14 ms·

Investors don’t want to meet you. They wanted to be introduced to you

155 points by jaf12duke 13y ago

brosco45 13y ago
It's not what you know, but who you know.
- gms7777 13y ago
  Its not who you know, but who they know.
  - martywm 13y ago
    Its not who you know, but how they know you.
    - joshfraser 13y ago
      It's not what you know, but how you think
      - Snowda 13y ago
        It's not what you know, but how who you know, know, know how you think.
pg 13y ago
I'm impressed with Jason's posts. He seems to be methodically working through all the misconceptions of inexperienced founders. This is an important and subtle one. Investors assume that if they're hearing about you first from you, you can't be any good. If you were good, they'd already have heard about you, because you'd have found a way to get introduced to them by someone they trust. Even if investors didn't start out with this bias, they'd soon learn it from experience.
- pshin45 13y ago
  Also, what are your thoughts on the implications of this tendency of VCs as it pertains to teams outside the Bay Area or outside the US, who may have just as much talent and hustle but are forced to work that much harder and longer to get the same intros and connections (at the opportunity cost of spending more time on product & customers)? Is there a way to bridge that gap and make the process more equitable in different geographies and networks? EDIT: Removed the first part of my original two-part question because it was less relevant to the OP.
  - deleted 13y ago
    [deleted]
  - beat 13y ago
    I think that's a bigger problem for finding angels than finding VC. A little angel seed fund can give a startup enough traction to register with the VCs (and afford a trip or two to Silly Valley). But in Silly Valley itself, angels are easy to find and quick to commit. Those of us out in flyover country have to deal with no local angels at all, or tire-kicking committees that want traditional 50 page five year business plans and take six months to make up their minds. And I'm sure the situation is far worse in places like India.
- michaelochurch 13y ago
  Investors assume that if they're hearing about you first from you, you can't be any good. If you were good, they'd already have heard about you, because you'd have found a way to get introduced to them by someone they trust. So you're admitting that they're social-proof whores who refuse to think for themselves, even about the subject matter of their own jobs? VCs should be mortally humiliated by the fact that the game they're running is, after all is counted, a feudal reputation economy-- all flashes, no substance. Yet people are surprised that VC, as an asset class, has been a stinker for the past 13 years.
  - encoderer 13y ago
    Turns out most men are social proof whores. They are much more likely to date somebody who has been introduced to them by a friend they trust. Oh, and women too. C'mon. Weak argument here man. Newsflash: We trust the people that... we trust.
JoeAltmaier 13y ago
Argues its impossible to find the needle in the haystack, so VCs use other founders to sift the chaff. But a VC was quoted that they funded zero cold contacts. That doesn't sound like its hard; it sounds they're incapable of evaluating cold contacts at all. I'm guessing they use contacts for their expertise, because VCs lack any.
- cmdkeen 13y ago
  Why would they run the risk if they have enough warm leads from trusted contacts? The VC money to startup lead ratio is obviously one sided to present sufficient profit motive to invest in cold introductions. If the VC market becomes sufficiently in favour of warmly introduced startups that there is profit motivation in investing in those startups that cannot garner warm introductions then someone will do it. But they will be assuming much greater risk.
  - JoeAltmaier 13y ago
    The ecosystem changes: sometimes leads are scarce; sometimes plentiful. That can't explain never, ever investing in cold contacts. Risk can be mitigated by doing some diligence. It sounds to me like the only diligence VCs do (are capable of?) is "what does some other smart guy think?" I'm not trying to paint VCs as incapable, but this story makes it so likely. Zero cold contacts invested in? Zero ability to evaluate leads on their own? That's pretty damning.
    - 001sky 13y ago
      Warm intros have a built in safety net, too. In a downside, the credibility of the referrer helps to blunt the damage to the VC's reputation. Also, the potential upside from other deals coming through that system, which is lost or diminished by non-investment, offsets the immediate loss. These are some important political dynamics. So, as a result...its not just the "information" efficiency that is at play.
    - derefr 13y ago
      You're missing a third category here. "Cold contact" implies that the startup contacts them. I imagine the really-smart VCs are going out, doing research/watching the market, and cold-contacting the startups, with nobody having reached out to them first.
tsumnia 13y ago
As someone on the East Coast, I feel this is the main reason everyone wants to immediately leave our town to go to the West. We have plenty of VC's around our area, but the network hasn't been built so only the very high up know anyone.
- deleted 13y ago
  [deleted]
soneca 13y ago
So is it the same meritocracy(1) of being accepted on a top university? (1) http://www.justiceharvard.org/2011/02/episode-08/ http://www.justiceharvard.org/2011/02/episode-08/
- jamesaguilar 13y ago
  Possibly so. People have limited time to process evidence to come to a decision. So they seek out the types of evidence that provide stronger signals. That may cause some false negatives, but since you know it now, that's pretty much your problem. No one owes you an investment in your startup. (I think this is far less of a problem than access to education, as someone in the position of founding a startup is already on a very high tier of agency and privilege compared to the vast swath of society. Also, you're "born with" connections to startup founders at a far lower rate than you are born with connections to universities, in general.) Great link, though, thanks!
