to be useful, and to not waste anyone's time. I try to say "no" very quickly, and try to be very transparent about my thinking process. Some founders really appreciate this. Some others don't. And that's fine. I want to be the VC that I would have wanted to meet when I was a founder, that's it.
- jakey_bakey 3y ago
  I appreciate that :)
anonzzzies 3y ago
> Everyone wants investment from venture capitalists. Everyone minus 1 at least anyway.
skrebbel 3y ago
I’ve fundraised in Europe, and as an HN-educated founder, I was surprised (and happy) to discover that pretty much every VC we talked to that didn’t want to move forward, told us so explicitly, reasonably quickly. And they were happy to explain why if we asked, which was instrumental for learning how differently than us they thought. People love to complain about the European VC landscape, and how little capital there is compared to the US and so on, and they’re not wrong, but this to me is a stand-out positive. We felt taken seriously by everybody, just about nobody wasted our time.
DoingIsLearning 3y ago
I feel like this a SV/California culture of 'conflict avoidance' and general pleasantry rather than something specific to VC culture. It just so happens that most big VC players are in California.
rambambram 3y ago
> "angel syndicates" I'm very sorry, but I just laugh my ass off because of all these kinds of words related to money and investors.
acjohnson55 3y ago
I think most founders (understandably) don't know how the capital marketplace works, and so they create these codebooks for translating the things VCs say into a mental framework that makes sense to them. I don't know what the answer is, other than simply building the right company at the right time. There are people who are very good at navigating the fundraising space, but that usually comes from having expertise and/or connections prior to founding a company. Once you are in the middle of trying to start a company, it's a little late. Your best bet is to find a way to demonstrate that you're on to something big, then find people who can see that she vouch for it.
nixpulvis 3y ago
Had to stop at "None were brave enough to rip off the poisoned shirt we had woven for ourselves", but that's a great line.
4star3star 3y ago
I think it would be important to record and review the exact language used. People have a tendency to speculate, project and misremember things. "Let us know when you have more traction," could easily (and wrongly) be translated to, "They said they want to work with us once we can prove growth," which is not the same statement. If you asked someone on a date, and they said, "Get back to me when your abs are showing," would you actually surmise that you were a good match and just needed to do more crunches?
taylodl 3y ago
No money means "no." Doesn't matter WTF they say.
lazyant 3y ago
> much like the Inuit people, who have many words for snow, this is a myth https://en.wikipedia.org/wiki/Eskimo_words_for_snow https://en.wikipedia.org/wiki/Eskimo_words_for_snow

239 points by jakey_bakey 3y ago

victor9000 3y ago

Money means yes, everything else means no.

jakey_bakey 3y ago
This is a solid 7-word tl;dr
- quickthrower2 3y ago
  Money talks, bullshit walks
deleted 3y ago
[deleted]

lisper 3y ago

It's not so much that "yes" means "no" but that VC's never actually say no, and it's easy to understand why. Whether or not they actually fund you, they always want you to think that they are going to fund you because that way they hedge their bets in two ways. First, if they learn new information (like if you suddenly start to get traction) they can change their minds without losing face. Second, and more importantly, as long as the answer is actually no you are potential competition for some other company that is actually in their portfolio, so they want you to think that you have a shot with them so you won't pursue other opportunities as aggressively. The only thing that actually means "yes" in VC land is when the check clears.

