How Venture Capitalists Have Helped Me
Posted in Leadership on Feb 19, 2017
Venture capital is a competitive industry. Investors compete to win the best companies, so they pitch founders on the value they bring to their portfolio companies. When I was a new founder, their pitches didn’t resonate with me. I found it difficult to understand how they could help. A few years later, I get it; they really can add value. This is what I’ve found so far.
When I first began speaking to potential venture capital investors, I felt as though their pitches to me were all variations on “you’ll get access to our network.” This fell on mostly deaf ears. At that point in my career, it was actually an anti-value for me. My experience of “networking” was associated with cliques and special privileges shared between people based on belonging to a club. It sounded like a fraternity’s pitch to a would-be pledge, to be honest.
At this point I’ve had a few years’ experience working with some fairly active and involved investors, and on reflection, I see more of the value than I did at the beginning. If I were to explain this to past-me, here’s what I might try to emphasize.
In the early years, I didn’t understand how important it would be to hire carefully, nor how difficult and time-consuming it would be. I thought I was good at hiring, but I was wrong. This is a book-length topic, but my venture capital investors have helped in several concrete ways between then and now.
Note that my investors’ recruiting services aren’t for doing recruiting, per se. They’re for helping my company succeed in our own recruiting efforts.
Investors, both actual and potential, have helped review and clarify my plans. They have found things I overlooked, pointed out errors in my logic, and made my models much more rigorous. They have helped me understand the common language of things such as operating plans, showing me what types of models will be quick to evaluate and provide good answers, as well as what’s conventional and therefore easy to pattern-match.
My board member at NEA, Arjun Aggarwal, has spent a great deal of time helping build models for many aspects of the business, helping turn thoughts into spreadsheets. This is not typical; board members aren’t usually this active and involved. Arjun adds a lot of value to the team by doing this.
Speaking to investors generally results in at least some type of challenge to my thinking, even if very diplomatic. Every question is an effort to go a bit deeper. When I speak to venture capitalists, I write down the questions they ask me. Common themes always emerge. I am not a venture capitalist and don’t think like one. Being able to review my notes and see where I need to focus, both for their sake and for mine, is invaluable to me.
I’m not a pitcher by nature. But virtually everything I do involves summarizing the business’s value, current status, and opportunity to someone, whether that’s a potential recruit, an investor, a partner, a customer, the board of directors, the all-staff meetings, and so on. Venture capitalists provide feedback on how well I’m doing that.
My investors have also gone beyond the call of duty to help me understand how to pitch better, build a better deck, and helped me with pitch practice and rehearsal. As I’ve leaned into this process, I’ve found it useful all day, every day.
When I’ve pitched potential investors, I’ve found it very useful to note and decode their feedback. Some will not say no in a direct way, leaning on compliments followed by encouragement to stay in touch. Others will take time to be very specific about why they’ve decided not to invest. Their feedback is clear guidance as to what they think the business should focus on achieving. It has to be taken with a grain of salt, but collating this feedback often results in advice that’s less conflicting than some other sources I’ve gone to for help. It also points out where I’m just doing a bad job communicating our strengths; I’ve gotten feedback that we should do X when, in fact, we already do X and I just wasn’t saying it very well.
Early startups generally can’t and shouldn’t spend money on an expensive PR firm. Both of my major investors have PR staff and services who have helped us with periodic work we otherwise wouldn’t have had resources to do well.
Similar to recruiters, PR firms are probably a trap for founders pretty often—not that they mean badly, but you need to know how to work with them or you’ll steer yourself astray. Working with our investors’ PR experts instead of with agencies has allowed us to get lots of help at particular times, without taking a big risk on a long-term commitment.
Various introductions to advisors, entrepreneurs-in-residence, and other helpful people have come through my investors. Many of these people have generously spent significant amounts of time with me and others on the team. We’ve dodged many serious mistakes as a result. We’ve also seized on opportunities we didn’t see ourselves, and found alternative ways to do things that produced surprising results at times. This is true both on the business and the technical sides.
If you’d asked me in 2013, I think I would have said that investors were perhaps exaggerating how much they could help us. I’d have said “all they do is say they’ll make introductions, and introductions are just going to use up precious time I need to conserve.” That’s not what I’ve found. I’ve received help I didn’t expect, didn’t know I needed, and has made a big difference to the business.
PS: If I’ve omitted anything you’ve done for me, it’s forgetfulness, not passive aggressiveness.