Betting Against the American Dream (in San Francisco)


My friend Matt Pasienski, a Physics PhD, just announced he’s moving to Mexico and leaving San Francisco behind. Here’s what he wrote:

The American Dream has moved to Mexico. If you work hard in Mexico you can buy a house, have a family, and live a good life. That’s not something I can see happening in San Francisco right now.

Guadalajara is going to be a major world-wide hub for technology within the next 5 years.

As an American, these words break my heart. My father, born in 1929 to a single mom living in a one-room adobe hut in the Southwest, lived the American dream and clawed his way out of poverty into a PhD and professorship at a community college in Los Angeles. This is not supposed to be the story of the United States.

As a Bay Area resident, these words ring true. In any other place, our household income would earn us a place in the upper middle class, but here in the epicenter of the technology revolution, we instead live month-to-month, renting a musty, unadorned house for $3,700/month (a steal in these parts!). Daycare for our son, provided by a local church, costs $1,600/month and only lasts until 3pm, which means if we’re both going to work, we have to hire a nanny for $20-25/hour to fill in for the missing hours (you think a nanny could live on $12/hour in these parts? haha). Total cost of childcare: ~$2,500/month.

For our small family, that’s $6,200/month (i.e. $74,400/year) of post-tax income dedicated to just housing and childcare––before food, before gas, before clothes or toys or coffee.

64% of Americans don’t even earn that much money on a pre-tax basis.

Yet this is where the jobs are. For now.

Then there was this interview with the Mayor of Palo Alto:

We have to do away with this notion that Silicon Valley must capture every job available to it… We’re looking to increase the rate of housing growth, but decrease the rate of job growth.

Yep, the official stance from the Mayor of Palo Alto is that his city wants less jobs.

Ergot, he wants these jobs to go elsewhere. Like Guadalajara.

Or perhaps Seattle.


Los Angeles?


As a Bay Area resident, these words make me feel hopeless and powerless. How will we ever afford a home here? It feels so out of reach.

As an entrepreneur however, these words make me think there’s an opportunity to bet against the Bay Area, to profit from the NIMBY catastrophe that is Bay Area housing policy.

Here’s my idea. Let’s call it IMBY Corp:

1) Raise a $50M investment fund from SF techies who are frustrated by Bay Area housing policy.
Pitch it as a derivative of the broader tech economy, but with a lower risk profile than traditional venture capital or angel investing. After all, the strategy might not work, but unlike startup investing the result is unlikely to be a complete loss of capital.

2) Buy residential real restate in emerging tech hubs like Seattle, Austin, Guadalajara, etc.
Target purchase price: $600k per property. Focus on the hip, gentrifying neighborhoods that are already attracting tech talent. Think: San Francisco’s Mission district back in 2010.

3) Invest $30k per property in renovations & furniture.
Make the house nice enough and furnish the properties in order to…

4) Rent the properties out on AirBnB to generate cash flow.
Back of the envelope: Average rental price of $60/night. Revenue potential per property: $21,900 (reality will be less, see next point…)

5) Use a third-party service provider to handle guest checkins, cleaning etc. for the first two years.
Assume third-party service delivers 60% property utilization and takes 30% cut of gross revenues, leaving IMBY Corp. with $9,198 per year in net income before taxes. Assume that once the fund switches to first-party service in year 3, property utilization jumps to 70% and overhead drops by to 20% of gross revenues, leaving IMBY Corp with $10,512 per year in net income per property before taxes.

5) Sell the properties for a profit after 5 years at a 50% premium on the purchase price.
Starting with $50M, you’d be able to buy 76 houses (assuming ~$500k in initial overhead). If each house sells for an average of $900k after 5 years (entry price: $600k), adding in all the associated setup costs ($50k) and AirBnB profit (($9,198 x 2) + ($10,500 x 3)  = ~$50k) makes it a wash, the result is a net profit of $300,00 per house with a final total portfolio value of $68,400,000 for an Internal Rate of Return of 7.65% per year over five years, which is better than buying US Treasury bills, but nowhere close to being an LP in a Sequioa fund much less angel investing in the next Uber.

