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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

#201

Post by VirusNewbie »

est31 wrote: post #96
VirusNewbie wrote: post #88

Earlier quoted context omitted.

This is super weird to me. In the tech circles I've run in, being from Harvard is about the same as being from UCLA or something. I've never heard it considered a sign of exclusivity. CMU, Stanford, MIT, yes. But Harvard? It's not exactly known for a rigorous engineering program, and even less so the last fifteen years or so.

When looking for CEOs, they don't look for top notch engineering talent, they look for top notch CEO talent, where talent means capability. CEOs do need deep technical understanding, anything else and you have an enviroment that scares away engineers, but they don't need to be the best engineer in the entire company. If you've been to Harvard, you are on a first name basis with highly ranking finance people. It's not…

This sounds totally backwards, but I say this as someone who has no personal experience raising money, so maybe you're a VC or a founder?

If someone can get in front of VCs, presumably it doesn't matter if they know a bunch of other rich people from school. I really don't get the sense that VCs are impressed by someone's ability to convince some nepo hedge fund manager to invest a few million.

I think they're impressed by business accumen combined with technical chops. If you want to bootstrap, then yeah, maybe a school with the most amount of money matters so you can get a huge seed round.

But you think people with strong ideas and impressive technical backgrounds who get in front of VCs are going to be less impressive by less technical people who rub shoulders with finance bros?

Certainly Harvard/Yale is a good choice if you're going into medicine, law, or I dunno, maybe banking? But tech? I wouldn't think it's a top choice at all.

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

#202

Post by insanitybit »

throwaway2037 wrote: post #192
insanitybit wrote: post #162

Earlier quoted context omitted.

You're coming off as very biased. My startup was certainly grounded in research and rigor, I even spoke with academics at universities about the work. In many ways, my project was productizing some state of the art CRDT research by applying it to a domain that is in dire need of solutions - information security. Most founders I met were doing similarly well-founded work. You're thinking about a tiny fraction of the V…

Wild post. No trolling: What is the cross section of CRDT and info sec? Usually, "CRDT" is like catnip on HN. And, yes, I am a major fanboi/fangurl of CRDT. The first time I ever watched a networed text editor with "simultaneously" blinking cursors where two humans were editing in parallel was mind blowing. It opens your mind to many other collaborative editing ideas.

I work in the SIEM space, which basically involves ingesting massive amounts of data (relatively speaking). A single customer can ingest terabytes a day, or even 10s to 100s of terabytes of data a day. And you want to run near-arbitrary realtime analytics on it + batch analytics on it. It's a fun, difficult problem.

My product's big thing was to extract the data from logs and into a graph data structure. The thing is that I've just taken "huge amount of scale + nice, immutable log" and turned it into "huge amount of scale + evil, mutable graph". Building a massive-scale graph datastructure that can be mutated over time is... hard. Like, "hope you've been keeping up on your academic papers" hard.

One of the key optimizations I leveraged was to represent the graph as a CRDT. Every Node has a `merge` function that follows CRDT semantics.

This allows me to collapse states together in a way that converges.

Security queries have some interesting properties:

1. They often care about thresholds, meaning that they inherently work well with a lattice (once a you've hit a "bad" state you will always want to investigate that state - this is unlike, say, operations where if it "recovers" you can ignore it)

2. They almost always filter out data

These two properties combine nicely. It means that if our alert is a threshold, and our data only 'grows' in one direction (thanks CRDTs), we can reject queries using stale data and not worry about invalidating any caches.

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

#203

Post by insanitybit »

wg0 wrote: post #170
insanitybit wrote: post #162

Earlier quoted context omitted.

You're coming off as very biased. My startup was certainly grounded in research and rigor, I even spoke with academics at universities about the work. In many ways, my project was productizing some state of the art CRDT research by applying it to a domain that is in dire need of solutions - information security. Most founders I met were doing similarly well-founded work. You're thinking about a tiny fraction of the V…

I'm glad that you're working on something solid. You're not I'm addressing to. Rather the opposite. You are (or were) building something that has rigorous formally documented academic work. > You're thinking about a tiny fraction of the VC market - the moonshot startups that make the news. Exactly, that's why I implied that it's a very very small number. May be less than a fraction. CRDTs would be interesting area to…

> Exactly, that's why I implied that it's a very very small number.

Perhaps I misread, it sounded like the opposite.

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

#204

Post by skrebbel »

JumpCrisscross wrote: post #52
jakey_bakey wrote: post #35

Earlier quoted context omitted.

Oh, it's absolutely genuine, but there is a contradiction in a VC (inherently risky endavour) requiring you to de-risk their risky investment If you already had traction, you wouldn't need to kiss the ring

> If you already had traction, you wouldn't need to kiss the ring They’re telling you you’re pitching at the wrong stage. Growth and early stage doesn’t invest before traction; that’s the purview of angels and possibly seed investors.

Nah, they're just politely saying no. Lots of (pre) seed investors, who supposedly actually really invest before tangible proof, don't actually do this. Their MO is to hope to talk to early stage founders who are doing amazing before said founder realize that they can raise at way better terms.

It's the "win by doing lots of cold sales" model, but for VCs: if you talk to enough founders eventually a startup that does way too good for your seed/preseed ticket size will actually accept your terms and give you 25% of their company for next to nothing.