jakey_bakey 3y ago
Solid summary tbh. It's all about incentives really.
hinkley 3y ago
If they run down your clock because you think a check is coming, their other company can hire your former employees.
- maccard 3y ago
  I'm not going to say this has never happened, but I think it's a little naive to think that this is the common path. In my experience, the first option OP presented (hedging bets and wanting to save face) are incredibly common.
  - hinkley 3y ago
    Naïveté is when someone assumes good outcomes from bad situations. What I'm exhibiting is probably more correctly described as cynicism. I've worked for a few startups that were sure they were hearing 'yes' from VCs and we ended up running out of money thinking a check would come any day now. There's an old saying, "I'll believe it when I see it." Cynics and startup employees expanded this to, "I'll believe it when the check clears." And then there's me over here, who knows you can claw back a check that has 'cleared' for about 30 days, saying "I'll believe it a month after the check clears."
marcell 3y ago
Disagree, I’ve heard “no” from dozens of VCs. They sometimes even give a post hoc rationalization.
personjerry 3y ago
That's what the article says
Aurornis 3y ago
Top tier VCs will definitely tell you “no” and they’ll often get there quickly. It’s more often the small funds, the inexperienced family offices, and the junior associates that don’t have authority who string companies along forever. They don’t have as much authority or funds to actually work with, so they have a lot of time to string you along. Lumping all VCs together really doesn’t lead to accurate descriptions of how the industry works.
- FreakLegion 3y ago
  This is the most accurate comment I've seen here. Sequoia, Benchmark, Kleiner, etc. will all tell you "no" and why with minimal turnaround time. The same is true for second-tier players like Craft, smaller shops started by breakaways from the big firms, and scouts. Good VCs are professionals and have no interest in wasting your time or theirs. A "no" now never precludes future participation anyway; they don't need to string you along for that.
  - mbesto 3y ago
    Which actually reinforces the grandparent's point. Sequoia, Benchmark, Kleiner, etc. can say an actual "no" and you'll still go back to them because they're...Sequioa, Benchmark, etc. You'll go back to them, because its a huge signal to prospective buyers, potential acquirers, partners, etc. that you're being funded by a top tier VC. > Good VCs are professionals and have no interest in wasting your time or theirs. "Good" VCs has less to do about professionalism and more to do about pedigree. Professionalism and "good"/"bad" VCs are not mutually exclusive things.
    - FreakLegion 3y ago
      The grandparent said "VC's never actually say no". I did the opposite of reinforce that. Every good VC will give you a version of the following if it's a "no": 1. It's a "no". (Clear, unambiguous.) 2. Here's why. (E.g. not believing in the space, issues with customer background or another part of due diligence.) 3. We make mistakes all the time and hope you prove us wrong. (I've pitched the partner at Sequoia who invested in FTX. His name's Alfred, super nice guy and fully aware that screwing up is part of his job. "No" isn't a value judgment.) 4. Happy to talk again for the next round. (If they're a multistage fund, e.g. you won't hear this from First Round.) It's all very predictable. The one real "why" you won't typically hear back on is strength of the founding team. They won't tell you when they think you're the problem. But product, space, GTM, basically anything else they're happy to dissect. This is true for all of the firms that people have heard of. Of course there's a long tail of bad VCs, too, generally podunk firms few people ever encounter anyway. Avoid TechOperators out of Atlanta, for example.
_heimdall 3y ago
Serious VCs often will say no, and they'll say it quickly. Honestly I prefer the approach of being extremely straightforward with expectations. Make your pitch, but also make it clear that you aren't interested in playing games and would prefer a clear "no" if that's the decision.

ldjkfkdsjnv 3y ago

Rubrik for early stage: 1. No product: -> went to stanford or harvard -> funded (no questions asked) -> held director level at faang -> funded -> everyone else -> probably not funded 2. Have product: -> not prestigious -> need real ARR with good growth -> prestigious -> need a product -> everyone else -> not funded

jakey_bakey 3y ago
It's the whole fairground saying, right? (I'm definitely in the middle-class bucket)
zomglings 3y ago
This is almost accurate. I would add one more thing: -> Have previous success (as founder or as employee) in same space -> funded
- ldjkfkdsjnv 3y ago
  Yeah i was more so thinking of first time founders. Second time founder is a different thing, though I dont think early employees ("founding engineers") get much respect.
  - jonathankoren 3y ago
    “Founding ____” is not “founder”. It’s just a fancy way of saying “employee”. This is always been the case.
    - ldjkfkdsjnv 3y ago
      Never said it was, its a scam title. Only time it holds relevance is again if the founder already had a success. Then the chances of the equity being worth something are higher
    - ShamelessC 3y ago
      Seems sort of clearly misleading at any rate.

aussieguy1234 3y ago

"Everyone wants investment from venture capitalists". I have a bootstrapped side project, Tunnelmole, turning a small profit and growing at a slow and steady rate on its own. I'm the engineer so I only really pay hosting costs, which are covered by the revenue, although in the early days I had to cover this. While venture capital is an option, if it continues to grow, it's entirely possible the venture capitalists may not be needed.