Am I missing something? Would you take this bet? This is an idea I’ve been toying around with over the last few weeks. Perhaps someone else wants to run with this and make it a business?

I’d love to hear from any real estate or finance folks with actual experience investing these types of assets. Are my ballpark assumptions in the ballpark? Please share your thoughts in the comments on tweet me @mattmireles.

You’re always gaining credibility… or losing credibility.

The Rakish Brigantine

“Should we fire the CEO?” That’s the question at the heart of every board meeting. It’s the only thing I can really do as a board member, really. Even if I never say those words, the question is always in the back of my mind.

-Anonymous Board Member & Entrepreneur

A founder called me today. His lead investor was in the news in a bad way:

Rothenberg Ventures, the four-year-old, San Francisco-based seed-stage venture firm, may be on the brink of implosion, say several sources close to the firm.


At Rothenberg, the Rise and Fall of a Virtual Gatsby  -Techcrunch

“I thought startups were the ones that failed,” he said. Through the phone, I could hear him shaking his head in disbelief.  “It never occurred to me that my VC would implode.”

[Disclosure: The founder in question gave me permission to write about this. ] 

The founder was young. No professional experience outside of a couple menial summer jobs. But the business was surprisingly solid and well thought out. The boy could sell and he had the numbers to prove it.

But he’d just started raising money again. And here was his lead investor, the only brand name on a cap table littered with unsophisticated friends, family and randoms, going through a very public meltdown at the worst possible time. The other investors had looked to Rothenberg for guidance on how to respond to the many unpleasant gyrations that come with being a minority investor in a fledgling technology startup helmed by an inexperienced CEO.

“Dude, this is not good.”

The founder had called me, laughing nervously as he joked about having shat his pants “multiple times” throughout the course of the day.

We talked it over.

Did Rothenberg have a board seat? No.

Was he relying on Rothenberg as an ongoing source of capital? No.

Could Rothenberg call the note? When did the note mature? He didn’t think so, but he was looking into it.

Could Rothenberg sell their stake to someone else? Looking into it.

Was anything about his operating plan going to change as a result of Rothenberg melting down? Not a thing.

“Honestly,” he explained, “it just looks bad. I’m not sure how to address it when we talk to investors.”

Address it head on, I advised. You can’t hide it or run from it, so just directly acknowledge the problem, explain how it affects you and what you’re going to do about it.

This is what leadership is all about.

As an entrepreneur, you’re always being judged––by investors, by your team, by your board. It sucks, but it’s what you signed up for, so embrace it.

You’re always either gaining credibility or losing credibility. Remember that.

The surest way to lose credibility is to go silent.

Silence is like darkness. People are afraid of the dark, the unknown. It invites their fears to run wild. It feeds the monsters in their head. And those monsters, that fear is not your friend.

Good CEOs control the narrative. Good CEOs fill the silence.

Bad shit happens. This is true in startups, business and life. You can’t control for it.

Instead, what you can do is:

Work fast and do whatever you can to make sure they hear the bad news from you –– this sets you up as in control of the situation and in the know. Nothing makes people freak out like reading, for the first time, bad news about themselves on the wide open internet.

Acknowledge that bad shit has happened –– this demonstrates that you’re firmly attached to reality and not clueless. As my anonymous board member friend explained to me once, a clueless CEO is fired CEO.

Explain how the bad shit affects your business, specifying that which you know for sure and that of which you are still uncertain  –– this demonstrates that you understand the gravity of the situation. It’s always better for you to define that which you fear than it is to leave it to someone else’s imagination (or worse their officemates)

Lay out your plan of action ––this is the essence of leadership, this is what everyone wants to hear. People want their leader to be a man (or woman) with a plan. Now, you and I both know that your plan might not work, but that doesn’t matter. Having a plan means that you’re in control, that they don’t need to worry, that you’re on top of it.

Ask for help –– this transforms the problem that you own into a problem that the group owns, which will at least soften the blow in event that you fail, and at best lead to new ideas and more actual help. If the problem is yours alone to bear, then it’s easy for other to sit back and entertain their primal desire to blame you.

