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“Yes” means “no”: The language of VCs

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

#121

Post by mensetmanusman »

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…

Next wave of ai companies require major $$$ to train; the game has shifted somewhat.

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

#122

Post by lokar »

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…

Work for whom? All of the early employees and investors in Uber have done very well.

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

#123

Post by davecheney »

Two things:

1. Nobody is entitled to venture capitalist funding. It is not an oddly named and run social works program.

2. VC funding is not a home run. It is not free money. If the only way you can launch a tech business is venture funding with the hope of hitting it out of the park before the funds’ cliff, perhaps consider if the return justifies the effort.

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

#124

Post by geodel »

ldjkfkdsjnv wrote: post #4

Rubrik for early stage: 1. No product: -> went to stanford or harvard -> funded (no questions asked) -> held director level at faang -> funded -> everyone else -> probably not funded 2. Have product: -> not prestigious -> need real ARR with good growth -> prestigious -> need a product -> everyone else -> not funded

Like the 'No child left behind' did wonders to education, maybe 'No startup left behind' is needed to fund all of them irrespective of business model or founders' background.

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

#125

Post by mrangle »

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, or to protect money at the possible cost of reputation. Funds can't invest in everything, even if passing on something borderline is a repuation risk. The "not a no but no" third option seeks to both retain reputation and protect money.

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

#126

Post by omeze »

tptacek wrote: post #111
pnw wrote: post #78

Earlier quoted context omitted.

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".

If its a fund that has led rounds before then yes, but if its a new fund or small fund then it might be part of the GPs proving they can get deal flow to their LPs before raising a larger fund

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

#127

Post by tptacek »

omeze wrote: post #126
tptacek wrote: post #111

Earlier quoted context omitted.

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

If its a fund that has led rounds before then yes, but if its a new fund or small fund then it might be part of the GPs proving they can get deal flow to their LPs before raising a larger fund

I mean, maybe, but (a) I've been told many times that it's code, and it's like a running joke in the industry, and (b) if you have a lead, you're not worried about reading tea leaves anymore. Saying "we'll invest if you have a lead" is like saying "we'll invest if you put a successful round together". Who wouldn't? The point at which you have a lead for your round is often the point where you start turning them down.

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

#128

Post by mrangle »

a1371 wrote: post #62

I played the VC game. We were attending every opportunity to give 10% of our business for $200K. No one would bite. Gradually, it felt it was easier to land customers than VCs. Then there came a moment that I wish for every founder. Our revenues started not only paying the bills, but also fueling growth. It felt as if a veil was lifted from my eyes. Now, it feels like all those pitches were a waste of time.

Essentially, the market forced you onto the track that it wanted you to be in. Which, as you found out, is a good thing (and the only possibility).

As the best time for VC investment is generally at the inflection point of the exponential growth curve. When revenue can't keep up with what it costs to supply the ever faster growing demand. Which, for many companies, will be shortly before an outright acquisition. And usuaully 5-10 years, minimum, after slow customer growth. Assuming a good business but not necessarily a unicorn in terms of market position.

But at that point wily founders may instead look to keep their company and seek a loan.

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

#130

Post by FreakLegion »

Aurornis wrote: post #114
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 o…

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 string you along for that.
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