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“Yes” means “no”: The language of VCs

jacobbartlett.substack.com

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Re: “Yes” means “no”: The language of VCs

#111

Post by tptacek »

pnw wrote: post #78
ChuckMcM wrote: post #50

They miss my favorite: "Yes, we'll invest we just don't want to be 'lead'." That is code for: "You aren't going to find anyone who shares your idea of what your valuation should be so we are safe telling you we'll invest if you find a 'lead investor' because that person doesn't exist." It gets funny/twisted when you do find a lead and go back and now there is some other goal post that is keeping them out of "this rou…

Not necessarily. It could also be code for "We can't write a check big enough to lead your round". E.g. a seed fund who writes $1m checks isn't going to lead a $5m round. The VC would be putting themselves out of a job if they wrote a $5m check when they told their LPs their fund target was $1m checks.

"We're in if you find a lead" is kind of notoriously code for "no".

Re: “Yes” means “no”: The language of VCs

#112

Post by marcus_holmes »

fonix232 wrote: post #74
thwarted wrote: post #56

For our two-sided marketplace startup, this meant Android and iOS apps for customers, and another pair of apps for mechanics. 6 months later, we released our fully-fledged MVP to a deafening silence from customers, mechanics, and investors. It's probably really hard to get traction when it's not obvious who your customers are, and this description reveals that. Your customers are the entities that are paying you. Is…

Yeah, I was thinking the same. Fixr seemed like a solution looking for a problem, without having an even borderline clear idea on what it is supposed to be. No wonder it failed.

I've seen hundreds of startups like this. Literally talking to someone last week who was developing an app but had no clear idea who their customer was or why they would buy it.

There's so much survivor-biased bullshit in the industry, though. Founders who raised millions on an idea with no MVP, no customers, no traction. Everyone laps it up and repeats it on social media and then there's another 100 founders who are wasting their time and savings on ideas with no clue. The ecosystem soaks up their savings and spits them out disillusioned and drained of cash.

Re: “Yes” means “no”: The language of VCs

#113

Post by tptacek »

marcell wrote: post #104
jedberg wrote: post #102

When I was raising funds, the thing that I hated to hear most was "We will give you $X as long as you find a lead" where $x was usually just less than 1/2 of what we were asking for. That was basically their way of saying "we don't believe in you but we don't want to miss out if someone else does". We didn't really want investors like that so we bootstrapped instead.

You can collect these “soft commits” to make it easier to land a lead. You can tell the potential lead, “we have $X in soft commits, so if you become our lead, our company will have total $X + $Y funding.” It makes your pitch to the lead more compelling.

They'll ask who your "soft commits" are, and they'll read between the lines; if any of them are significant firms, it'll get read as "those firms refused to commit, there must be a reason".

Michael Seibel had a video a long time ago from a YC VC class, and related his strategy to work around this, of setting a very short deadline --- like, do all the meetings inside of a week, and tell people "get your term sheets in by the weekend". The idea was: don't give investors an opportunity to stall, and, by stalling, send an adverse message to all the other investors.

(I don't know if this works at all anymore, but it gives you an idea of what the issue is here.)

Re: “Yes” means “no”: The language of VCs

#114

Post by Aurornis »

lisper wrote: post #3

It's not so much that "yes" means "no" but that VC's never actually say no, and it's easy to understand why. Whether or not they actually fund you, they always want you to think that they are going to fund you because that way they hedge their bets in two ways. First, if they learn new information (like if you suddenly start to get traction) they can change their minds without losing face. Second, and more importantl…

Top tier VCs will definitely tell you “no” and they’ll often get there quickly.

It’s more often the small funds, the inexperienced family offices, and the junior associates that don’t have authority who string companies along forever. They don’t have as much authority or funds to actually work with, so they have a lot of time to string you along.

Lumping all VCs together really doesn’t lead to accurate descriptions of how the industry works.

Re: “Yes” means “no”: The language of VCs

#115

Post by threeseed »

dheera wrote: post #82
behnamoh wrote: post #76

Earlier quoted context omitted.

I'm not white either but seriously, this mindset of "victimization of non-white people" needs to stop. I'd rather be taken seriously for my merits than my minority privileges (due to DEI for example).