  - deleted 13y ago
    [deleted]
lquist 13y ago
another top tier VC once told me that out of the thousands of business pitches he receives in his office every year, his firm has never funded one that came in completely cold. Referring to Chris Sacca (http://lowercasecapital.com/prospecting/ http://lowercasecapital.com/prospecting/) perhaps?
- dm8 13y ago
  Majority of VCs/investors (particularly in the bay area) don't give significant importance to cold approach. Lot of savvy founders are aware of this.
lquist 13y ago
If you’re working in any startup hub, you almost certainly have friends that are working on their own startups. Ask them to help you. The first question should be, “Am I ready to fundraise?” I would actually phrase this another way, "Be honest with me: If I asked you to refer me to one of your investors, would you recommend me to him/her or is my startup not there yet?"
- ericabiz 13y ago
  As someone who, like the OP, is often on the other side of that conversation (I've helped startups raise seed funding and get into accelerators), here are a couple tips: 1) Be specific. Which investor do you want an intro to, and why? I know my investors well. Some of them love meeting early-stage startups. With others, you are wasting your time unless you've already raised significant capital. Other times I can't help at all (recently got asked for an intro by a B2C company--I know my investors from a B2B perspective since that's where my company is, and I'm not sure who would be a best fit for a B2C company.) 2) Be real. If you don't have any customers/pipeline, traction, or even a working demo, you're not ready for investment. For some reason there tends to be a pervasive belief that a "napkin idea" can get funded. Maybe 1% of the time, that's true. But even with a previous exit under my belt, I still had to have some form of traction before I got investors onboard. If you have nothing except an idea, please feel free to ask for advice, but don't ask for advice on looking for investors, because I'm going to tell you to focus on traction first.
  - DenisM 13y ago
    As it was explained to me, amount of prep work you must do varies by your credibility: - First-time founder has to show traction. - With a handful of successful startups under the belt, one can make do with a good powerpoint, a prototype and some customer interviews. - With a long streak of victories, a napkin is just fine. Ergo if you're not Steve Jobs, you can't get away with a napkin.
AndrewKemendo 13y ago
Ooh, this one is really good. Also heartbreaking as someone who invested a TON of time into making personal investment calls. I definitely learned this one the hard way. One thing that I would add also is that investors don't seem to want to be introduced to you by their non-investor/non-business contacts, so their friends and acquaintances. I learned this one also because I figured that would be a good approach. What seems to happen in this case is the "stink" on you gets transferred to the intermediary and the investor picks up on it.
speeder 13y ago
This leads me to the question: How you get networked with people that know investors, when your startup is in a non-hub place? (like, not in United States or Europe)
jb007 13y ago
Forget about investors. Bootstrap your Company. When you are successful, don't mind them. They like to reap where they have not sown.
michaelochurch 13y ago
Not to kill the messenger-- OP is right-- but that "only our kind, dear" stance is an arrogant attitude for people who are spending other people's fucking money. Fuck all of those emasculated half-men who can't bite down on a decision themselves, but must slurp down the pre-chewed, half-digested chyme of social proof. I could say a lot more but it's already obvious where the good people stand.
ig1 13y ago
I think Jason is overly focusing on one side of the relationship (i.e between the startup and the introducer) when I'd argue in actuality a lot of the value of the introduction depends on how well placed the introducer is to evaluate you. For example I would rank introducers as: 1) People who are superstars in your field (i.e Peter Thiel if you're a payments startup) or have great track-records in backing super-star companies across fields. 2) People who are experts in their field and the VC trusts. For example if you're in an adjacent space to a current portfolio company, getting an introduction from that portco (or even a reputable non-portco) carries a lot of weight. Or investors who have a track record in your field. 3) People who are customers of your product and the VC trusts. If your customers are gushing about you that makes for a great intro, if a portco emails their VC saying "there's this product that we use and love and the company is raising money" that'll get attention. 4) People who are well placed to evaluate your product/startup and have some relationship with the VC. Similar to (2)/(3) but they don't have to have a strong relationship with the VC. The VC trusts them because of their expertise not because of their relationship. 5) People who are well positioned to evaluate you and your team personally and the VC trusts. So for example people you've worked with in the past who will personally vouch for you. Below that you basically have introductions from people who (a) Aren't in a position to evaluate your business and (b) Aren't in a position to evaluate your team. So it's basically a case of "we met these guys the other day and they seemed smart and had a nice demo" - i.e. the VC might spend a bit of extra time looking at it as a favour to the introducer but it's unlikely to be significantly better than meeting at an event, etc. At that level a bunch of other factors come into play. If an investor is super-into your space or if you've got a strong resume/team they'll likely look at you regardless of how you came to their attention.
avifreedman 13y ago
Another thing you can do if you are are a practitioner in a particular domain is to let your vendors and partners know that you're open to doing due diligence calls on their behalf. Then if you do take a call, be circumspect but honest in your advice/feedback. That can be great for building your network for the day when you might want funding, advice, or 3rd party intros.