Aside: On a tactical note, I find that SMS and iMessage are a better way to communicate with stakeholders than email. Message composition is faster because it’s less formal. Response time is faster because the channel is so noise-free. How many times have you had an email sitting in your inbox forever, just waiting for your response. But you don’t respond because your thoughts are too complex, you’re too nervous, etc. The same can happen with a text message, but it does so much more rarely.

If you don’t know it, the iMessage hack is pretty useful. Oftentimes, you don’t need a phone number to send an iMessage. Just past the person’s email into iMessage. If the text turns blue, it works and you can be sure it’s tied to the person’s account. If it stays green, maybe they’re on Android or it doesn’t work. It’s an easy hack and a great way to cut through the noise. Be warned though that not everyone will appreciate your invasion into their personal space, so be prepared to cajole and apologize away your way into the recipient’s comfort zone.


People always want to be led, especially in times of uncertainty and fear.

Communication is the bedrock skill of leadership. Do it right and you’re a hero. Do it wrong and you’re in a world of hurt.

“It’s times like this when you learn to be a CEO.” I said, signing off. “Inspire confidence. They will follow.”

PS If you know of any founders that need coaching or startups that need a hustler, send them my way. I recently left Dishcraft and am figuring out what’s next. Contact me: @MattMireles  or

People, like businesses, want predictable revenue.

Let me set the record straight for you deluded millionaires of the world: For most people most of the time, working in the “Gig Economy” is an act of desperation that you do only because the alternative is unemployment or an even worse job.

Working a gig is exactly like being a temp. It sure as fuck beats unemployment, but unless you’re a teenager or a bored housewife, temping is not desirable.

People –like businesses– want predictable, recurring revenue. 

In business, we call this “quality of revenue.” Investors pay a premium for companies with high quality revenue. Here’s how Bill Gurley of Benchmark Capital (led Uber’s Series A) described

Investors favor pricing models that provide a high level of predictability and consistency in the future. It is easy to see why revenue visibility would have a positive impact on a Discounted Cash Flow analysis. The more certain you can be of future cash flows, the higher premium you will put on a business, and as a result, you will see a higher price/revenue multiple.

-Bill Gurley, All Revenue is Not Created Equal: The Keys to the 10X Revenue Club

Working in the Gig Economy is the worker equivalent of an transactional eCommerce company reliant on SEO. Times may be good now, but you never know what tomorrow will bring. The flick of a programmer’s switch can leave you ruined .

And while the same can & does happen to full-time employees, with employment comes a financial safety-net called unemployment compensation.

A financial safety net… yeah, who would want that?

Getting Unstuck

“The only difference between Elite Entrepreneurs and those just getting started is the amount of time we stay stuck.”
Dan Martell

Winning is all that matters. You only have to get to the top of the mountain once. How much time you spent falling down at the bottom beforehand doesn’t matter (other than the opportunity cost, I suppose.)

Q: How long did it take for Steve Jobs to get back on the horse after Apple fired him?

A: More than a few minutes. Also, who the fuck cares?!?

Being able to get yourself out of a rut is a good thing. But even the best of us end up there sometime.

Something to think about.

Letter to a Fired Founder

A friend of mine just got fired from his startup. As a founder, he was classy, loyal and relentless. He behaved like a champion. But despite all this, he got shitcanned nonetheless. So I wrote him a letter:


I know you must be feeling pretty shitty right now. Probably a little bitter too. I know I would.

[!Name], I’ve seen you in action. You’re an inspiring leader. You’re a motherfucking relentless hustler. And you’ve got the heart of a lion.

If you go off and start a company some day, I’d be honored to work for you. Or co-found. Or invest. Or whatever.

In the coming weeks, I’d advise taking some time off, investing in your mental health and getting out of the valley. This is what I wish I had done.

Travel. Mentor. See the world outside of Northern California.

It’s not a marathon, it’s a fucking ironman.

And whenever or wherever you need me, I’ll be here for you. I am your friend.