djbusby 3y ago
The longer you go w/o raising money the better your position can be.
- ant6n 3y ago
  Unless you run out of cash
smurda 3y ago
I work at a VC firm. If the business can finance itself, you absolutely don’t need VC cash. Ultimately, that’s the goal - build a profitable business.
- aussieguy1234 3y ago
  The only reason I'd consider it, is to accelerate the current growth, beyond what I can drive myself. But it depends how my own efforts go, there's still a long way to go before my current methods become ineffective.
jakey_bakey 3y ago
I address this in the second sentence when I explain that this puts you in the same category as many famous grifters. The ending of the piece helps to confirm exactly what you said - really, you want to bootstrap unless you are going so gangbusters that a lack of quick cash is damaging your ability to grow.
striking 3y ago

Sytten 3y ago

"Everyone wants investment from venture capitalists." Am I the only one not living in this bubble. I cofounded a boostrap business. Having cash to hire and not have to work two jobs would sure be nice, but if I am raising it would not be to be on Forbes list, it would be to build an actual business. The vanity of those people sometimes.

jakey_bakey 3y ago
I really hope you read the second sentence and understood I was trying to be a little satirical here
- quickthrower2 3y ago
  I did, I enjoyed reading that, from ire to wry smile, in a sentence.
  - jakey_bakey 3y ago
    I'm very glad my structure worked as intended :) Can you f*cking believe that the publication on Medium I originally posted this to edited that sentence out!?
- tkgally 3y ago
  I enjoyed that sentence, too. It may be what led me to keep reading to the end of the piece.
kybernetikos 3y ago
I listened to an interview with Ivan Kuckir who created Photopea with an old laptop and a cheap webhost. It runs in the users browsers, so his costs are extremely low. The interviewer asked him about taking VC money, but he didn't seem keen. It's a runaway financial success as it is, and there isn't really anything that taking a bunch of money would allow him to do that he can't already do.

djbusby 3y ago

It's a good retrospective. It's clear the author learned, and improved. I didn't find anything new, it's got commentary on three common failure-to-raise modes. One thing I noticed about the tale was lots of focus on the product and MVP things. I think more efforts on Customer Development before MVP can provide a lot of traction signal to VC.

jakey_bakey 3y ago
Thank you for saying! Certianly the post is primarily aimed at wide-eyed first-time founders like I was to help temper some of the naïvete

CPLX 3y ago

I've never understood the cult around tech VCs, the ratio of self-regard to actual value delivered to the world (or even their own firms) has always seemed staggeringly out of scale with reality. And that's even true in a world that seems to have no shortage of unearned self-regard. I guess if you play the game you can get your hands on a lottery ticket with pretty good odds. But seriously fuck these people and their egos. I'm pretty sure if you build really solid tech or a growing company they'll come chase you, so I am really hard pressed to figure out why people should pay all that much attention to who they are and what they think at all.

jakey_bakey 3y ago
In terms of prestige finance, I suppose they probably deliver more value than private equity. In terms of everything else...
hgomersall 3y ago
VCs are just a different target market. Similarly, you can build a business with grant awarding bodies as your customers. The problem with both is that generally you have to pivot to selling to customers who actually want the product you've been pitching.

daft_pink 3y ago

Maybe it's my business major background and my skepticism of all these tech companies that have no reasonable business model to make $'s, but unless there is an obvious need for investment like buying a large amount of real estate or machinery, why would you need VC money to build an app after you've already spent several months doing it? It should run on it's own and not need investor money. You shouldn't be focused on getting VC's, you should focus on developing an app that actually turns a profit. It's not that difficult. Anyways, I found your story really interesting. Good story :)

jakey_bakey 3y ago
Appreciate it :) But yes, after learning a lot from my various startup scars, I don't believe I'll be seeking VC dollars for an app unless: - I am creaking under success with an impossible cloud bill - I am a late-onset cofounder of an already successful co that needs and app
deleted 3y ago
[deleted]
RobRivera 3y ago
> It's not that difficult. Who is going to tell him/her?
wavemode 3y ago
The goal of most Silicon Valley founders isn't profit, but growth. Quickly increase users, quickly increase revenue, quickly increase headcount. Quickly become a large company which can be sold for billions. Or, never reach sustainability and eventually go bankrupt - this outcome is actually still good for the founders since they probably walk away with millions in their pockets (from paying themselves seven-figure salaries).
- eastbound 3y ago
  It’s growth… until the “plateau” phase of the Schumpeter economic cycle (~60 years), where entrenched actors raise prices and customers lose choice.