> I'd rather be taken seriously for my merits Me too. The reality is that people don't always take my merits seriously. I'm male though. Females have it much worse. I have heard lots of horror stories (both behind their back in "locker room talk" and directly from them) where their actual merits are effectively ignored and all focus is on their body. It's insane.

> Females have it much worse

The entire concept of "warm introductions" is harmful to women.

Because most VC partners, CEOs etc are men. And so you have this power imbalance where young, women founders feel like they are forced to build relationships with typically older men.

And like you said there are plenty of horror stories (my partner was one) where this power imbalance gets abused.

Re: “Yes” means “no”: The language of VCs

#116

Post by ip26 »

marcus_holmes wrote: post #110
terminous wrote: post #53

Earlier quoted context omitted.

Because the SV VC business model isn't to build a traditional profitable business that beats the competition by providing a superior product/service for a competitive price. It is to dominate the competition by subsidizing the real cost to consumers, until you have taken over the market and can raise the price and lower the quality of the product/service. Edit: Or the business model is to be acquired by a FAANG who f…

Does that even work as an investment model? The poster child for this has got to be Uber, and they've shown that this is a lot harder to achieve than it appears. The huge wins have all been IPOs where the business is still growing/trying to dominate the market, and not where they're in that monetisation phase. At least that's what I've seen. I don't think there's a single case yet where the "dominate and then monopol…

Uber seems to have created a lot of opex (30k employees, high comp) setting a pretty high bar to reach profitability, and there are many substitute goods (planes, trains, your own car, bicycles, busses, walking). So they may not be positioned to truly corner consumers with prices high enough to reach profitability, even if they monopolize cabs.

Re: “Yes” means “no”: The language of VCs

#117

Post by _heimdall »

lisper wrote: post #3

It's not so much that "yes" means "no" but that VC's never actually say no, and it's easy to understand why. Whether or not they actually fund you, they always want you to think that they are going to fund you because that way they hedge their bets in two ways. First, if they learn new information (like if you suddenly start to get traction) they can change their minds without losing face. Second, and more importantl…

Serious VCs often will say no, and they'll say it quickly.

Honestly I prefer the approach of being extremely straightforward with expectations. Make your pitch, but also make it clear that you aren't interested in playing games and would prefer a clear "no" if that's the decision.

Re: “Yes” means “no”: The language of VCs

#118

Post by _heimdall »

daft_pink wrote: post #30

Maybe it's my business major background and my skepticism of all these tech companies that have no reasonable business model to make $'s, but unless there is an obvious need for investment like buying a large amount of real estate or machinery, why would you need VC money to build an app after you've already spent several months doing it? It should run on it's own and not need investor money. You shouldn't be focused…

Tech companies aren't cash flow businesses, though IMO they should be. When debt is cheap tech leans hard into pre-revenue funding. Now that interest rates are more reasonable tech companies have to actually show a profit, and most don't know how.

Re: “Yes” means “no”: The language of VCs

#119

Post by quickthrower2 »

behnamoh wrote: post #76
dheera wrote: post #55

Earlier quoted context omitted.

-> went to stanford or harvard -> funded (no questions asked) I'd edit this to -> white male went to stanford or harvard -> funded (no questions asked) Source: I know lots of female and non-white Harvard grads who didn't get funded. I'm a non-white MIT grad and also found funding very, very difficult even when we had a product. We almost continuously had to spend >1/2 of our working hours just trying to get funding.…

I'm not white either but seriously, this mindset of "victimization of non-white people" needs to stop. I'd rather be taken seriously for my merits than my minority privileges (due to DEI for example).

What we need are data. Then set up funds that scoop up the good ideas left on the table by this dumb money if it exists.

Re: “Yes” means “no”: The language of VCs

#120

Post by blindriver »

VCs are the biggest snakes in business.

Until you actually see money in your bank account, consider every single thing they say as a no. No matter how much they kiss your ass, and no matter how much they throw term sheets at you, until you see money in the bank account, it’s a “no”.

If they want to say yes, they will have the money in your bank account that day, but if you get any excuses, then it means they are stringing you along.

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