littlecritter 13y ago
I was at an event with VC Peter Thiel (founders fund) over the weekend. Someone asked him to contribute to a charitable event during the Q&A. He made the point clear: If you want me to do something for you, come through a trusted friend. I only invest personally if you've been recommended by a trusted friend.
graycat 13y ago
Investors can want whatever the heck they want, but wanting is not getting. I know plenty of people high up in US business and academic research, but those people and the VCs don't know each other. VCs and I don't know the same people. Bluntly, the VCs are a bit below my 'circle' of business acquaintances. In particular, the fraction of VCs I would hire into my company is tiny, so small to be nearly invisible. Why? Because their technical qualifications in information technology, etc. in a word suck. I mean, would you hire a VC? For what, BizDev? What if a VC gave you advice on how to invest your IRA? How many VCs can code, productively with today's technology? How about be a system administrator for a high end server farm or network? "The single most important decision you will ever make is with whom to do business." Extra credit for the source.
graycat 13y ago
> This is an important and subtle one. Investors assume that if they're hearing about you first from you, you can't be any good. If you were good, they'd already have heard about you, because you'd have found a way to get introduced to them by someone they trust. Yes, the investors do "assume", but, for information technology investing, their ROI for the past 10 years sucks (details in a Fred Wilson blog). VCs don't know the right people to know a significant fraction of people who are really "good". A really "good" startup entrepreneur likely won't know anyone a VC will "trust". If a VC can't evaluate my work from what I write, then they won't be able to be effective on my Board; I won't be able to hope to be successful with them on my Board; and I won't be able to have them on my Board or have them invest. I want to be successful in business, but on average VCs are not very successful. Khosla had some recent, sharp remarks on VCs.
graycat 13y ago
The actual sense of the title of this thread is just not true. My experience is that plenty of information technology (IT) VCs are plenty eager to talk seriously without any introduction except an e-mail from a startup founder. What I learned, to my great surprise, is that apparently the VCs are under some quite severe constraints. So, they are forced, from whatever, to ignore essentially everything about a project I learned doing projects in business, academic research, and for the US DoD. Instead, for an IT project they want to see, as about the second thing, some running software. That there might be a lot of crucial work before such software, work that makes the software itself trivial, just is not in their experience and is nearly always way beyond their nearly always rather meager technical backgrounds. So, for the running software, they want to "play with it", likely essentially to look at the user interface (UI) and estimate how well many users will like it. For more, they want to see some forms of 'traction' which apparently they use as a surrogate for accounting data traditional in commercial bank lending or private equity investing. For a deeper look, they like simplistic 'patterns' based on past history of IT VC taken fairly narrowly. So, they have a fundamental problem seeing or evaluating something that is really new, even if, say, the US DoD problem sponsors could see the power and value. So, I have a list of 40+ VCs eager to "play with" my software when it goes live. I got an introduction to none of them and for each of them just sent e-mail. They responded with e-mail and at least one phone conversation. They are impressed enough with the 'market', the 'technology' to the (meager) extent they and value it, and the goals. Then they just want to see it working, hopefully also with 'traction'. How much? One VC firm said 100,000 unique users a month. With my site that might be $12,800 a month in revenue at which time, with my low 'burn rate' of a sole proprietor solo founder, I should be on a nice path of 'organic' growth and still 100% owner. Yes, my situation is not 'standard', but neither are successes in the VC business. The VCs need to learn how to look at and reliably evaluate work that is new, typically just on paper; US research academics and high end US DoD problem sponsors can; VCs cannot. So far maybe that lapse has not much hurt them. But, generally, gotta tell you, the VCs are way, way behind the leading edge of US science, technology, and entrepreneurship.
jseban 13y ago
So many hoops you have to jump through to "do a startup" (I want to differentiate between starting your own company). It's starting to look like less freedom and more BS compared to working for BigCo.
vinceguidry 13y ago
This is the sort of thing you need to be aware of, in all areas of life, if you want to be successful. People have filters, and you're fighting a stupid, uphill battle if you want to get through them. Spend that time going around them. It doesn't matter if you're looking for funding from that top firm, a date with that gorgeous woman, a job in that blue-chip, or a visa to visit a post-Soviet wonderland. Everything worth having comes from others, and a confrontational attitude is the worst one, if you're trying to get through filters, that's how they perceive you. If at any time it feels like you're beating your head against a wall, that's because you are. Take a step back and figure out what you're doing wrong.
phylosopher 13y ago
Thank you Jason. I direct a not-for-profit foreign government and private foundation incubator based in San Francisco. We just completed a one-month quasi-accelerator for companies that came to the US. None were ready for VC funding and we made this clear. Despite our best effort to get the entrepreneurs to focus on customer development, many spent their time on VCs and angel networks. They got meetings but not much else. We are going to make sure that all new companies participating in future accelerators read your post.