caesil 3y ago

>“Talk to us again when you have traction.” >In our first-time founder naïveté, we took this to heart. Our startup lived or died on whether we had traction. Ummm... this seems pretty genuine, as opposed to a polite no? If you don't have something compelling to differentiate you from the cacophony of other founders who want preproduct dollars, then of course you need to demonstrate the viability of the product.

jakey_bakey 3y ago
Oh, it's absolutely genuine, but there is a contradiction in a VC (inherently risky endavour) requiring you to de-risk their risky investment If you already had traction, you wouldn't need to kiss the ring
- JumpCrisscross 3y ago
  > If you already had traction, you wouldn't need to kiss the ring They’re telling you you’re pitching at the wrong stage. Growth and early stage doesn’t invest before traction; that’s the purview of angels and possibly seed investors.
  - skrebbel 3y ago
    Nah, they're just politely saying no. Lots of (pre) seed investors, who supposedly actually really invest before tangible proof, don't actually do this. Their MO is to hope to talk to early stage founders who are doing amazing before said founder realize that they can raise at way better terms. It's the "win by doing lots of cold sales" model, but for VCs: if you talk to enough founders eventually a startup that does way too good for your seed/preseed ticket size will actually accept your terms and give you 25% of their company for next to nothing.

daniel-cussen 3y ago

[dead]

m3kw9 3y ago

When you say yes, they value their time/energy like money, it gets you to shut up so they can move on, and delay the explanation later on why they “reconsidered”, it’s passed to the assistant for the reply. Now when they don’t say yes/no abruptly and just asks more questions, they are interested and that’s a better gauge

logotype 3y ago

Oh, I’ve heard many No’s. So many No’s that I will never, ever try to work with VC’s ever again. Fuck them. There’s a very high probability that you won’t need them either. In my case, I just kept going. If you have a good product then you will succeed. With VCs or not!

jakey_bakey 3y ago
I kinda feel for the people who are desparate to be the big cheese rather than have their own thing that's sustainable
- Aeglaecia 3y ago
  wonder how they would feel squashing your business in the same industry
  - jakey_bakey 3y ago
    It's the only thing that makes them feel something

dhash 3y ago

This article is kinda silly, but very true. I have a LUT in my notes that is “VC says” “they actually mean”

ChuckMcM 3y ago

They miss my favorite: "Yes, we'll invest we just don't want to be 'lead'." That is code for: "You aren't going to find anyone who shares your idea of what your valuation should be so we are safe telling you we'll invest if you find a 'lead investor' because that person doesn't exist." It gets funny/twisted when you do find a lead and go back and now there is some other goal post that is keeping them out of "this round."

pnw 3y ago
Not necessarily. It could also be code for "We can't write a check big enough to lead your round". E.g. a seed fund who writes $1m checks isn't going to lead a $5m round. The VC would be putting themselves out of a job if they wrote a $5m check when they told their LPs their fund target was $1m checks.
- tptacek 3y ago
  "We're in if you find a lead" is kind of notoriously code for "no".
  - omeze 3y ago
    If its a fund that has led rounds before then yes, but if its a new fund or small fund then it might be part of the GPs proving they can get deal flow to their LPs before raising a larger fund
    - tptacek 3y ago
      I mean, maybe, but (a) I've been told many times that it's code, and it's like a running joke in the industry, and (b) if you have a lead, you're not worried about reading tea leaves anymore. Saying "we'll invest if you have a lead" is like saying "we'll invest if you put a successful round together". Who wouldn't? The point at which you have a lead for your round is often the point where you start turning them down.
      - 3y ago

vram22 3y ago

I wonder how many here got the second paragraph of the OP. Second sentence of second paragraph, actually.

mdekkers 3y ago
I hope nobody needed pointing out that it is (obvious) satire
- vram22 3y ago
  I didn't, at least. That's what I implied by my comment.

thwarted 3y ago

For our two-sided marketplace startup, this meant Android and iOS apps for customers, and another pair of apps for mechanics. 6 months later, we released our fully-fledged MVP to a deafening silence from customers, mechanics, and investors. It's probably really hard to get traction when it's not obvious who your customers are, and this description reveals that. Your customers are the entities that are paying you. Is this supposed to be an app for mechanics to find work? Is it supposed to be an app for people with car problems to find someone to fix it? Those looking to get their vehicle serviced aren't going to want to pay the finders feed on top of the cost charged by the mechanic, which means those people are not your customers. What are the cases where someone would pay for your app? Are mechanics having trouble finding work? Are the mechanics the customers of Fixr? Do people with car trouble have it often enough that they'd pay for such a service vs whatever else they'd do? "Talk to us again when you have traction" indeed. Or "Talk to us again when you know how to recognize traction."

