I read the following line in Paul Graham's essay:
"The reason VCs seem formidable is that it's their profession to. You get to be a VC by convincing asset managers to trust you with hundreds of millions of dollars. How do you do that? You have to seem confident, and you have to seem like you understand technology."
I don't mean to imply with my blog title that all VC's are idiots. Simply put though, even if they are, they sure as hell can hide it well. It's funny how much that sentence from Paul's essay stuck in my mind. Having recently been out in the market gauging LP appetite for venture capital funds, that fact couldn't be more accurate. When raising money as a VC, you're selling yourself and your partners. The VC's themselves become the product. Unfortunately, many VC's manage their portfolio as well with this "game-face" on. Hence, as an entrepreneur you'll probably think they're an idiot. I've caught myself on occasion making this mistake and proving that I'm full of shit on that occasion. I regret it every time!
At the same time, I think we're seeing a major shift in the market right now when it comes to early-stage venture. This is the phase when old-school VC's simply won't continue thriving. You have to be ever closer to the entrepreneur when investing in companies and you have to know how they tick. That's why you've seen a whole slew of guys establish themselves as the players in the past couple years: Brad, Fred, Paul, Mark, Jeff and so forth. Not necessarily everyone in the new group was a serial entrepreneur but they've always been close to the entrepreneur. These guys aren't going out raising funds on the back of "game-face". Sure, you present yourself professionally to your investors and it's not easy for anyone. Yet, the new breed is letting their performance and actions speak louder than their Powerpoint presentation and smile. These are the guys who I look to for inspiration!
What does this mean for you as an entrepreneur? I think it's pretty simple. Don't get blown away by brand names. As always, when it comes to raising venture capital, you're entering into a relationship with one person. Statistically, the chance of running into someone who is clueless is pretty high. Do you homework!