155 points by jaf12duke 13y ago

brosco45 13y ago

It's not what you know, but who you know.

gms7777 13y ago
Its not who you know, but who they know.
- martywm 13y ago
  Its not who you know, but how they know you.
  - joshfraser 13y ago
    It's not what you know, but how you think
    - Snowda 13y ago
      It's not what you know, but how who you know, know, know how you think.

pg 13y ago

I'm impressed with Jason's posts. He seems to be methodically working through all the misconceptions of inexperienced founders. This is an important and subtle one. Investors assume that if they're hearing about you first from you, you can't be any good. If you were good, they'd already have heard about you, because you'd have found a way to get introduced to them by someone they trust. Even if investors didn't start out with this bias, they'd soon learn it from experience.

pshin45 13y ago
Also, what are your thoughts on the implications of this tendency of VCs as it pertains to teams outside the Bay Area or outside the US, who may have just as much talent and hustle but are forced to work that much harder and longer to get the same intros and connections (at the opportunity cost of spending more time on product & customers)? Is there a way to bridge that gap and make the process more equitable in different geographies and networks? EDIT: Removed the first part of my original two-part question because it was less relevant to the OP.
- deleted 13y ago
  [deleted]
- beat 13y ago
  I think that's a bigger problem for finding angels than finding VC. A little angel seed fund can give a startup enough traction to register with the VCs (and afford a trip or two to Silly Valley). But in Silly Valley itself, angels are easy to find and quick to commit. Those of us out in flyover country have to deal with no local angels at all, or tire-kicking committees that want traditional 50 page five year business plans and take six months to make up their minds. And I'm sure the situation is far worse in places like India.
michaelochurch 13y ago
Investors assume that if they're hearing about you first from you, you can't be any good. If you were good, they'd already have heard about you, because you'd have found a way to get introduced to them by someone they trust. So you're admitting that they're social-proof whores who refuse to think for themselves, even about the subject matter of their own jobs? VCs should be mortally humiliated by the fact that the game they're running is, after all is counted, a feudal reputation economy-- all flashes, no substance. Yet people are surprised that VC, as an asset class, has been a stinker for the past 13 years.
- encoderer 13y ago
  Turns out most men are social proof whores. They are much more likely to date somebody who has been introduced to them by a friend they trust. Oh, and women too. C'mon. Weak argument here man. Newsflash: We trust the people that... we trust.