fonix232 3y ago
Yeah, I was thinking the same. Fixr seemed like a solution looking for a problem, without having an even borderline clear idea on what it is supposed to be. No wonder it failed.
- marcus_holmes 3y ago
  I've seen hundreds of startups like this. Literally talking to someone last week who was developing an app but had no clear idea who their customer was or why they would buy it. There's so much survivor-biased bullshit in the industry, though. Founders who raised millions on an idea with no MVP, no customers, no traction. Everyone laps it up and repeats it on social media and then there's another 100 founders who are wasting their time and savings on ideas with no clue. The ecosystem soaks up their savings and spits them out disillusioned and drained of cash.
jakey_bakey 3y ago
100%. I was a little embarrassed to include it but the first-time-founders' naïvete was an important, and hopefully quite relatable to many people, part of the story

a1371 3y ago

I played the VC game. We were attending every opportunity to give 10% of our business for $200K. No one would bite. Gradually, it felt it was easier to land customers than VCs. Then there came a moment that I wish for every founder. Our revenues started not only paying the bills, but also fueling growth. It felt as if a veil was lifted from my eyes. Now, it feels like all those pitches were a waste of time.

featuregag 3y ago
And if you make your success public enough in the right circles? Those same VCs will be throwing their panties at you. It’s the game.
- blitzar 3y ago
  “I LOVE THIS FOUNDER" ... "I am a 10 out of 10"
  - throwaway2037 3y ago
    Hat tip for the SBF VC quote. If anyone else doesn't know these (now truly meme-worthy quotes), stick the quote in Google to see VCs gushing about SBF & FTX.
    - blitzar 3y ago
      Its even better that the quotes of VCs gushing about SBF & FTX is in a puff piece written by the VCs themselves about how special they were that they could identify the real thing.
mrangle 3y ago
Essentially, the market forced you onto the track that it wanted you to be in. Which, as you found out, is a good thing (and the only possibility). As the best time for VC investment is generally at the inflection point of the exponential growth curve. When revenue can't keep up with what it costs to supply the ever faster growing demand. Which, for many companies, will be shortly before an outright acquisition. And usuaully 5-10 years, minimum, after slow customer growth. Assuming a good business but not necessarily a unicorn in terms of market position. But at that point wily founders may instead look to keep their company and seek a loan.

xyst 3y ago

What you need to do is launder your “app/concept/vision” through “high profile individuals”. Ideally, get someone with a high level of influence to invest or just get them on your board. Having their name in the decks increases future investment by vulture capitalists by at least 420%. Once VCs see those names, their typical DD process goes out the window. All they see is the name and gamble millions/billions just because of this. Some notable examples of this are “theranos”, “ftx”, “frank”. Shit it even stretches back to the 1990s with infamous con artists like Jordan Belfort or Bernie Madoff. Remember those college frat bros that cheated off you? Those frat bros and sorority sisters are often connected to high wealth individuals. Higher chance of this at “Ivy League” universities. Remember. It’s not what you know. It’s WHO you know ;)