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

#205

Post by mrangle »

Galacta7 wrote: post #200
mrangle wrote: post #125

The show Silicon Valley well parodied this phenomenon. It implied that the evasive "no" is commonly because VCs don't want to be known for passing on an investment, outright, that then later takes off. Which would reflect negatively on their judgement, in more or less a worse manner than it would when risking money on something that fails. The implied choice then becomes to probably lose money but retain reputation,…

> "The show Silicon Valley well parodied this phenomenon." Yup, often hilariously. Basically summarized in this scene (especially the very end of the clip): https://youtu.be/PdCoadVSfXg?si=VVwDsNw84WoZx8XD

Great scene.

The theme is repeated both when Monica reveals her shameful secret of having passed on Slack, and when Erlich turns down the ferret / pig startup: "I'm not passing, exactly, I'm just not saying yes" (paraphrased).

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

#207

Post by _heimdall »

JohnFen wrote: post #198
_heimdall wrote: post #118

Earlier quoted context omitted.

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.

> Tech companies aren't cash flow businesses Most actually are. It's just that the big ones tend not to be, and there are lots of startups that want to look and act like the big ones.

Yep that's totally fair, I could have clarified here. I was specifically thinking about the VC world in the context of this threat and would expect any tech companies interested in VC money would fall into the bucket of those big (or aspiring to be big) tech companies.

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

#208

Post by hinkley »

maccard wrote: post #31
hinkley wrote: post #15

Earlier quoted context omitted.

If they run down your clock because you think a check is coming, their other company can hire your former employees.

I'm not going to say this has never happened, but I think it's a little naive to think that this is the common path. In my experience, the first option OP presented (hedging bets and wanting to save face) are incredibly common.

Naïveté is when someone assumes good outcomes from bad situations.

What I'm exhibiting is probably more correctly described as cynicism. I've worked for a few startups that were sure they were hearing 'yes' from VCs and we ended up running out of money thinking a check would come any day now.

There's an old saying, "I'll believe it when I see it." Cynics and startup employees expanded this to, "I'll believe it when the check clears."

And then there's me over here, who knows you can claw back a check that has 'cleared' for about 30 days, saying "I'll believe it a month after the check clears."

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

#209

Post by FreakLegion »

j-a-a-p wrote: post #159
FreakLegion wrote: post #130

Earlier quoted context omitted.

This is the most accurate comment I've seen here. Sequoia, Benchmark, Kleiner, etc. will all tell you "no" and why with minimal turnaround time. The same is true for second-tier players like Craft, smaller shops started by breakaways from the big firms, and scouts. Good VCs are professionals and have no interest in wasting your time or theirs. A "no" now never precludes future participation anyway; they don't need to…

Hmm, my experience with one of the largest investors in NL was a full verbal 'yes'. The investor was actively involved in the hiring process (that is how I got in). A founder put in his cash (think a small apartment) for a lower single digit percentage of agreed valuation. I signed for something smaller / similar but without bringing in cash. In reality the money never arrived, they forked in few times 250k. The othe…

A signed contract is certainly part of the process. I can't speak to outside the US but here the high-level steps are:

1. Engage the firm and reach a decision that they'd like to invest.

2. Negotiate and sign a term sheet. (The only part of this that's legally binding is that you won't continue shopping around while negotiating the full deal with them. That said, it's extraordinarily uncommon for things to fall apart after signing a term sheet.)

3. Negotiate and sign the full deal. (This goes beyond just a contract, e.g. you'll be amending your articles of incorporation to reflect changes in board composition and a million other things.)

Virtually all breakdowns are in steps 1-2. Maybe the firm doesn't want to invest, or they aren't offering a compelling valuation, or they aren't flexible on dilution, or they only lead and you want another firm to lead, etc.

Keep in mind these are VCs, not PE. VCs make their money from outlier companies, so the competent ones don't optimize for worst-case outcomes. You'll never see a dirty term sheet (e.g. liquidation preference > 1x) from Sequoia, for example, because they don't return 8x on a fund by squeezing pennies out of failed startups.

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

#210

Post by satvikpendem »

97-109-107 wrote: post #178
satvikpendem wrote: post #64

If you know marketing, you don't need VCs (unless you are in a capital-intensive business like rocket building). The problem is that most people who get funded are technical and do not know marketing and growing organically. However, there are lots of businesses that grow extremely well simply due to the cofounders having previous experience with marketing, often in a professional capacity. My go-to example is Lemlis…

I'm not dismissive of businesses like Lemlist, but would propose another angle. I find that businesses that are spin out from agency models are particular, inherit a strong characteristic and outlook similar to agencies. This is not a critique of their model per say, but an observation that leads me to be hesitant to take advice from agency-born models and apply to more typical product-focused B2B or B2C settings. Th…

True, most agency companies may make money but their products definitely have quite a lot of room for improvement, since the founders are not engineers by trade and thus there is no permeation of engineering culture as in other tech companies. However, I will say that it would be good for tech people to learn the marketing side if only by doing it semi-professionally for a client, just to see what goes into it. Then, they can choose to bootstrap or go the VC route, not necessarily create a whole new agency from scratch and continuously work on that. It's simply a learning method, one where you conveniently get paid to do so.

Yes, I don't think content is the only way, and I don't believe most of their growth was from content, anyway. It seems like it was just sending out lots of messages to people and hoping they're interested. Content marketing is a secondary mechanism, it is inefficient to get you your first customers, and it is definitely not the best go to market strategy as you say.

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