JoeAltmaier 13y ago

Argues its impossible to find the needle in the haystack, so VCs use other founders to sift the chaff. But a VC was quoted that they funded zero cold contacts. That doesn't sound like its hard; it sounds they're incapable of evaluating cold contacts at all. I'm guessing they use contacts for their expertise, because VCs lack any.

cmdkeen 13y ago
Why would they run the risk if they have enough warm leads from trusted contacts? The VC money to startup lead ratio is obviously one sided to present sufficient profit motive to invest in cold introductions. If the VC market becomes sufficiently in favour of warmly introduced startups that there is profit motivation in investing in those startups that cannot garner warm introductions then someone will do it. But they will be assuming much greater risk.
- JoeAltmaier 13y ago
  The ecosystem changes: sometimes leads are scarce; sometimes plentiful. That can't explain never, ever investing in cold contacts. Risk can be mitigated by doing some diligence. It sounds to me like the only diligence VCs do (are capable of?) is "what does some other smart guy think?" I'm not trying to paint VCs as incapable, but this story makes it so likely. Zero cold contacts invested in? Zero ability to evaluate leads on their own? That's pretty damning.
  - 001sky 13y ago
    Warm intros have a built in safety net, too. In a downside, the credibility of the referrer helps to blunt the damage to the VC's reputation. Also, the potential upside from other deals coming through that system, which is lost or diminished by non-investment, offsets the immediate loss. These are some important political dynamics. So, as a result...its not just the "information" efficiency that is at play.
  - derefr 13y ago
    You're missing a third category here. "Cold contact" implies that the startup contacts them. I imagine the really-smart VCs are going out, doing research/watching the market, and cold-contacting the startups, with nobody having reached out to them first.

tsumnia 13y ago

As someone on the East Coast, I feel this is the main reason everyone wants to immediately leave our town to go to the West. We have plenty of VC's around our area, but the network hasn't been built so only the very high up know anyone.

deleted 13y ago
[deleted]

soneca 13y ago

So is it the same meritocracy(1) of being accepted on a top university? (1) http://www.justiceharvard.org/2011/02/episode-08/ http://www.justiceharvard.org/2011/02/episode-08/

jamesaguilar 13y ago
Possibly so. People have limited time to process evidence to come to a decision. So they seek out the types of evidence that provide stronger signals. That may cause some false negatives, but since you know it now, that's pretty much your problem. No one owes you an investment in your startup. (I think this is far less of a problem than access to education, as someone in the position of founding a startup is already on a very high tier of agency and privilege compared to the vast swath of society. Also, you're "born with" connections to startup founders at a far lower rate than you are born with connections to universities, in general.) Great link, though, thanks!
- deleted 13y ago
  [deleted]

lquist 13y ago

another top tier VC once told me that out of the thousands of business pitches he receives in his office every year, his firm has never funded one that came in completely cold. Referring to Chris Sacca (http://lowercasecapital.com/prospecting/ http://lowercasecapital.com/prospecting/) perhaps?

dm8 13y ago
Majority of VCs/investors (particularly in the bay area) don't give significant importance to cold approach. Lot of savvy founders are aware of this.

lquist 13y ago

If you’re working in any startup hub, you almost certainly have friends that are working on their own startups. Ask them to help you. The first question should be, “Am I ready to fundraise?” I would actually phrase this another way, "Be honest with me: If I asked you to refer me to one of your investors, would you recommend me to him/her or is my startup not there yet?"

