“Some of the best companies I’ve invested in were referred to me by founders I’ve rejected. “
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.
This is all 100% true, and has the added benefit of helping you sleep well at night.
“who knows? Maybe she’ll be the next Travis Kalanick.”
Hopefully in every way but personality, amen. #SayNoToAssholeQuotaOverflow
As entrepreneurs go, travis is as baller as they come. He’s ruthless, cunning, cheery and fucking good. You don’t get as far as he has unless you’ve got some sharp elbows.
Also, when I met him back in the day, he was super fun and friendly. Every interaction I’ve had with the man has been positive. —
There’s another important element here — relationships not only bring deals in, they also help the investor make the deals they do participates in better deals. If you really know who you’re working with – if you understand their motivations, their cunning, the depths of their commitment; if you can tell when they’re ‘faking it’ or when they’re feeling down, versus when they’re simply focused, ‘head down’, and doing the physical work of building a startup (or feeling on top of the world) – you’re going to better know when and how to trust them, and when and how to offer a helping hand. The best investors and the best entrepreneurs are actually trying to make an impact in the world — to change and improve how the world works. If you don’t have an appreciation and respect for the people you work with – if you don’t ‘know’ them – I find it very hard to believe that you’re going to truly be able to (or perhaps even, want to) coordinate efficiently enough to realize those impacts you set out to make.