Thanks for being part of my life and supporting me so much over the last few years. I hope that now I’ll have the chance to be there for you in your time of need, whatever that looks like.


-Matt Mireles

Be there for your friends, the real ones. Tell them what you see in them. They deserve it.

Ask for the Money

I have a technique for asking investors for money. At the end of the pitch meeting, I ask:

“So… are you in?” 

It’s that simple.

If you’re a founder and you’re raising money for your startup, you need to ask for the money at the end of the pitch meeting. Cuz if you don’t ask, you won’t get.

So many people don’t do this.

Don’t be one of those people.

No One Is Self-Made

One of Robert Putnam's famous scissor graphs

Fatherhood has changed me.

In my pre-fatherhood twenties, I thought of myself as a self-made man. I viewed the world through an individualistic, narcissistic lens and my accomplishments, I believed, were largely my own. I had taken risks and busted my ass to get whatever I got. I congratulated myself and began — quietly — to scorn those who had failed to put themselves in the right industry, the right career. They were weak, I was strong, and that’s the game.

Fatherhood has taught me that no one is self-made.

My son will never remember how much he has been given. He will never remember the love he got at three in the morning when his tummy ached from constipation pains. But it — along with the thousands upon thousands of other gestures of love — will teach him to feel safe and secure in his person, which in turn will fuel his confidence and one day (I hope) enable him to take economic and social risks that propel forward his civic, social and business life.

Matt Reading to Luca

I am constantly impressed by how much my son depends upon me, upon us, for guidance. If we don’t teach him to eat with a fork, he will not eat with a fork. If we don’t teach him to be kind, he will not be kind. If we don’t teach him to read, he will not read. It takes effort, consistent effort, to raise the man we hope that he will become.

Civilization is not an automatic process.

Stephanie and I read to him regularly. When I stop, Luca cries. He will take this for granted as a natural part of life, because it is all he knows. Yet it will give him a permanent leg up in life, especially compared to his peers whose parents are not so involved, maybe because they’re too busy trying to make ends meet or maybe because they simply don’t know that it matters.

So too will the $20,000+ / year (!!!) we’re investing in his education at the Palo Alto daycare (in SF, the pricetag was $30k) pay off in ways large and small. His best friend is the child of two Harvard graduates. He and his little girlfriend have so much fun together. Amidst all that fun and play, they talk and teach each other things. The effect of peer influence is real. He learns from her. I see it. For a 3 year old, his language skills are quite advanced, yet she talks even more than he. His growth accelerates when they are together. And so too does his advantage.

My boy is not above hitting, kicking or biting. He is a child. I am the disciplinarian in the family (shocking though it may be to my elder siblings). He needs guidance — sometimes stern, sometimes soft. But he needs his parents, both his mom and his dad. Daddy in particular doesn’t fuck around. Resistance is futile, as I like to say. He knows that.

In those moments when I’m dragging him to the naughty corner (a pain for us both), I often wonder what would happen if I wasn’t around or if I didn’t care. What if Luca didn’t have a dad who was around? How would he turn out? It’s easy to imagine a different life, one without the discipline, without the guidance, without daddy to enforce lessons of right from wrong.

Same with Stephanie. Whereas my favorite past-times with the boy are reading and wrestling, hers are talking, more talking and playing with him & his toys (something I find dreadfully boring). Were it not for Stephanie, he’d be physical brute with middling verbal skills.

Together, we give him what he needs. Or so we endeavor.

Were it not for both of our efforts, our incomes and our social capital, where would he be? How could he hope to compete with the children with the children who are so priveleged?

Such are the thoughts that have been occupying my mind as I read Our Kids — The American Dream in Crisis by Robert Putnam. The book tells the story of an America increasingly divided — not by race or ethnicity — but by class and educational attainment.

Over the last 40 years, college-educated, rich Americans have clustered together, enjoying all manner of positive network effects much like the ones I just described. Americans without college degrees are living together too, suffering from the same sort of network effects, except in reverse: crime, drug use, low expectations and bad schools.

The graph below and other “scissor graphs” like it tell the story.

