9 ms·

VCs are liars. And so am I.

156 points by jbreinlinger 14y ago

bearritto 14y ago
Markets are not efficient which is another way of saying that information asymmetry exists.Successful financiers would prefer to keep it that way. What would be a rational reason for divulging why you turned down a potential opportunity? You can't really formulate one. Also, this doesn't have anything to do with VC's per se. It happens in Private Equity, Fixed Income, Credit, Public Equities ...
mindcrime 14y ago
Feh, just be honest with people. If they get defensive, they get defensive, so what? I'd love to hear you tell me "I just don't think you have what it takes," as that's just going to pour fuel on my fire and motivate me to work that much harder just to spite you. I love negative feedback like that... fuck all ya'll, because when I'm running a billion dollar company and rocking up to your shitty office in my Maserati to ask "how's it going?" I'll be laughing to myself at how pathetic and stupid you were to doubt me.
- kposehn 14y ago
  > rocking up to your office in my Maserati This only works if you're in a white MC Stradale with gunmetal wheels. ;)
- sgrove 14y ago
  And this is a perfect reason why it'll never happen. What does the other side gain from telling you the truth and burning bridges like this? Best to give a vague, non-committal reason so there's always a chance they can talk with you again in the future. Investors (to take one example) are fallible and scared. They're driven by fear, and by greed - fear that they might miss out on the next facebook (it'll go on their public record, usually, because of what you're proposing), and greed at the upsides are if they can get in before others on the next facebook. Notice I didn't say "before anyone else." That's best, but barring that, you want to be able to get in later because you have a good relationship with the founder. And touchy founders that would be vindictive about being rejected are tough to keep a good relationship with, and most entrepreneurs are emotionally heavily invested in their own startup so it's easy to be touchy and vindictive, so it's "best" as an investor to not upset anyone. "best" is in quotes because this is a trend that might slowly be changing, in large part because of the pressure from groups like YC.
  - mindcrime 14y ago
    Oh, no, no, no... at least in my case, I certainly didn't mean to imply that I'd take any bridges as having been burned. When I say "fuck ya'll" I mean that in the best possible way... I want to have that chip on my shoulder, I'd take it as them having done me a favor if somebody tells me that they think I can't hack it. I feed off that shit. Best to give a vague, non-committal reason so there's always a chance they can talk with you again in the future. I'd talk to the OP again, after I make it bigtime and roll up in the Maserati, with a 6' tall, red-headed supermodel with a Scottish accent on my arm... and I'd say "fuck you, dude" and then buy a round of beers and sit back and laugh about the whole thing. Of course, that's just me... :-)
    - heretohelp 14y ago
      You write and think like a cocky 13 year old.
      - joering2 14y ago
        But yet you couldn't even check basic facts like this guy has karma above 3,800 for over 4 years, +500 linkedin connections, tons of software engineering experience, and 19 job recommendations [1]. Sure; he writes and thinks like a kid. Let me ignore him! [1] http://phillip.onlinked.in/ http://phillip.onlinked.in/
        jbooth 14y ago
        Quote: " I'd talk to the OP again, after I make it bigtime and roll up in the Maserati, with a 6' tall, red-headed supermodel with a Scottish accent on my arm... and I'd say "fuck you, dude" and then buy a round of beers and sit back and laugh about the whole thing." He might be a professional success but based on this sample size, yeah, writes and thinks like a cocky 13yo until proven otherwise. No offense intended to anyone, of course. Maybe it was satire.
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- jbreinlinger 14y ago
  btw, I love being proven wrong as well. It gives me incredibly important data. I always reflect on past decisions, good and bad. It helps minimize the bad ones and maximize the good ones.
  - mindcrime 14y ago
    Heh... hopefully you got the spirit of my reply, unlike some people in this thread.
- carsongross 14y ago
  I agree with the honesty part, but if you are basing your self-worth on the ability to roll up on someone in a Maserati... I'm not much of a Rand guy, but I think Roark's response is the best: "But I don’t think of you."
  - mindcrime 14y ago
    I agree with the honesty part, but if you are basing your self-worth on the ability to roll up on someone in a Maserati... Of course I'm being partially facetious here. The point is to take negative feedback as a challenge and use it as motivation. I'm not much of a Rand guy, but I think Roark's response is the best: "But I don’t think of you." Yeah, ya know, I was just watching The Fountainhead again last week and that scene really jumped out at me. I do admire that outlook, but I also find value in choosing to use doubters doubts as motivation. I know it seems contradictory but it works for me.
- Jitle 14y ago
