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VCs aren’t your friends

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Re: VCs aren’t your friends

#231

Post by alephnerd »

wslh wrote: post #230
alephnerd wrote: post #209

Earlier quoted context omitted.

> if I would have to raise funds I will put laser focus in the people I know instead of trying to reach VCs that are not in my network This is the most common piece of advice all VCs and Founders give. Even YC has called it out on multiple occasions

I don't think the message is clear in the startup industry (yes, industry). The startup industry gives a lot of noise to inexperienced founders (obviously the great majority) making them think the game is more even. The corollary are the following questions: - What a founder without VC connections should do? - How long will it take? Even if they have a super product in mind (not a time machine) they will have an anno…

Fair point. I have noticed a drastic lack of good startup advice outside of the Bay Area and Seattle scene. Both those two have very entrenched entrepreneurship networks so information percolates

> what a founder without VC connections should do

Network, network, network.

Finding a VC is the same process as finding your first customer. Sales is a grind, as is running a company. It acts as a filtering function to find seriousish players.

> How long will it take?

If you raise funding, at least 10-15 years to even get the chance to potentially list or get a high 9 figure low 10 figure acquisition.

Re: VCs aren’t your friends

#232

Post by gwbas1c »

The tone of the post just reminds me of how frustrating interviewing for a (software engineering) job is: Many rejections are arbitrary and the best advice is to just keep applying.

In this case, I suspect Jason assumes that every business should be 110% focused on fundraising. Well, businesses are trying to run their business! The goal is to run the business, the pitch is a tool, not the goal.

The same thing applies to finding a (software engineering) job: Candidates have life obligations and can't dedicate 110% of their time to pleasing a single interviewer. The goal is to demonstrate that you can do a job, the interview isn't the job itself.

Re: VCs aren’t your friends

#233

Post by gumby »

benreesman wrote: post #197
openrisk wrote: post #191

In transactional financial markets "friends" is not the right word, but there is something to be said about more or less effective alignment of interests and that is purely a matter of design. There is more than enough money sloshing around, it all boils down to designing contracts and suitable information exchanges between parties. So anybody thinking that the current system is sub-obtimal can try their hand at disr…

Financial accountants have a line item for not being a dick. It’s called “goodwill”. No shit.

Ha ha, this is both hilarious and so true!

Re: VCs aren’t your friends

#234

Post by renegade-otter »

ryanwaggoner wrote: post #228
renegade-otter wrote: post #194

Earlier quoted context omitted.

As someone who took more than a year off to build his SaaS - the days of stitching together a prototype at night are pretty much over. You need to be an incredible hustler and have a really good insight into a desperate business need. Customers today expect polish and few bugs right out of the gate. I spent months on polish alone. If you don't, your product is going to be savaged like this: "Former Yahoo CEO Marissa…

How’s your SaaS doing now, if you don’t mind my asking?

friendlyfire.tech is pretty much dormant :)

The benefit of being bootstrapped, of course, is that it's designed with costs in mind, so I don't spend more on hosting than I do on my Netflix subscription.

Re: VCs aren’t your friends

#235

Post by mbesto »

knifie_spoonie wrote: post #99
mef wrote: post #73

Earlier quoted context omitted.

consider that this is sending a negative signal to the VC that other VCs have already passed, rather than that it hurts their feelings

> other VCs have already passed Is this really a sensible factor to consider? Canva's was founder was rejected 100 times before someone took a chance. Is there any hard evidence that founders who secure funding earlier are more likely to provide a VC with a successful exit?

> Is there any hard evidence that founders who secure funding earlier are more likely to provide a VC with a successful exit?

There really isn't much hard evidence about any correlative patterns about early stage VCs. Which is why their model is essentially spray and pray. The successful ones (Sequoias, a1z, etc.) are just signaling rods whereby high growth startups gravitate towards well known VCs, which in turns means signaling to M&A markets.