One of Robert Putnam's famous scissor graphs


They all look ominously similar. Each graph shows two lines diverging over the past several decades in the experiences of American kids at the top and bottom: in the share born to single mothers, in the chances that they’ll eat family dinners, in the time parents spend reading to them, in the money families invest in their clubs and lessons.

“Every summer camp you went to or every piano lesson you got or every time you went to soccer club, you were getting some advantage,” Putnam says, “that somebody else out there — Mary Sue — was not.”

from The Terrible Loneliness of Growing Up Poor in Robert Putnam’s America

This other America is not foreign to me.

Before I was a father, before I was an entrepreneur, I worked as a 911 paramedic in the Harlem and the Bronx. Monday through Thursday from 2005 to 2008, I attended Columbia University, taking courses in international politics at the best political science department in world. But come 7am on Friday, I put on the uniform and got to work on 12 X-ray (central Harlem) or 17 Willy (South Bronx). The people we served were poor. We were mostly tourists in their lives, parachuting into their living rooms or street corners to fix an asthma attack or an overdose.

In my time, I took care of a woman who’d had 30 abortions. I saw the police gleefully electrocute a man just because he made some noise in his jail cell. I did CPR on a floppy baby whose father had accidentally smothered the child in his sleep.

Now that I’m a father, I think often of all the sons and daughters growing up in that other America. It was a very different America from the one that my son will know.

How will these kids in that other America fare in a future where software has eaten the world?

Given the competitive nature of the education system and the job market, what chances for advancement will they have? How is it right and just that the circumstances of my son’s birth will determine so much of his future?

Their prospects look grim.

This is not the America that I want.

This is not the legacy that I want to leave behind.

This is not the American Dream.

I’m not sure what the answer is or how I can be a part of it, but as an entrepreneur sitting in the heart of Silicon Valley, I’m actively looking to be part of the solution.

If you know anyone who’s working on this problem, please send them my way. I’d love to be a soldier in this struggle.

Goodbye, Alarm Clock. How I Hacked Google Calendar to Call My Phone in the Mornings.

Oh Fuck I Overslept!

Oh Fuck I Overslept!

I used have a problem waking up on time. Like most early adopter types, I no longer have a physical alarm clock. Instead, I use my iPhone. However, the phone charger is in the kitchen and I always charge my phone at night. And for whatever reason, moving it back and forth from the kitchen to the bedroom just never worked. I think it’s because it was too hard to find the plug at night.

Not a problem really, except when I have a meeting scheduled in the morning and I don’t check my calendar the night before because my phone is in the kitchen charging.

First world problems, I know.

But, being the life hacker that I am, I came up with a fanfuckingtastic solution that I’m going to share with you today.

Whenever I want to wake up at a certain time, I create an event in my calendar called “Wake Up” and then at the appointed time, I get a phone call telling me to wake up. 

Here’s how it works:

Step 1
Create an event in Google Calendar called “wake up” at the time you want the alarm to go off. This can be a recurring event. I use Sunrise as my gCal client and here’s what it looks like:

Matt's Sunrise Calendar Screenshot


Step 2
Login into Zapier and create a new task. This is really easy and involves zero coding. If you don’t have an account, create one at

Zapier Create New Task Screenshot


Step 3
Choose Google Calendar as your trigger app. .

Choose Google Calendar as Zapier Trigger screenshot

Step 4
Choose “Event Start” as your trigger. 

Choose Google Calendar Event Start as Zapier Trigger screenshot


Step 5
Choose Twilio as your action app.

Choose Twilio as Action App on Zapier screenshot


Step 5
Choose Call Phone as action.

Choose Call Phone as Twilio Action on Zapier screenshot


Step 6
Connect your Google Calendar and Twilio accounts to Zapier if you haven’t already.

If you haven’t connected your Google account to Zapier, you will need to now. Again, pretty painless

If you haven’t heard of, connected or signed up for Twilio, it’s a cloud-based telephony service that allows you to automatically send text messages and make phone calls. Very useful. Twilio is a bit developer focused as a brand and if that intimidates you, then maybe checkout SendHub.