  This response perfectly demonstrates the need to lie as stated in the article. As an investor, you say "no" A LOT. I can't have the 99% of people I talk to walking away with an attitude. I received the introduction to one of our best investments from a CEO we said no to. Do you think that CEO would have made the introduction if I had told him he doesn't have what it takes to be a founder at a VC backed startup?
  - mindcrime 14y ago
    Do you think that CEO would have made the introduction if I had told him he doesn't have what it takes to be a founder at a VC backed startup? Maybe, who's to say?
  - rexreed 14y ago
    How many times a day do you think successful startup founders hear "no" and get on with it? How many times a day do you think successful startup founders say "no"? A lot. Learn to be successful. Say no and learn to accept no. It's surprising how dishonesty permeates the financial services industries (of which venture capital is one).
- tomjen3 14y ago
  That is properly why YCs rejection letter are so nice. Otherwise too many people would get that bit of extra fuck you moral boost (and as PG keeps pointing, start ups are run on morale).
- moron 14y ago
  Telling people like you your faults is like talking to a brick wall. Why bother? I don't blame them for lying.
kposehn 14y ago
Interesting. To the author: I'd definitely want the blunt, unvarnished and harsh truth. No joke! The only way to get better is to get the truthful opinion of people that matter.
- mdda 14y ago
  The problem with the standard "the truthful opinion of people that matter" is that if you don't like what you hear, you might just reclassify the speaker into the "people that don't matter" group. Even the statement of your enthusiasm for the unvarnished truth is a veiled threat... For this comment, all down-votes will be considered up-votes :-)
  - kposehn 14y ago
    > The problem with the standard "the truthful opinion of people that matter" is that if you don't like what you hear, you might just reclassify the speaker into the "people that don't matter" group. I've done that before - and it is one of the things I most regret. I ended a friendship because of that kind of mistake and swore to myself I'd never do that again. After all, if I do that I'm exactly the kind of person I despise. How can I seek to improve myself if I won't listen when I might get butt-hurt from the words I hear? > Even the statement of your enthusiasm for the unvarnished truth is a veiled threat... I'm not sure how you figure that. It is actual enthusiasm, don't confuse it.
Monotoko 14y ago
Yeah... honesty is certainly the best policy here. The people who don't have what it takes will either give up and go onto something else, or cause them to plug the leaks and turn the startup into a successful venture. It's win/win here for the founder I think...
pcrh 14y ago
This kind of behavior occurs in all walks of life, e.g. in dating. It just goes to show how much investment is based on vague impressions. For example, why shouldn't a founder get frustrated with fund-raising, or be desperate for funding, it's not a reflection on the business idea or feasibility.
nirvana 14y ago
Do angels require liquidation preferences and other arbitrary terms (like paying their lawyer fees) that VCs do? Do angels impose bad decisions? (I've seen more than one company lose %50 of its ultimate market value as a result of a VC imposing bad decisions on them.) Are angels more or less likely to follow the heard or be arbitrary? (EG: he's nervous while pitching us therefore, he must be hiding something) Since Angels these days have rather large amounts of funds, and the cost of running a company is much smaller -- I believe we'll be able to service up to 200 million customers for about $300/month operating costs excluding salaries which nobody is taking right now. Do we really even need to deal with VCs anymore? Why not take a series of Angel investments? Seems many companies could be done in three: $100k: Seed stage $100-$500k: Have product/market fit and getting traction. $500k-$2M: Profitable and want to spend heavily on marketing and growing the team. Seems like those rounds should be sufficient for a lot of companies, like say Instagram. And they're small enough to be handled by a syndicate of angels. And if the company is of the type that it then needs to raise $5M-$15M for further growth, at that stage you could probably get VCs in on much more reasonable terms.
- jandrewrogers 14y ago
  Many startups are not website hacked together over a few months, they require much more time and more capital. Even limiting it to the domain of software-based services, applications that are based on genuinely new software technology still require building an enormous amount of software infrastructure that cannot be slapped together with a clever bit of scripting. Most of the really interesting stuff requires capital because it requires a lot of very careful and very high-end code development. I would strongly recommend bootstrapping if possible but that is not feasible for many cases. Some people conflate the "<well-known startup> for <noun> website" startups with the actual technology startups. If your startup requires shipping a 100k lines of novel and bulletproof code, you are not going to be doing it for less than a couple million bucks. Software development of the purest kind is expensive but it also produces much of the interesting value.
