November 28, 2004
Ten Commandments for Entrepreneurs
Over the next few of weeks, I'm going to post my version of "The Ten Commandments" for Entrepreneurs -- my ideas of the 10 most important "procedural" things to keep in mind when you approach a VC.
These insights, for whatever they're worth, stem from nearly 20 years as a lawyer who represented entrepreneurs seeking VC funding, as well as 6+ years now on the other side of the table as a VC evaluating funding pitches.
Although I'm going to write about 10 Commandments, there are really 13, the first three of which are, sort of, "Uber Commandments": (1) have a great technology idea, (2) have a great team and (3) pick a huge market in the midst of a major transition. That's the hard part -- and it's where advice from a VC can't really help you. But the next 10 Commandments are things you can control, more or less, and you should take advantage of this whenever possible.
Commandment No. 1:
Whenever you're approaching a VC firm for funding, it's always optimal (surprise!) to connect with the partner in the firm who has the closest investment interest to the space your startup is going after. As busy as most good VC's are, it's usually hard to stop what one is doing and take time to come up to speed on a new market unless one is making a calculated shift in one's area of investment interest (which does happen --- over time).
No matter how hard you try as partner in a VC firm (and I have to say that, at Mayfield, I’m pleased at how hard we try), it’s difficult to be as interested in a deal passed along to you by a partner as you are in one that comes in directly through your network. A number of reasons, but it mostly comes down to the fact that most good VC's are pretty busy and – for a referred deal -- you don’t have the same “context” as you do for a deal that comes to you directly from someone you know.
Not to say that good things don’t happen. At Mayfield and some other firms, the partners do pretty readily pass around deals that seem more appropriate to the interests and backgrounds of other partners. For example, at Mayfield, we have done two deals this year that came in initially through me but ended up being “done” by other partners (who, BTW, are better suited for the companies than I would have been).
Despite the above advice, however, there is a caveat: it's definitely better to get a good personal introduction to any partner in a particular firm than to it is to merely approach the “right” partner out of the blue. For a whole variety of reasons, VC firms almost never seriously consider deals that come in “over the transom”.
So, whenever possible, do your homework on the partners in a particular firm, and try to get a personal introduction to the one whose background and investing interests seem to best fit your company. From an informational perspective, this is usually not hard to do. Most VC firms have good descriptions of their partners’ backgrounds and interests on their web sites, and you can also tell a lot about what a partner is interested in by looking at the deals they’ve done.
November 28, 2004 in Weblogs | Permalink
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Posted by: pauline | Mar 3, 2005 2:55:00 AM
FYI, love your blog. A big thanks!
Posted by: Randy Charles Morin | Mar 9, 2005 6:48:45 AM
"For a whole variety of reasons, VC firms almost never seriously consider deals that come in 'over the transom'."
Well, the universe seems to be awash in ways to make mistakes and to have only thin threads of ways to be successful.
In fact, for the future of information technology and for the success there needed by the VCs, the VCs are poorly connected with nearly all of the crucial entrepreneurs. Mostly the VCs do not know the right people.
Nearly all the crucial origins of the best in information technology was for US national security; fortunately for the US, that work was commonly done with excellent standards and results. In particular, from that work and more, the means of technical project review are well polished, practiced, proven, and established. In these means, "someone you know" is, and should be, irrelevant. If the VCs are to be successful with information technology, then they need to make good use of these established means.
Posted by: Norm Waite | Mar 13, 2005 3:51:35 PM
Really looking forward to reading all the commandments. Am a novice when it comes to VC's and what they do and how they work. Would help if you could list VC companies somewhere although I could search on Google. But Google gives one a lot of junk and I am sure your list will be junk free.
Also, are you open to questions?
Posted by: Navin | Apr 8, 2005 4:44:01 AM
I went to a Angel Investor meeting not so long ago, and found the whole experience to be very helpful in learning what works and what doesn't. At that level, you have to really impress to get the funding. Some of the companies presenting had full-time employees that just went around the US participating in these events. You really need to have your presentation down. I agree with the 13 slide max. That is really enough. Don't slam the slides with too much info, and make sure that people in the back of the room can see. Remember, you are just teasing the audience. Get them to get the details after the presentation!
Posted by: kuduo | Jul 16, 2006 12:09:01 AM