Step 7
Choose the specific Google Calendar you want to use.

Google Calendar picker on Zapier screenshot

Step 8
Make sure “time before” is set to zero. Delete whatever is in the “time before” fields.

Time Before google Calendar in Zapier screenshot

Step 9
Add a Custom Filter that looks for the text in Google Calendar’s Summary field to contain the phrase “Wake Up.”

Custom Filter "Wake Up" Google Calendar in Zapier screenshot


Step 10
Setup your automated phone call, including your call from number, your cell phone number in the call to number, what you want the computer to say and the kind of voice you want to hear it in.

Automated Twilio Phone Call on Zapier screenshot

Step 11
Test it out and turn it on!

Test out Zapier zap screenshot

Step 12
Whenever you want a wake up call, add an event in your calendar called “Wake Up” and get your ass woken up by phone call and a female computer voice that berates you and tells you to get up.

This works really well for me because I’ve received near Pavlovian training to always hear and respond to the sound of my phone ringing, regardless of where it is in the house.

Do it and never oversleep again.


Mission Driven Companies Do It Better.

The North Star

Mission driven companies do it better. They execute better. They scale faster. They grow quicker.

In my first company, we were anything but mission driven. And this caused us huge problems.

If you had asked 5 people in the company, “What does your company do, exactly?” you would have gotten five very different answers. Each employee, each founder had their own idea of what the company was about:

  • “We’re a machine learning company.”
  • “We’re a cloud labor company.”
  • “We’re a transcription company.”

And on and on.

Ok, you’re wondering, so what?

Practically speaking, this meant that I, as a the CEO, had to micromanage the team if I wanted the company to build the product and customer experience I had envisioned. This is bad. I had failed as a leader in a big way. People didn’t know the why, so I had to constantly decide on and explain the what. This sucked. “Why don’t they get it!?!” I would wonder, frustrated.

Ultimately, the fault was my own.

Think about it from the employee’s perspective. They show up, join the company, poke around the product, listen to the founder talk about their big dreams of riches and world domination, yet each founder’s dream is unique or in conflict somehow with the others. And so what is the employee to do but come up with her own interpretation, her own vision of what matters and what is important. And then use that to make decisions––decisions that invariably affect the product and the customer experience.

The more employees you have, the bigger the problem gets.

Things got exponentially worse when I was raising money. Some CEOs can still manage the company’s day-to-day while fundraising. I was not such a CEO. Fundraising consumed me. It forced me to delegate. And that resulted in things going off the rails.

When fundraising was finally done, I returned to a company focused on a different vision than the one in my head––one more focused on solving hard technical problems than customer problems. At the time, I blamed the team. Now I blame myself.

Later, when I ventured off the island that was my own company, I experienced the privilege of meeting some truly great companies. One thing I noticed of all the great companies was that everyone in company was on the same page. Everyone knew what the mission was and everyone used the same language to describe it.

This alignment was an extraordinary management tool. Because everyone was on the same page, mission and outcome wise, management didn’t have to micromanage people. And because they didn’t have to micromanage people, they could focus on bigger things. They could delegate to people in the lowest levels of the organization and know that the employees decisions would reflect the management team’s intent. They could build a flat hierarchy that retained the best people longer.

Awesome. And such powerful leverage.

Being mission driven doesn’t mean being progressive, enlightened or humane. Being mission driven simply means that everyone in the understands the organizational end game and actively uses this understanding guide their day-to-day decision making.

Being mission driven means that everyone in the organization knows not just the ephemeral what, but the unchanging why. Being mission driven means that everyone understands and is focused on the problem you’re trying to solve, not the current instantiation of the solution.

The CEOs of mission driven companies operate with more leverage than their counterparts. Instead of a swarm of men dedicated to doing their bidding and executing their commands, they have a hivemind of humans working together in parallel to solve a single well-defined problem. That’s leverage! And in the long run, that’s what wins.