jerhewet 14y ago
> And I see the flip side, people that are past the age of 50 [...] are not capable of creating compelling social products. This tells me everything I need to know about this ass monkey.
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- jcrites 14y ago
  What does it tell you? I am trying to understand what you mean. Do you believe every person the author met over the age of 50 is in fact capable of building compelling social products, and that the author has misjudged them?
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- cookiecaper 14y ago
  Your ellipses excludes some important context: >people that are past the age of 50 and are trying to start a mobile, local, social startup but really are not capable Not "all people past the age of 50 -are- incapable", just people who are so incapable they don't recognize the credibility they lack due to external influential but not necessarily exclusive factors like their age, background, and appearance. I think all of us could rattle off a list of 50+ year old "geezers" that could pull something like this off, but the reality is that many of them can barely use a cell phone. If your presentation doesn't include measures to address that assumed, pre-programmed credibility gap, which often means just talking about things in a way that demonstrates you know what you are talking about and actually can navigate around Android, then you likely don't (yet) have the realism or the drive necessary to make something go. The 50+ remark is just a way to say "This guy looks like he can barely use Outlook", or "This guy is out of touch". Perhaps not the most well-considered illustration, but I think we can get the OP's point without throwing a politically correct hissy-fit.
  - shard 14y ago
tlogan 14y ago
The reason why VCs will not tell "team is not strong" is because they can be wrong about the team (people can learn, be better, or they can be misjudged etc.) but that mistake might burn bridges. Only real friends will tell you "you suck": so step 1 - get some friends.
erikb 14y ago
Is the hint to Epimenides on purpose?
craigyk 14y ago
Why VCs judge people: 1. The team/people do matter 2. They aren't smart/knowledgeable* enough to truly evaluate the merits, weaknesses, etc. of a pitch, so they use people as a proxy. * smart/knowledgable are used here loosely to encompass the wide range of reasons why a VC might judge an idea poorly
nirvana 14y ago
Dear OP: You always say the team is important. I couldn't agree with you more. The Team is important not only in the startup, but also in the group of people that make up your investors. Thus, given that we've decided your team is not strong enough to be investors in our company we're going to pass. In the future, it might be wise to hire partners who are not biased based on age, or prone to making decisions based on irrational conjecture (such as a presenter in an important meeting being nervous.) Also, be aware that one of the signs that a VC firm is not going to be a reliable partner is a pattern of cargo-cult investing. Just because Instagram just got sold for $1B does not mean you should be investing in every social-mobile-location-picture sharing startup (not run by anyone over 50, of course!) The best opportunities, by definition, are the ones with a novel approach. Thank you for your time, and if you should have a major turnover in partners, feel free to contact us again in the future. Signed- Startup Founder
- TheSOB88 14y ago
  Right, because every startup is Worth It (TM l'Oreal). :P Of course, you're also right - I don't think this guy is a very effective VC at this point. Some of his points seemed completely disconnected. But a person hand-waving or getting nervous on an important topic is a great flag to look for, don't you think?
  - seigenblues 14y ago
    No, it isn't. I was writing a long post about how we think we're really good at detecting "important signals" like if someone's lying, but that we're actually terrible at it. But the new yorker article that was frontpaging yesterday should pretty much explain it, even though Jonah Lehrer is a bit smug for my tastes ;) TL;DR- the OP sounds like a very shallow-thinking VC who's blissfully unaware of his own biases. It might work out ok for him -- these biases usually work most of the time, and that's why we have them -- but it will probably fail in some very crucial instances where a more thorough, data-driven approach might have worked better. In fact, that may be precisely how the great VC's are differentiated from the merely ok, but that's a different story... (link: http://www.newyorker.com/online/blogs/frontal-cortex/2012/06/daniel-kahneman-bias-studies.html http://www.newyorker.com/online/blogs/frontal-cortex/2012/06...)
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cookiecaper 14y ago