satvikpendem 3y ago

If you know marketing, you don't need VCs (unless you are in a capital-intensive business like rocket building). The problem is that most people who get funded are technical and do not know marketing and growing organically. However, there are lots of businesses that grow extremely well simply due to the cofounders having previous experience with marketing, often in a professional capacity. My go-to example is Lemlist (and their "Lempire" of related products). The founders built their own cold email agency, grew that to millions just through sheer labor, then built software to automate that process and now they're at a 200 million dollar valuation from more than 10 to 15 million dollars in annual recurring revenue. They have lots of marketing channels: organic SEO via content marketing, Facebook group with frequent events like interviews with other agency owners and salespeople, YouTube videos that are then recut and repurposed to TikTok/Instagram/Facebook videos, partnering with influencers, paid advertising, and of course, cold messaging other salespeople and agencies via LinkedIn and email. Most technical founders do not know or have the patience to do any of this. If they do, though, they could similarly grow to such an ARR in a few short years, as Lemlist started only in 2018. Similar examples include GoHighLevel and ClickFunnels which are almost at or over a 1 billion dollar valuation each, both bootstrapped. The ClickFunnels founder for example sold his software via live demos (both webinars and in person events) where you got X% off but only if you booked right at the end of the demo, which apparently drove quite a high percentage of their initial sales. I'd highly advise founders to start a marketing agency if only to understand marketing in a real capacity and how to deliver results to paying clients. I have done so via a cold email and paid ads agency for various niches before and I believe it's helped me immensely with future products. Best of all, you learn to be truly aligned with your customers and providing them direct value because they are paying you every month. If you make a mistake, you must fix it, you have no backup fund of venture capital previously raised in order to skate BY, especially now that ZIRP (zero-interest-rate phenomenon) is over.

jasmer 3y ago
[dead]
97-109-107 3y ago
I'm not dismissive of businesses like Lemlist, but would propose another angle. I find that businesses that are spin out from agency models are particular, inherit a strong characteristic and outlook similar to agencies. This is not a critique of their model per say, but an observation that leads me to be hesitant to take advice from agency-born models and apply to more typical product-focused B2B or B2C settings. This leads me also to note that that the nature of content exposes us to a lot of people who believe in posting content. I'm not against it, but would like to fight the common urge towards content as the best strategy to go to market. However, given that the medium is message, we don't hear from people who don't need to post to do business.

threeseed 3y ago

Have actually read a few founders now who had no connections and just treated VCs as sales targets: 3000+ investor cold emails, 100+ meetings, 3 term sheets, 1 deal. Reading this it makes me wonder if this isn't the best strategy.

pnw 3y ago
I know several successful founders who had to pitch over 100 firms on their financing round. I would say the usual number is probably 30 to 50, but 100 isn't out of the ordinary, especially if you are doing something unusual or new.
- mightytravels 3y ago
  I think people underestimate how hard it is to truly evaluate someone else’s business. Imagine you hear bullshit every day - you just can’t call people out on it. So in the end you go with something you can actually properly evaluate because of some inside you have as an investor. Of the this ends up being a theme.
davedx 3y ago
Sounds like a huge waste of time
- blitzar 3y ago
  Sounds like 6 months in a regular cubicle job.

Joel_Mckay 3y ago

"Everyone wants investment from venture capitalists" No they don't, why should anyone sane pay for working capital with equity. If all a VC brings to the table is cash, than they are functionally a bank loan with really terrible terms. One can tell a bad idea when you have to explain its value proposition to people, at that point it is a vanity project already non-viable. Rule #14: "Never outsource economic control structures, or one may end up indentured"

moralestapia 3y ago

>In all honesty, you don’t want to take external funding unless you have intensely strong user growth; and being unable to hire becomes your bottleneck. 100%

conartist6 3y ago

Your title is one of those things that reminds me why our industry is so short of women

jakey_bakey 3y ago
Wait, really? Please explain this Also, the actual title or the one HN moderated it to?
- conartist6 3y ago
  I understand it to be wordplay on "no means no", a well-known anti-rape slogan. In repurposing the lingo to be a statement about venture capitalism, there is a lack of respect for the need for such a slogan. I think men a tendency to trivialize that message because it scares us a bit. It's a message of rejection and shame so it's uncomfortable and we naturally to want to twist it around until it isn't threatening anymore.

pnw 3y ago

To be fair, none of those ideas seem like venture scale ideas to me. Maybe I'm missing something? If you are talking to just one investor, you are doing it wrong. It's a parallel process, not serial. Kissing a lot of frogs serially looking for Prince Charming will slowly kill your morale, waste your time and investors quickly learn that others have passed on your deal. Think of it more like drafting a football team. You want all the potential investors on the field at the same time. That's how deals close in weeks, not months. If your investment round is taking so many months, something is wrong. This is why YC and Techstars do a demo day. Parallel pitches to a large audience of investors is the technique to close a round quickly.

mightytravels 3y ago

Also watch Season 2 Episode 1 of "Silicon Valley" :) https://www.youtube.com/watch?v=857XqOoMm8c https://www.youtube.com/watch?v=857XqOoMm8c

quickthrower2 3y ago
Is that the brain rape one?