ericabiz 13y ago
As someone who, like the OP, is often on the other side of that conversation (I've helped startups raise seed funding and get into accelerators), here are a couple tips: 1) Be specific. Which investor do you want an intro to, and why? I know my investors well. Some of them love meeting early-stage startups. With others, you are wasting your time unless you've already raised significant capital. Other times I can't help at all (recently got asked for an intro by a B2C company--I know my investors from a B2B perspective since that's where my company is, and I'm not sure who would be a best fit for a B2C company.) 2) Be real. If you don't have any customers/pipeline, traction, or even a working demo, you're not ready for investment. For some reason there tends to be a pervasive belief that a "napkin idea" can get funded. Maybe 1% of the time, that's true. But even with a previous exit under my belt, I still had to have some form of traction before I got investors onboard. If you have nothing except an idea, please feel free to ask for advice, but don't ask for advice on looking for investors, because I'm going to tell you to focus on traction first.
- DenisM 13y ago
  As it was explained to me, amount of prep work you must do varies by your credibility: - First-time founder has to show traction. - With a handful of successful startups under the belt, one can make do with a good powerpoint, a prototype and some customer interviews. - With a long streak of victories, a napkin is just fine. Ergo if you're not Steve Jobs, you can't get away with a napkin.

AndrewKemendo 13y ago

Ooh, this one is really good. Also heartbreaking as someone who invested a TON of time into making personal investment calls. I definitely learned this one the hard way. One thing that I would add also is that investors don't seem to want to be introduced to you by their non-investor/non-business contacts, so their friends and acquaintances. I learned this one also because I figured that would be a good approach. What seems to happen in this case is the "stink" on you gets transferred to the intermediary and the investor picks up on it.

speeder 13y ago

This leads me to the question: How you get networked with people that know investors, when your startup is in a non-hub place? (like, not in United States or Europe)

jb007 13y ago

Forget about investors. Bootstrap your Company. When you are successful, don't mind them. They like to reap where they have not sown.

michaelochurch 13y ago

Not to kill the messenger-- OP is right-- but that "only our kind, dear" stance is an arrogant attitude for people who are spending other people's fucking money. Fuck all of those emasculated half-men who can't bite down on a decision themselves, but must slurp down the pre-chewed, half-digested chyme of social proof. I could say a lot more but it's already obvious where the good people stand.

ig1 13y ago

I think Jason is overly focusing on one side of the relationship (i.e between the startup and the introducer) when I'd argue in actuality a lot of the value of the introduction depends on how well placed the introducer is to evaluate you. For example I would rank introducers as: 1) People who are superstars in your field (i.e Peter Thiel if you're a payments startup) or have great track-records in backing super-star companies across fields. 2) People who are experts in their field and the VC trusts. For example if you're in an adjacent space to a current portfolio company, getting an introduction from that portco (or even a reputable non-portco) carries a lot of weight. Or investors who have a track record in your field. 3) People who are customers of your product and the VC trusts. If your customers are gushing about you that makes for a great intro, if a portco emails their VC saying "there's this product that we use and love and the company is raising money" that'll get attention. 4) People who are well placed to evaluate your product/startup and have some relationship with the VC. Similar to (2)/(3) but they don't have to have a strong relationship with the VC. The VC trusts them because of their expertise not because of their relationship. 5) People who are well positioned to evaluate you and your team personally and the VC trusts. So for example people you've worked with in the past who will personally vouch for you. Below that you basically have introductions from people who (a) Aren't in a position to evaluate your business and (b) Aren't in a position to evaluate your team. So it's basically a case of "we met these guys the other day and they seemed smart and had a nice demo" - i.e. the VC might spend a bit of extra time looking at it as a favour to the introducer but it's unlikely to be significantly better than meeting at an event, etc. At that level a bunch of other factors come into play. If an investor is super-into your space or if you've got a strong resume/team they'll likely look at you regardless of how you came to their attention.

avifreedman 13y ago

Another thing you can do if you are are a practitioner in a particular domain is to let your vendors and partners know that you're open to doing due diligence calls on their behalf. Then if you do take a call, be circumspect but honest in your advice/feedback. That can be great for building your network for the day when you might want funding, advice, or 3rd party intros.

littlecritter 13y ago

I was at an event with VC Peter Thiel (founders fund) over the weekend. Someone asked him to contribute to a charitable event during the Q&A. He made the point clear: If you want me to do something for you, come through a trusted friend. I only invest personally if you've been recommended by a trusted friend.