Most people should not be told just to give up completely. I'm not sure why the OP wants to focus on "you just don't have what it takes to run a company" instead of "your presentation skills were lacking, rehearse more", or something like that. For many entrepreneurs, the offense is not in "x needs improvement", but "We believe you are too stupid to improve on x". Even if you believe that, why not just say "x needs improvement" and then wait to see if they really are too stupid to improve on x or not? Why does everything the VC thinks, including have to be shared? There is nothing productive about "you're incapable, just give up" or "you're incapable, go deal with someone who gives people less money first and see if that gives you some capability". These are all deflections of the real problem. Why not try "We were concerned that you appeared nervous when asked how your site would handle potential copyright issues" instead of "you just can't do it"?
- sopooneo 14y ago
  If you actually are capable, and someone says otherwise, you will ignore them.
- redthrowaway 14y ago
  >There is nothing productive about "you're incapable, just give up" I disagree. For some people, hard as it is to take, this is exactly the right advice. Some people simply aren't cut out for what they're trying to do, and changing tack sooner rather than later is the optimal course of action. Any advice which precipitates that decision is therefore good advice, no matter how hurtful it might be to receive.
  - cookiecaper 14y ago
    Some people may need to put in a lot of work at something to become competent, but I don't believe that wholesale just some people can never succeed at something as generic as entrepreneurship unless there is a physical or mental disability or some really exceptional background involved. Most normal people really can become successful entrepreneurs if they try hard enough. As the OP said, just saying, "You'll never make it, just give up" is very unlikely to yield positive results. So even if you think the founder really will never make it, why is that an important criticism to share? They may surprise you if you actually provide helpful criticism on action points where real progress can occur. "Stop being you" is, of course, not actionable.
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damoncali 14y ago
In order to believe that "we need to see more traction" is a lie, you have to believe that you are able to identify "good teams" with certainty. That is what ticks people off about VC's.
raffi 14y ago
shrug I used to be part of the "please give me permission to start a business by letting me into your seed program" crowd. My company made it to the final round for a program and the end feedback was they didn't think we could deliver on what we were building. At first, I took it as le insult. An insult against my mad pr0grammer skills. In hindsight, I look at it as: my technology may have been OK, but it wasn't astounding enough to qualify as a revolution in the area and lead a big stampede to my door. It was a harder problem area (NLP). Something simpler with the same amount of persistence and execution may have led to much greater results. In hindsight I appreciate the honesty. They saw it before I did. The challenge is, people aren't ready to hear certain things until they're ready to hear it.
- rexreed 14y ago
  So are you saying you would rather have not heard the honest, but negative feedback at all? It sounds like in hindsight you are grateful for the honesty. Would n-years of lying have helped you any more? Would you have the insight you have now if you were simply lied to and told "great team - show me more traction", when they really think "gosh, what a sucky team"?
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mikeleeorg 14y ago
While I totally understand the human nature behind it, I find it a shame that more investors don't offer personal criticism with their rejections. It's a great way for startup founders to grow their skills, at least when it comes to pitching to investors.
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deepakprakash 14y ago
Honest question: How does YC give feedback to companies that are rejected? Is it pretty much like the author described? Or do they take pains to be truthful? (given that PG is known to speak his mind)
bambax 14y ago
The discussion between VCs and entrepreneurs is difficult because it's handled by everyone concerned, directly. That's why we have lawyers; that's why artists have agents. People who don't care one way or the other and for whom nothing's ever personal. Entrepreneurs need professional pitchers -- agents who would be able to gather honest feedback and tell it like it is.
rwrwrw 14y ago
Sorry, what is a "VC"?
- rwallace 14y ago
  Venture capitalist.
daemon13 14y ago
I saw that some comments pick-up on VCs being adamant on founder's nervousness and such. Probably, OP should have mentioned different pointers, but still I think that such comments are missing an important point of this post by Josh - honest feedback almost never works. I have managed up to 30 people, [colleagues and HQ people not counting] - 95% of the time honest feedback does not work, mostly because of the: - ego, or - hidden agenda 5% it worked with people, with whom I had working relationships, based on mutual trust AND they were all GetDone high performing individuals. So what do you do when you know that honest feedback will not work? Are you going to hit a brick wall with your head? No... you come up with some nice words, etc. You can like such people, value them, but if you feel that they can not accept your honest feedback, you don't give it.