shermantanktop 3y ago

I’m not in this game, but it sounds like if there’s a condition, the answer is “no,” rather than great advice. All these anecdotes boil down to VCs saying “if (false),” where what drives the false proposition is your job to guess about and may be useless. And if that proposition were true, the startup might not need their money or contacts.

nextworddev 3y ago

What founders need to understand is that VCs are generally risk averse (which is surprising because they are supposed to be “venture”) and are momentum / fomo driven. Very few VCs think outside the box and can act independently (though they act like they can).

jedberg 3y ago

When I was raising funds, the thing that I hated to hear most was "We will give you $X as long as you find a lead" where $x was usually just less than 1/2 of what we were asking for. That was basically their way of saying "we don't believe in you but we don't want to miss out if someone else does". We didn't really want investors like that so we bootstrapped instead.

marcell 3y ago
You can collect these “soft commits” to make it easier to land a lead. You can tell the potential lead, “we have $X in soft commits, so if you become our lead, our company will have total $X + $Y funding.” It makes your pitch to the lead more compelling.
- jedberg 3y ago
  I know we could have, but we thought it would be dishonest of us to do so since we had no intention of taking the soft commits. They were always from investors that had nothing to offer and apparently no conviction in their belief either.
- tptacek 3y ago
  They'll ask who your "soft commits" are, and they'll read between the lines; if any of them are significant firms, it'll get read as "those firms refused to commit, there must be a reason". Michael Seibel had a video a long time ago from a YC VC class, and related his strategy to work around this, of setting a very short deadline --- like, do all the meetings inside of a week, and tell people "get your term sheets in by the weekend". The idea was: don't give investors an opportunity to stall, and, by stalling, send an adverse message to all the other investors. (I don't know if this works at all anymore, but it gives you an idea of what the issue is here.)
  - marcell 3y ago
    I heard the short deadline advice also, it’s nice idea but has flaws: - most VCs will have at least a few days delay on when they are willing to meet you - intros are required, and often intros come out of other VC meetings. This means you can’t shotgun everything - if a VC wants to meet after your “deadline”, will you actually say no? Who has more power? If you are a hot deal or Michael Seibel himself, the short deadline probably works. For mid level startups it’s not as easy.

hn_throwaway_99 3y ago

In fairness to the VCs, the 3 examples given in "The VC Codex" section seemed blatantly obvious to me. Here is the first one, for example: > When they say: “Talk to us again when you have traction.” > They really mean: “If you prove there is a market opportunity and that you can execute as a management team, then we might consider you. But because I don’t believe either of those things will happen, I will not be taking a risk on you”. I mean, the general tone of the article is "VCs speak an ambiguous language because they're doing a dance with founders." One hand, sure, of course, that happens in literally every sales negotiation. But "Talk to us again when you have traction" seems pretty clear that the VC doesn't believe in either your market thesis or team, and they're basically saying "prove us wrong". I just don't see any guile here.

jakey_bakey 3y ago
This is very true - the story also follows my maturing from extremely naïve to having my head screwed on a little better. To many people newly playing at startups, the traction comment is an invitation and not a rejection.

blindriver 3y ago

VCs are the biggest snakes in business. Until you actually see money in your bank account, consider every single thing they say as a no. No matter how much they kiss your ass, and no matter how much they throw term sheets at you, until you see money in the bank account, it’s a “no”. If they want to say yes, they will have the money in your bank account that day, but if you get any excuses, then it means they are stringing you along.

davecheney 3y ago

Two things: 1. Nobody is entitled to venture capitalist funding. It is not an oddly named and run social works program. 2. VC funding is not a home run. It is not free money. If the only way you can launch a tech business is venture funding with the hope of hitting it out of the park before the funds’ cliff, perhaps consider if the return justifies the effort.

jakey_bakey 3y ago
Hey, if the company's equity goes to zero then it was free money!

mrangle 3y ago

The show Silicon Valley well parodied this phenomenon. It implied that the evasive "no" is commonly because VCs don't want to be known for passing on an investment, outright, that then later takes off. Which would reflect negatively on their judgement, in more or less a worse manner than it would when risking money on something that fails. The implied choice then becomes to probably lose money but retain reputation, or to protect money at the possible cost of reputation. Funds can't invest in everything, even if passing on something borderline is a repuation risk. The "not a no but no" third option seeks to both retain reputation and protect money.

