I spent a couple of days in London at the London Web Summit, wonderfully organized by Paddy and Mike. It was a meeting of the minds when it comes to the internet scene in Europe and was fairly well attended. In addition to meeting a lot of old friends at the event, I felt that there was also a lot of opportunity to meet new people. One thing which kept coming up in conversation though was VC’s and what I thought of them. I guess people feel I have some thoughts on this considering this previous post!
For some reason, now that I am no longer directly a VC, people figure I’ll speak much more openly about my opinion of them. To be honest, I’ve never been one to hold back in this regard, not really giving a shit whether my opinion „hurt“ my chances as a VC or not. I never saw reason to not be open and transparent about my thoughts in this regard and was actually taken aback when someone questioned whether I feared „retribution“. Note to crowd: VC’s may at times act like the mob but they don’t have the balls to „execute“ like the mob (get it, get it, wink, wink). Yet, what I found most peculiar was the feedback people were requesting of me now. In summary, I’d say it was basically along the lines of „can we work with this guy and trust that he’ll deliver what he promises?“ Further, a second point seemed to be „will they be able to get me to another financing round and if not, will they screw me when they’re my only option?“ Finally, a point that bled through in the questions asked of me was „will these guys be around in 5 years time?“ Are you sure this is what you really want to know from me? Or do you basically want to know whether you can believe the hype?
I can easily answer all these questions here by giving you one piece of advice. Don’t believe the hype when it comes to VC funds or specific investors. In the course of three days I heard multiple stories about both people and their firms . One VC was supposedly a rockstar and loved by those they funded and their firm. Yet from another person, they were the biggest scam out there. This is how far apart the opinions were: 180 degrees. Further, I was told that one fund was super supportive from start to finish, making so many things happen. Yet a day later, another entrepreneur told me how he basically never saw this investor after they wired the money and the turnaround time on anything he needed from them was tedious, even to the point of almost costing him additional funding and thereafter his exit.
There’s a long story which could be told here listing other experiences. That’s not necessary in my opinion. I’l repeat what I always say instead of dragging this out. Do your homework. Spend time with the partner who is going to lead your deal. Make sure you meet others at this fund. Ask entrepreneurs whom they previously backed what their opinion is but preferably come to your own conclusions. Go and get drunk with the partner in question. Are they a dick when inebriated? They’ll probably be a dick when under pressure too. Do they speak poorly of their partners? Bad idea! They will speak poorly of you. Call them on the weekend (make up a reason to.) Do they act pissed that you would bother them on a Saturday or Sunday? If yes, problems! You will in the future need to call them on a weekend and it will be far more important than something you call them on now. Ask a receptionist at the office of said fund what they think of the partner you are dealing with (be chatty and inquisitive). Find out who the responsible partner worked with in the past (colleagues) and ask them what they think. You’d be surprised what I’ve heard from people who worked at banks or consultancies what they thought of guys who left for VC. There is so much that you could do.
Unfortunately, here’s the KICKER! You probably won’t do much of this. Here’s where I get pissed off about all that you read above. There’s so much content out there about this. There’s not much left out in terms of how to screen your investors and figure out who is what. Yet, I keep getting questions when at conferences which are purely based on hype and public opinion of partner or fund. When you dig a bit deeper, which is usually super easy to do, you find out completely different stories. Clearly though too many people skip this step when raising capital. Don’t! It’s like marrying a girl after one date. It’s like having unprotected sex. It’s like jumping from the bridge without checking the depth of the water. It’s like driving at night and turning off the headlights in the pitch of dark. I could go on. You get the point. Luck is statistically not on your side when gambling.