156 points by jbreinlinger 14y ago

Markets are not efficient which is another way of saying that information asymmetry exists.Successful financiers would prefer to keep it that way. What would be a rational reason for divulging why you turned down a potential opportunity? You can't really formulate one. Also, this doesn't have anything to do with VC's per se. It happens in Private Equity, Fixed Income, Credit, Public Equities ...

mindcrime 14y ago

Feh, just be honest with people. If they get defensive, they get defensive, so what? I'd love to hear you tell me "I just don't think you have what it takes," as that's just going to pour fuel on my fire and motivate me to work that much harder just to spite you. I love negative feedback like that... fuck all ya'll, because when I'm running a billion dollar company and rocking up to your shitty office in my Maserati to ask "how's it going?" I'll be laughing to myself at how pathetic and stupid you were to doubt me.

kposehn 14y ago
> rocking up to your office in my Maserati This only works if you're in a white MC Stradale with gunmetal wheels. ;)
sgrove 14y ago
And this is a perfect reason why it'll never happen. What does the other side gain from telling you the truth and burning bridges like this? Best to give a vague, non-committal reason so there's always a chance they can talk with you again in the future. Investors (to take one example) are fallible and scared. They're driven by fear, and by greed - fear that they might miss out on the next facebook (it'll go on their public record, usually, because of what you're proposing), and greed at the upsides are if they can get in before others on the next facebook. Notice I didn't say "before anyone else." That's best, but barring that, you want to be able to get in later because you have a good relationship with the founder. And touchy founders that would be vindictive about being rejected are tough to keep a good relationship with, and most entrepreneurs are emotionally heavily invested in their own startup so it's easy to be touchy and vindictive, so it's "best" as an investor to not upset anyone. "best" is in quotes because this is a trend that might slowly be changing, in large part because of the pressure from groups like YC.
- mindcrime 14y ago
  Oh, no, no, no... at least in my case, I certainly didn't mean to imply that I'd take any bridges as having been burned. When I say "fuck ya'll" I mean that in the best possible way... I want to have that chip on my shoulder, I'd take it as them having done me a favor if somebody tells me that they think I can't hack it. I feed off that shit. Best to give a vague, non-committal reason so there's always a chance they can talk with you again in the future. I'd talk to the OP again, after I make it bigtime and roll up in the Maserati, with a 6' tall, red-headed supermodel with a Scottish accent on my arm... and I'd say "fuck you, dude" and then buy a round of beers and sit back and laugh about the whole thing. Of course, that's just me... :-)
  - heretohelp 14y ago
    You write and think like a cocky 13 year old.
    - joering2 14y ago
      But yet you couldn't even check basic facts like this guy has karma above 3,800 for over 4 years, +500 linkedin connections, tons of software engineering experience, and 19 job recommendations [1]. Sure; he writes and thinks like a kid. Let me ignore him! [1] http://phillip.onlinked.in/ http://phillip.onlinked.in/
      - jbooth 14y ago
        Quote: " I'd talk to the OP again, after I make it bigtime and roll up in the Maserati, with a 6' tall, red-headed supermodel with a Scottish accent on my arm... and I'd say "fuck you, dude" and then buy a round of beers and sit back and laugh about the whole thing." He might be a professional success but based on this sample size, yeah, writes and thinks like a cocky 13yo until proven otherwise. No offense intended to anyone, of course. Maybe it was satire.
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jbreinlinger 14y ago
btw, I love being proven wrong as well. It gives me incredibly important data. I always reflect on past decisions, good and bad. It helps minimize the bad ones and maximize the good ones.
- mindcrime 14y ago
  Heh... hopefully you got the spirit of my reply, unlike some people in this thread.
carsongross 14y ago
I agree with the honesty part, but if you are basing your self-worth on the ability to roll up on someone in a Maserati... I'm not much of a Rand guy, but I think Roark's response is the best: "But I don’t think of you."
- mindcrime 14y ago
  I agree with the honesty part, but if you are basing your self-worth on the ability to roll up on someone in a Maserati... Of course I'm being partially facetious here. The point is to take negative feedback as a challenge and use it as motivation. I'm not much of a Rand guy, but I think Roark's response is the best: "But I don’t think of you." Yeah, ya know, I was just watching The Fountainhead again last week and that scene really jumped out at me. I do admire that outlook, but I also find value in choosing to use doubters doubts as motivation. I know it seems contradictory but it works for me.
Jitle 14y ago
This response perfectly demonstrates the need to lie as stated in the article. As an investor, you say "no" A LOT. I can't have the 99% of people I talk to walking away with an attitude. I received the introduction to one of our best investments from a CEO we said no to. Do you think that CEO would have made the introduction if I had told him he doesn't have what it takes to be a founder at a VC backed startup?
- mindcrime 14y ago
  Do you think that CEO would have made the introduction if I had told him he doesn't have what it takes to be a founder at a VC backed startup? Maybe, who's to say?
- rexreed 14y ago
  How many times a day do you think successful startup founders hear "no" and get on with it? How many times a day do you think successful startup founders say "no"? A lot. Learn to be successful. Say no and learn to accept no. It's surprising how dishonesty permeates the financial services industries (of which venture capital is one).
tomjen3 14y ago
That is properly why YCs rejection letter are so nice. Otherwise too many people would get that bit of extra fuck you moral boost (and as PG keeps pointing, start ups are run on morale).
moron 14y ago
Telling people like you your faults is like talking to a brick wall. Why bother? I don't blame them for lying.

