Venture capitalists are simple people: they’ve either decided to invest and are conceiving themselves that there they’ll gut is right (a.k.a. due diligence), or there’s not a chance in hell that they’ll do so. While they may be simple, they’re not necessarily forthcoming, so if you think it’s hard to get a definite yes out of a venture capitalist, you should try to get a conclusive no.
Alas, entrepreneurs are also simple people: if they don’t hear a conclusion, they assume the answer is yes. This is why there’s so much miscommunication between venture capitalists and entrepreneurs. To foster greater understanding between the two groups, here is an expose of venture capitalists’ top ten lies.
“We can make a quick decision.”
Sure, the firm could make a quick decision—after all, it’s not their money they’re risking, but the firm never does make a quick decision because the partners are not the bold, swashbuckling, innovation catalysts they purport to be. They are risk-averse like most people in the financial sector and like to follow the crowd.
“I liked your company, but my partners didn’t.”
In other words, “No.” The sponsor is trying to get the entrepreneur to believe is that he’s the right guy, the smart guy, the guy who gets it; the other didn’t, so don’t blame him. This is a cop-out; it’s not that the other partners didn’t like a deal as much as the sponsor wasn’t a true believer. A true believer would get it done.
“If you get a lead, we will follow.”
The venture capitalist is saying, “We don’t believe, but if you can get Sequoia to lead, we’ll jump on the pile.” In other words, once the entrepreneur doesn’t need the money, the venture capitalist would be happy to give him some more. What you want to hear is, “if you can’t get a lead, we will.” That’s a believer.
Show us some traction, and we’ll invest.” In other words, “No.” This lie translates to “I don’t believe your story, but if you can prove it by achieving significant revenue, then you might convince me. However, I don’t want to tell you no because you might be the next Google, and I’d look like a total orifice.”
“We love to co-invest with other venture capitalists.” Like the sun rising and Canadians playing hockey, you can depend on the greed of venture capitalists. Desire in this business translates to “If this is a good deal, I want it all.” What entrepreneurs want to hear is, “We want the whole round. We don’t want any other investors.” Then it’s the entrepreneur’s job to convince them why other investors can make the pie more significant as opposed to reconfiguring the slices.
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