4 ms·

Bad Advice

45 points by diego 13y ago

7Figures2Commas 13y ago
> Ultimately you asked these people to invest because you thought they could help you. I know this is accepted as Silicon Valley gospel, but it's worth rethinking the notion of investor-as-advisor. I won't say that investors are incapable of providing worthwhile advice, but money is money and when raising it, you should be asking "Who is going to give me the most money on the best terms?" not "Who can give me advice?" Most of the time, the best advice will come from your customers, professional colleagues/peers and employees. Much of the time, that advice will be provided free of conflict at no cost.
- lsc 13y ago
  Huh. So I have zero experience with "real investors" - but... my understanding, and my experience at the small scale where I have worked is that people who have ownership in your company have influence over your company. Having someone who has a conflicting vision have ownership can be difficult, sure, but I can deal with people that I respect disagreeing with me. On the other hand, I can only imagine the hell that having a co-owner who is stupid must be.
- pbreit 13y ago
  Seems like bad advice considering how freely the money is flowing right now and how valuable a good investor could be.
  - 7Figures2Commas 13y ago
    Your logic is flawed. If money is cheap and freely flowing, which it is, why would an entrepreneur pay a premium to an investor in the form of more equity for less cash, board seats, more restrictive founder vesting and/or significant liquidation preferences in exchange for supposed "value adds" like advice? Entrepreneurs raising capital should take advantage of the extraordinary environment we are in to raise as much money as is practical on the most favorable terms possible. Period.
    - gojomo 13y ago
      ...and then earn/buy the advice elsewhere. See also Naval Ravikant's view of the once-upon-a-time VC-package of "advice, control, and money" becoming progressively unbundled... http://startupboy.com/2010/12/01/the-unbundling-of-the-venture-capital-industry/ http://startupboy.com/2010/12/01/the-unbundling-of-the-ventu... ...which has only accelerated (including by Naval's own initiatives) in the 3 years since that post.
pmikesell 13y ago
"1. Offers to make partnership introductions that are a waste of time." This happens over and over and over again. It's compounded by the fact that both of the introduced parties feel some amount of obligation to report the introduction as "super helpful" - and so this perpetuates. Some VCs are much better about receiving honest feedback about the usefulness of these intros (they are, after all people). It's best to set the tone up front a quickly. If the intro wasn't helpful, say so and don't let them waste more of your time. It seems to work well if you come to an agreement ahead of time that you would like to pre-evaluate any intros before they happen. And don't let them start suggesting a bunch of intros at the end of a board meeting - you've probably got a million other things going on in your head at that time.

45 points by diego 13y ago

> Ultimately you asked these people to invest because you thought they could help you. I know this is accepted as Silicon Valley gospel, but it's worth rethinking the notion of investor-as-advisor. I won't say that investors are incapable of providing worthwhile advice, but money is money and when raising it, you should be asking "Who is going to give me the most money on the best terms?" not "Who can give me advice?" Most of the time, the best advice will come from your customers, professional colleagues/peers and employees. Much of the time, that advice will be provided free of conflict at no cost.

lsc 13y ago
Huh. So I have zero experience with "real investors" - but... my understanding, and my experience at the small scale where I have worked is that people who have ownership in your company have influence over your company. Having someone who has a conflicting vision have ownership can be difficult, sure, but I can deal with people that I respect disagreeing with me. On the other hand, I can only imagine the hell that having a co-owner who is stupid must be.
pbreit 13y ago
Seems like bad advice considering how freely the money is flowing right now and how valuable a good investor could be.
- 7Figures2Commas 13y ago
  Your logic is flawed. If money is cheap and freely flowing, which it is, why would an entrepreneur pay a premium to an investor in the form of more equity for less cash, board seats, more restrictive founder vesting and/or significant liquidation preferences in exchange for supposed "value adds" like advice? Entrepreneurs raising capital should take advantage of the extraordinary environment we are in to raise as much money as is practical on the most favorable terms possible. Period.
  - gojomo 13y ago
    ...and then earn/buy the advice elsewhere. See also Naval Ravikant's view of the once-upon-a-time VC-package of "advice, control, and money" becoming progressively unbundled... http://startupboy.com/2010/12/01/the-unbundling-of-the-venture-capital-industry/ http://startupboy.com/2010/12/01/the-unbundling-of-the-ventu... ...which has only accelerated (including by Naval's own initiatives) in the 3 years since that post.

pmikesell 13y ago

"1. Offers to make partnership introductions that are a waste of time." This happens over and over and over again. It's compounded by the fact that both of the introduced parties feel some amount of obligation to report the introduction as "super helpful" - and so this perpetuates. Some VCs are much better about receiving honest feedback about the usefulness of these intros (they are, after all people). It's best to set the tone up front a quickly. If the intro wasn't helpful, say so and don't let them waste more of your time. It seems to work well if you come to an agreement ahead of time that you would like to pre-evaluate any intros before they happen. And don't let them start suggesting a bunch of intros at the end of a board meeting - you've probably got a million other things going on in your head at that time.