kposehn 14y ago

Interesting. To the author: I'd definitely want the blunt, unvarnished and harsh truth. No joke! The only way to get better is to get the truthful opinion of people that matter.

mdda 14y ago
The problem with the standard "the truthful opinion of people that matter" is that if you don't like what you hear, you might just reclassify the speaker into the "people that don't matter" group. Even the statement of your enthusiasm for the unvarnished truth is a veiled threat... For this comment, all down-votes will be considered up-votes :-)
- kposehn 14y ago
  > The problem with the standard "the truthful opinion of people that matter" is that if you don't like what you hear, you might just reclassify the speaker into the "people that don't matter" group. I've done that before - and it is one of the things I most regret. I ended a friendship because of that kind of mistake and swore to myself I'd never do that again. After all, if I do that I'm exactly the kind of person I despise. How can I seek to improve myself if I won't listen when I might get butt-hurt from the words I hear? > Even the statement of your enthusiasm for the unvarnished truth is a veiled threat... I'm not sure how you figure that. It is actual enthusiasm, don't confuse it.

Monotoko 14y ago

Yeah... honesty is certainly the best policy here. The people who don't have what it takes will either give up and go onto something else, or cause them to plug the leaks and turn the startup into a successful venture. It's win/win here for the founder I think...

pcrh 14y ago

This kind of behavior occurs in all walks of life, e.g. in dating. It just goes to show how much investment is based on vague impressions. For example, why shouldn't a founder get frustrated with fund-raising, or be desperate for funding, it's not a reflection on the business idea or feasibility.

nirvana 14y ago

Do angels require liquidation preferences and other arbitrary terms (like paying their lawyer fees) that VCs do? Do angels impose bad decisions? (I've seen more than one company lose %50 of its ultimate market value as a result of a VC imposing bad decisions on them.) Are angels more or less likely to follow the heard or be arbitrary? (EG: he's nervous while pitching us therefore, he must be hiding something) Since Angels these days have rather large amounts of funds, and the cost of running a company is much smaller -- I believe we'll be able to service up to 200 million customers for about $300/month operating costs excluding salaries which nobody is taking right now. Do we really even need to deal with VCs anymore? Why not take a series of Angel investments? Seems many companies could be done in three: $100k: Seed stage $100-$500k: Have product/market fit and getting traction. $500k-$2M: Profitable and want to spend heavily on marketing and growing the team. Seems like those rounds should be sufficient for a lot of companies, like say Instagram. And they're small enough to be handled by a syndicate of angels. And if the company is of the type that it then needs to raise $5M-$15M for further growth, at that stage you could probably get VCs in on much more reasonable terms.

jandrewrogers 14y ago
Many startups are not website hacked together over a few months, they require much more time and more capital. Even limiting it to the domain of software-based services, applications that are based on genuinely new software technology still require building an enormous amount of software infrastructure that cannot be slapped together with a clever bit of scripting. Most of the really interesting stuff requires capital because it requires a lot of very careful and very high-end code development. I would strongly recommend bootstrapping if possible but that is not feasible for many cases. Some people conflate the "<well-known startup> for <noun> website" startups with the actual technology startups. If your startup requires shipping a 100k lines of novel and bulletproof code, you are not going to be doing it for less than a couple million bucks. Software development of the purest kind is expensive but it also produces much of the interesting value.

jerhewet 14y ago

> And I see the flip side, people that are past the age of 50 [...] are not capable of creating compelling social products. This tells me everything I need to know about this ass monkey.