Galacta7 3y ago
> "The show Silicon Valley well parodied this phenomenon." Yup, often hilariously. Basically summarized in this scene (especially the very end of the clip): https://youtu.be/PdCoadVSfXg?si=VVwDsNw84WoZx8XD https://youtu.be/PdCoadVSfXg?si=VVwDsNw84WoZx8XD
- mrangle 3y ago
  Great scene. The theme is repeated both when Monica reveals her shameful secret of having passed on Slack, and when Erlich turns down the ferret / pig startup: "I'm not passing, exactly, I'm just not saying yes" (paraphrased).

kshahkshah 3y ago

I thought all this type of stuff was true until I did a proper raise. They will absolutely tell you no and give you reasons why. You should heavily discount the reasons

camel_gopher 3y ago

I think it was Paul Graham who gave a good indicator if the VC was saying yes. “Look down. Is there a term sheet in front of you?”

urbandw311er 3y ago
I like that, but from my experience I’d go as far as saying “is their money in your bank account?” Terms sheets are not legally binding. Money talks.

wg0 3y ago

Regardless of yes or no, VC money is ludicrously expensive. 125k is barely one year's salary and your 7% of ownership gone forever and that's the deal for almost all accelerators. On top of that - the connections, reach, prestige might be meaningless or irrelevant to your particular product and market.

vaxman 3y ago
I think you like it, like it, to be told, what to do, ain’t that true? https://youtu.be/XbLKWm12yx0 https://youtu.be/XbLKWm12yx0

simonebrunozzi 3y ago

I was in tech and gradually turned to VC, now I have my own VC firm based in Italy (I live in Venice, the original one, not the fake LA one), and we invest everywhere in Europe, and occasionally in the US. I was also a founder a few times. I hated VCs most of the time. Now I'm trying to be useful, and to not waste anyone's time. I try to say "no" very quickly, and try to be very transparent about my thinking process. Some founders really appreciate this. Some others don't. And that's fine. I want to be the VC that I would have wanted to meet when I was a founder, that's it.

jakey_bakey 3y ago
I appreciate that :)

anonzzzies 3y ago

> Everyone wants investment from venture capitalists. Everyone minus 1 at least anyway.

skrebbel 3y ago

I’ve fundraised in Europe, and as an HN-educated founder, I was surprised (and happy) to discover that pretty much every VC we talked to that didn’t want to move forward, told us so explicitly, reasonably quickly. And they were happy to explain why if we asked, which was instrumental for learning how differently than us they thought. People love to complain about the European VC landscape, and how little capital there is compared to the US and so on, and they’re not wrong, but this to me is a stand-out positive. We felt taken seriously by everybody, just about nobody wasted our time.

DoingIsLearning 3y ago

I feel like this a SV/California culture of 'conflict avoidance' and general pleasantry rather than something specific to VC culture. It just so happens that most big VC players are in California.

rambambram 3y ago

> "angel syndicates" I'm very sorry, but I just laugh my ass off because of all these kinds of words related to money and investors.

acjohnson55 3y ago

I think most founders (understandably) don't know how the capital marketplace works, and so they create these codebooks for translating the things VCs say into a mental framework that makes sense to them. I don't know what the answer is, other than simply building the right company at the right time. There are people who are very good at navigating the fundraising space, but that usually comes from having expertise and/or connections prior to founding a company. Once you are in the middle of trying to start a company, it's a little late. Your best bet is to find a way to demonstrate that you're on to something big, then find people who can see that she vouch for it.

nixpulvis 3y ago

Had to stop at "None were brave enough to rip off the poisoned shirt we had woven for ourselves", but that's a great line.

4star3star 3y ago

I think it would be important to record and review the exact language used. People have a tendency to speculate, project and misremember things. "Let us know when you have more traction," could easily (and wrongly) be translated to, "They said they want to work with us once we can prove growth," which is not the same statement. If you asked someone on a date, and they said, "Get back to me when your abs are showing," would you actually surmise that you were a good match and just needed to do more crunches?

taylodl 3y ago

No money means "no." Doesn't matter WTF they say.

lazyant 3y ago

> much like the Inuit people, who have many words for snow, this is a myth https://en.wikipedia.org/wiki/Eskimo_words_for_snow https://en.wikipedia.org/wiki/Eskimo_words_for_snow