graycat 13y ago

Investors can want whatever the heck they want, but wanting is not getting. I know plenty of people high up in US business and academic research, but those people and the VCs don't know each other. VCs and I don't know the same people. Bluntly, the VCs are a bit below my 'circle' of business acquaintances. In particular, the fraction of VCs I would hire into my company is tiny, so small to be nearly invisible. Why? Because their technical qualifications in information technology, etc. in a word suck. I mean, would you hire a VC? For what, BizDev? What if a VC gave you advice on how to invest your IRA? How many VCs can code, productively with today's technology? How about be a system administrator for a high end server farm or network? "The single most important decision you will ever make is with whom to do business." Extra credit for the source.

graycat 13y ago

> This is an important and subtle one. Investors assume that if they're hearing about you first from you, you can't be any good. If you were good, they'd already have heard about you, because you'd have found a way to get introduced to them by someone they trust. Yes, the investors do "assume", but, for information technology investing, their ROI for the past 10 years sucks (details in a Fred Wilson blog). VCs don't know the right people to know a significant fraction of people who are really "good". A really "good" startup entrepreneur likely won't know anyone a VC will "trust". If a VC can't evaluate my work from what I write, then they won't be able to be effective on my Board; I won't be able to hope to be successful with them on my Board; and I won't be able to have them on my Board or have them invest. I want to be successful in business, but on average VCs are not very successful. Khosla had some recent, sharp remarks on VCs.

graycat 13y ago

The actual sense of the title of this thread is just not true. My experience is that plenty of information technology (IT) VCs are plenty eager to talk seriously without any introduction except an e-mail from a startup founder. What I learned, to my great surprise, is that apparently the VCs are under some quite severe constraints. So, they are forced, from whatever, to ignore essentially everything about a project I learned doing projects in business, academic research, and for the US DoD. Instead, for an IT project they want to see, as about the second thing, some running software. That there might be a lot of crucial work before such software, work that makes the software itself trivial, just is not in their experience and is nearly always way beyond their nearly always rather meager technical backgrounds. So, for the running software, they want to "play with it", likely essentially to look at the user interface (UI) and estimate how well many users will like it. For more, they want to see some forms of 'traction' which apparently they use as a surrogate for accounting data traditional in commercial bank lending or private equity investing. For a deeper look, they like simplistic 'patterns' based on past history of IT VC taken fairly narrowly. So, they have a fundamental problem seeing or evaluating something that is really new, even if, say, the US DoD problem sponsors could see the power and value. So, I have a list of 40+ VCs eager to "play with" my software when it goes live. I got an introduction to none of them and for each of them just sent e-mail. They responded with e-mail and at least one phone conversation. They are impressed enough with the 'market', the 'technology' to the (meager) extent they and value it, and the goals. Then they just want to see it working, hopefully also with 'traction'. How much? One VC firm said 100,000 unique users a month. With my site that might be $12,800 a month in revenue at which time, with my low 'burn rate' of a sole proprietor solo founder, I should be on a nice path of 'organic' growth and still 100% owner. Yes, my situation is not 'standard', but neither are successes in the VC business. The VCs need to learn how to look at and reliably evaluate work that is new, typically just on paper; US research academics and high end US DoD problem sponsors can; VCs cannot. So far maybe that lapse has not much hurt them. But, generally, gotta tell you, the VCs are way, way behind the leading edge of US science, technology, and entrepreneurship.

jseban 13y ago

So many hoops you have to jump through to "do a startup" (I want to differentiate between starting your own company). It's starting to look like less freedom and more BS compared to working for BigCo.

vinceguidry 13y ago

This is the sort of thing you need to be aware of, in all areas of life, if you want to be successful. People have filters, and you're fighting a stupid, uphill battle if you want to get through them. Spend that time going around them. It doesn't matter if you're looking for funding from that top firm, a date with that gorgeous woman, a job in that blue-chip, or a visa to visit a post-Soviet wonderland. Everything worth having comes from others, and a confrontational attitude is the worst one, if you're trying to get through filters, that's how they perceive you. If at any time it feels like you're beating your head against a wall, that's because you are. Take a step back and figure out what you're doing wrong.

phylosopher 13y ago

Thank you Jason. I direct a not-for-profit foreign government and private foundation incubator based in San Francisco. We just completed a one-month quasi-accelerator for companies that came to the US. None were ready for VC funding and we made this clear. Despite our best effort to get the entrepreneurs to focus on customer development, many spent their time on VCs and angel networks. They got meetings but not much else. We are going to make sure that all new companies participating in future accelerators read your post.