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jcrites 14y ago
What does it tell you? I am trying to understand what you mean. Do you believe every person the author met over the age of 50 is in fact capable of building compelling social products, and that the author has misjudged them?
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cookiecaper 14y ago
Your ellipses excludes some important context: >people that are past the age of 50 and are trying to start a mobile, local, social startup but really are not capable Not "all people past the age of 50 -are- incapable", just people who are so incapable they don't recognize the credibility they lack due to external influential but not necessarily exclusive factors like their age, background, and appearance. I think all of us could rattle off a list of 50+ year old "geezers" that could pull something like this off, but the reality is that many of them can barely use a cell phone. If your presentation doesn't include measures to address that assumed, pre-programmed credibility gap, which often means just talking about things in a way that demonstrates you know what you are talking about and actually can navigate around Android, then you likely don't (yet) have the realism or the drive necessary to make something go. The 50+ remark is just a way to say "This guy looks like he can barely use Outlook", or "This guy is out of touch". Perhaps not the most well-considered illustration, but I think we can get the OP's point without throwing a politically correct hissy-fit.
- shard 14y ago

tlogan 14y ago

The reason why VCs will not tell "team is not strong" is because they can be wrong about the team (people can learn, be better, or they can be misjudged etc.) but that mistake might burn bridges. Only real friends will tell you "you suck": so step 1 - get some friends.

erikb 14y ago

Is the hint to Epimenides on purpose?

craigyk 14y ago

Why VCs judge people: 1. The team/people do matter 2. They aren't smart/knowledgeable* enough to truly evaluate the merits, weaknesses, etc. of a pitch, so they use people as a proxy. * smart/knowledgable are used here loosely to encompass the wide range of reasons why a VC might judge an idea poorly

nirvana 14y ago

Dear OP: You always say the team is important. I couldn't agree with you more. The Team is important not only in the startup, but also in the group of people that make up your investors. Thus, given that we've decided your team is not strong enough to be investors in our company we're going to pass. In the future, it might be wise to hire partners who are not biased based on age, or prone to making decisions based on irrational conjecture (such as a presenter in an important meeting being nervous.) Also, be aware that one of the signs that a VC firm is not going to be a reliable partner is a pattern of cargo-cult investing. Just because Instagram just got sold for $1B does not mean you should be investing in every social-mobile-location-picture sharing startup (not run by anyone over 50, of course!) The best opportunities, by definition, are the ones with a novel approach. Thank you for your time, and if you should have a major turnover in partners, feel free to contact us again in the future. Signed- Startup Founder

TheSOB88 14y ago
Right, because every startup is Worth It (TM l'Oreal). :P Of course, you're also right - I don't think this guy is a very effective VC at this point. Some of his points seemed completely disconnected. But a person hand-waving or getting nervous on an important topic is a great flag to look for, don't you think?
- seigenblues 14y ago
  No, it isn't. I was writing a long post about how we think we're really good at detecting "important signals" like if someone's lying, but that we're actually terrible at it. But the new yorker article that was frontpaging yesterday should pretty much explain it, even though Jonah Lehrer is a bit smug for my tastes ;) TL;DR- the OP sounds like a very shallow-thinking VC who's blissfully unaware of his own biases. It might work out ok for him -- these biases usually work most of the time, and that's why we have them -- but it will probably fail in some very crucial instances where a more thorough, data-driven approach might have worked better. In fact, that may be precisely how the great VC's are differentiated from the merely ok, but that's a different story... (link: http://www.newyorker.com/online/blogs/frontal-cortex/2012/06/daniel-kahneman-bias-studies.html http://www.newyorker.com/online/blogs/frontal-cortex/2012/06...)