Update: My friend Vijay Sundaram of Found (acquired by Hightail) made a comment via email that I think is worth sharing:

Great write up man, I agree wholeheartedly. Unfortunately to a huge portion of the venture and entrepreneur population this is “fluff” but nothing you’ll say will make them get it. Couple additional thoughts come to mind re: the underlying problem:

  1. Failure to instill “mission mindset” in employees – sometimes it’s a an issue of founders not operating with a mission in mind, sometimes it’s an issue of founders communicating that mission well, and sometimes it’s an issue of the employees that’ve been hired not being willing or capable of internalizing that mission
  2. Even with a “mission mindset” among employees, it doesn’t always translate into action (or the right action) – founders have to instill the mission mindset AND THEN have to demonstrate how to translate it into operating principles and decisions by example and consistency. This is where founder-managers are so crucial, because they do this day in day out by their wiring and why companies can flail despite an excellently articulated vision and mission (by a founder who doesn’t know how or do the hard work to translate to execution).


Be Kind. It Pays.

Be Kind

“Some of the best companies I’ve invested in were referred to me by founders I’ve rejected. “
-Anonymous Investor

I’ve been meeting with a lot of VCs lately. Not because I’m raising money mind you, but because I’m considering becoming one of them. And them, it turns, includes quite a range of personalities and attitudes.

The worst investors are the most transactional, the most focused on the deal, on the what you can do for me right now. In their minds, they see themselves as company pickers. They believe that their job is to find and choose the great companies. And if you’re not running a great company, you’re not interesting.

The best investors are the most focused on building long-term relationships with people. Yes, they too want to invest in great companies, but they know that the real challenge isn’t picking, it’s being picked. They ask not: “How do I find the great companies?”, but “How do I create a situation so that the best companies find me?”

Because when it comes down to it, the best entrepreneurs already have an idea of who they want to work with before they start pitching. They read blogs and books and Hacker News. They get advice from friends and advisors and mentors. They know.

The reason that relationships are so much more important than “deals” is that the ideas & the businesses in this business change faster than the people running them. That kid who was pitching a dumb idea yesterday very well may have learned an important lesson or two in the process of having that first idea fail, and tomorrow––who knows? Maybe she’ll be the next Travis Kalanick.

Or maybe she won’t.

But there’s a decent chance that she’ll know the next Travis Kalanick, that she’ll drink beer with him in the park and offer to intro him to her favorite investors. Cuz that’s how this ecosystem works. Maybe she didn’t succeed, but if she’s any good she has a sense for what success smells like (at least she thinks so) and she wants to be the woman who helped success achieve its ultimate destiny. She wants success to rub off on her, on her reputation. And so––selfishly––she helps the new kid on the block by making some key introductions. Because this was what was done for her 12 months prior. And so the virtuous, wonderful cycle that makes Silicon Valley tick continues.

In all this, a venture capitalist has but one hope––that the great deals arrive, somehow, on her radar, preferably in her inbox. She meets lots and lots of entrepreneurs, yet mostly says no.

Having been on the other side of this, I can say with great confidence that how you say “No” to someone matters quite a lot. This includes whether you actually say “No” at all, or instead leaving the person hanging and hoping in vain and frustration. If there’s no “yes” on the horizon, a firm and ideally thoughtful “no” is the next best thing. You’d be amazed at how many people simply go dark and stop responding!

I mean, fuck those guys. Have some respect for the entrepreneur on the other side of the table.

In the cruel, unforgiving world of entrepreneurship, a good, high-quality “No” is an act of kindness, an affirmation that you’re a peer and deserving of a response. It’s like being told that that one mirage you keep seeing on the desert horizon isn’t a lake after all, so focus your search for water elsewhere.

Selfishly, you should know that this kindness pays, that the entrepreneurs you treat well and impress with your demeanor will be keeping you in mind, touting your awesomeness to friends and later referring young hopefuls your way.

Just last week, I referred someone to a VC who told me “No” four years ago. Because I was impressed. And it stuck with me.

Note: This post was inspired by Ben Narasin @ TripePoint Ventures, George Zachary @ Charles River Ventures and Jon Callaghan @ True Ventures, among many others.