Re: VCs aren’t your friends

#236

Post by dpflan »

max_ wrote: post #28
keiferski wrote: post #21

The way VCs filter out potential investments seems fairly similar to the way Ivy League schools filter out potential students. (Probably because they are comprised of the same people.) It is not really about technical brilliance, or innovation, or anything that is written on their website as a core value. It's more about whether you're smart enough and can follow instructions and fit into the overarching institutiona…

VCs like Don Valentine & The founder of Atari actually passed on Steve Jobs because "they were not impressive". It was only after Steve Jobs exploited their preferential attachment & tendency of VC to succumb to herding effects that he was given investment.

Would you mind expanding upon this, detailing the exploitation:

"It was only after Steve Jobs exploited their preferential attachment & tendency of VC to succumb to herding effects that he was given investment."

Re: VCs aren’t your friends

#237

Post by gumby »

tomnipotent wrote: post #82
caseyy wrote: post #47

Earlier quoted context omitted.

Profitable companies attract much more VC interest and even competition.

Doesn't a VC make money from valuation, not profitability. A profitable business has either reached market potential, or isn't spending enough on growth. Anecdotally I can think of many more examples of unprofitable businesses getting VC money.

> Doesn't a VC make money from valuation, not profitability

Sure, but if the business is profitable that means it works. Now the investment can be spent on bending the curve up (e.g. hire more salespeople that could have been afforded from the company’s revenue alone) rather than the more risky approach of spending the money to see if the product will make it at all.

> A profitable business has either reached market potential, or isn't spending enough on growth.

This is a naïve view from the SaaS era propagated by SaaS and consumer app investors. Does not apply to most businesses and applied to none of the biggest companies today like Microsoft, Apple, NVIDIA, Google, et al.

Look at google: no, it wasn’t profitable (no revenue or even revenue model) but had huge uptake by the nerds without any effort to market it.

> Anecdotally I can think of many more examples of unprofitable businesses getting VC money.

Sure, several of my own companies were funded in this mode. But that capital was more expensive because it was used figuring out if the tech would work and if there were actually customers for the product.

Re: VCs aren’t your friends

#238

Post by kasey_junk »

csomar wrote: post #192
kasey_junk wrote: post #176

Earlier quoted context omitted.

In my experience they absolutely are part of the 2% fee. Why do you think they aren’t?

In that case, how can the rate be fixed or does that mean that the hedge fund limits its trade turn-over. In other words, if your trading fees are 0.2% and your trading volume is 10 times the capital raised, you already burned through your management fee.

That’s why they are fixed percentage not fixed. Trading fees go up with the amount of capital moved but mostly in a linear fashion.

Calculating your trading costs (and usually more importantly slippage) is absolutely table stakes for a fund that trades.

For most funds that’s relatively easy as the trading component is a cost center that you can outsource for predictable prices.

For funds that aren’t treating trades as cost centers, well it’s presumably part of what you are selling so you better be good at it.

Re: VCs aren’t your friends

#239

Post by PaulStatezny »

openrisk wrote: post #191

In transactional financial markets "friends" is not the right word, but there is something to be said about more or less effective alignment of interests and that is purely a matter of design. There is more than enough money sloshing around, it all boils down to designing contracts and suitable information exchanges between parties. So anybody thinking that the current system is sub-obtimal can try their hand at disr…

> money sloshing around

Meta-comment: What a creative and effective word picture. In just 3 words there's so much information that instantly comes across.

Re: VCs aren’t your friends

#240

Post by lumost »

fsloth wrote: post #61
keiferski wrote: post #21

The way VCs filter out potential investments seems fairly similar to the way Ivy League schools filter out potential students. (Probably because they are comprised of the same people.) It is not really about technical brilliance, or innovation, or anything that is written on their website as a core value. It's more about whether you're smart enough and can follow instructions and fit into the overarching institutiona…

In the tweet the wrong date was not a red flag due to lack of detail as such, but because it signaled: a) they had been raising for a while now b) the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit) So ”the market” did not consider the startup investable, and they did not think about their sales pitch strategically enough … this VC would have liked to be sold to, not just a sou…

Early stage vcs are successful when other vcs think the outcome is a good investment. Taking a bet that other VCs have already rejected will usually lead to a mixed payout.
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