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cookiecaper 14y ago

Most people should not be told just to give up completely. I'm not sure why the OP wants to focus on "you just don't have what it takes to run a company" instead of "your presentation skills were lacking, rehearse more", or something like that. For many entrepreneurs, the offense is not in "x needs improvement", but "We believe you are too stupid to improve on x". Even if you believe that, why not just say "x needs improvement" and then wait to see if they really are too stupid to improve on x or not? Why does everything the VC thinks, including have to be shared? There is nothing productive about "you're incapable, just give up" or "you're incapable, go deal with someone who gives people less money first and see if that gives you some capability". These are all deflections of the real problem. Why not try "We were concerned that you appeared nervous when asked how your site would handle potential copyright issues" instead of "you just can't do it"?

sopooneo 14y ago
If you actually are capable, and someone says otherwise, you will ignore them.
redthrowaway 14y ago
>There is nothing productive about "you're incapable, just give up" I disagree. For some people, hard as it is to take, this is exactly the right advice. Some people simply aren't cut out for what they're trying to do, and changing tack sooner rather than later is the optimal course of action. Any advice which precipitates that decision is therefore good advice, no matter how hurtful it might be to receive.
- cookiecaper 14y ago
  Some people may need to put in a lot of work at something to become competent, but I don't believe that wholesale just some people can never succeed at something as generic as entrepreneurship unless there is a physical or mental disability or some really exceptional background involved. Most normal people really can become successful entrepreneurs if they try hard enough. As the OP said, just saying, "You'll never make it, just give up" is very unlikely to yield positive results. So even if you think the founder really will never make it, why is that an important criticism to share? They may surprise you if you actually provide helpful criticism on action points where real progress can occur. "Stop being you" is, of course, not actionable.

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damoncali 14y ago

In order to believe that "we need to see more traction" is a lie, you have to believe that you are able to identify "good teams" with certainty. That is what ticks people off about VC's.

raffi 14y ago

shrug I used to be part of the "please give me permission to start a business by letting me into your seed program" crowd. My company made it to the final round for a program and the end feedback was they didn't think we could deliver on what we were building. At first, I took it as le insult. An insult against my mad pr0grammer skills. In hindsight, I look at it as: my technology may have been OK, but it wasn't astounding enough to qualify as a revolution in the area and lead a big stampede to my door. It was a harder problem area (NLP). Something simpler with the same amount of persistence and execution may have led to much greater results. In hindsight I appreciate the honesty. They saw it before I did. The challenge is, people aren't ready to hear certain things until they're ready to hear it.

rexreed 14y ago
So are you saying you would rather have not heard the honest, but negative feedback at all? It sounds like in hindsight you are grateful for the honesty. Would n-years of lying have helped you any more? Would you have the insight you have now if you were simply lied to and told "great team - show me more traction", when they really think "gosh, what a sucky team"?
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mikeleeorg 14y ago

While I totally understand the human nature behind it, I find it a shame that more investors don't offer personal criticism with their rejections. It's a great way for startup founders to grow their skills, at least when it comes to pitching to investors.

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deepakprakash 14y ago

Honest question: How does YC give feedback to companies that are rejected? Is it pretty much like the author described? Or do they take pains to be truthful? (given that PG is known to speak his mind)

bambax 14y ago

The discussion between VCs and entrepreneurs is difficult because it's handled by everyone concerned, directly. That's why we have lawyers; that's why artists have agents. People who don't care one way or the other and for whom nothing's ever personal. Entrepreneurs need professional pitchers -- agents who would be able to gather honest feedback and tell it like it is.

rwrwrw 14y ago

Sorry, what is a "VC"?

rwallace 14y ago
Venture capitalist.

daemon13 14y ago

I saw that some comments pick-up on VCs being adamant on founder's nervousness and such. Probably, OP should have mentioned different pointers, but still I think that such comments are missing an important point of this post by Josh - honest feedback almost never works. I have managed up to 30 people, [colleagues and HQ people not counting] - 95% of the time honest feedback does not work, mostly because of the: - ego, or - hidden agenda 5% it worked with people, with whom I had working relationships, based on mutual trust AND they were all GetDone high performing individuals. So what do you do when you know that honest feedback will not work? Are you going to hit a brick wall with your head? No... you come up with some nice words, etc. You can like such people, value them, but if you feel that they can not accept your honest feedback, you don't give it.