Category Archives: Venture Capital

Choose Investors Carefully or Not at All

Venture Capital

Choose your investors as carefully as you would choose a spouse. It should be obvious, but we focus on getting financed, as if money were the only object. Investors are partners. As with marriage, in which the wrong partners can ruin your life,  so too with investors. The wrong partner can ruin your business. That can also ruin your life.

It should be obvious but it isn’t. Entrepreneurs long for financing. I had a friend who spent years trying to "get financed" and did nothing but shop his deal in the meantime. That’s deadly. He was like the empty-eyed unshowered two-bit gambler in Las Vegas, living poorly off hope for a big win.  Don’t let the lure of "getting financed" cloud your vision. You’re much better off with no deal than the wrong deal.

I’ve been playing phone tag with Dave Chen of OVP Venture Partners because I want to credit him for the first time I heard somebody suggest entrepreneurs should choose a venture capitalist as carefully as anybody should choose a spouse. I heard him give a talk about that subject at the University of Oregon New Venture Competition.

The wrong partners will push you in the wrong direction, want the wrong thing. Dave pointed out the problem very well. With investors, you don’t just get their money, you get them also in business with you. You’re going to wake up with them every morning, and go to sleep with them every night (metaphorically, but still … ).

The right investors will be good partners. They know your field. They have contacts who can help. They have antennae pointed in the right direction. They have relevant experience.

How can you tell? Keep your eyes, ears, and mind open. You’re not going to get very far down the road without meeting them, spending time with them, talking about issues. Don’t go blindly unconcerned about compatibility. Have the courage to say no to partners who don’t fit. Imagine them as everyday companions. Will they help you? How? Will you want to get them on the phone? Will you look forward to meetings.

Thanks to A VC for pointing me to The Funded, a website collecting reviews and opinions from entrepreneurs about the venture capital firms that funded them.  This is a spectacularly important site to someone looking seriously at taking venture capital money.

–Tim

Hooray! At Least one VC Says Spelling Counts

Business Planning, Venture Capital, Writing

I’m so glad to see I’m not the only one left. I too, like Stephen Fleming, read a lot of business plans, and damn! Bad spelling and bad grammar throw me off, I can’t help it. It’s distracting, like a bad note played in a concert.

I suppose I should add that Stephen Fleming calls his site "Academic VC" and he teaches entrepreneurship too, so maybe you’re not going to believe him either, if you are one of those who believes spelling and grammar are an obsolete remnant of a dying age. Here’s a quote:

"When I teach my classes on entrepreneurship, I always have at least one student protest my statement that ‘Spelling counts.’ Especially when they’re not native English speakers. ‘It doesn’t affect the meaning! And it certainly doesn’t affect my ability as an entrepreneur!’"

"Sorry, folks, but spelling does count. Not because correct spelling is a virtue in and of itself — William Shakespeare couldn’t spell his own name, when he wasn’t busy taking credit for the Earl of Oxford‘s plays — but because of what it says about the person sending me the document. Usually the CEO."

"If you send me a document that says ‘Our plan estimates there costs to be…’ or ‘the product and it’s derivatives,’ you are telling me that (1) you don’t have good attention to detail, or (2) you’re in a hurry, and (3) you don’t know when to ask for help. None of those make me want to invest in you."

The thing is — and this is me now, not Stephen (although I’m pretty sure he’d agree) — decent simple and correct business writing is not that hard. Nobody says it has to be rhymed or suitable for framing, but at least know the difference between their and there and it’s and its and, my personal favorite, then and than. There’s also this trend to make all plurals possessive, with apostrophes.

We all make mistakes. I’m a good writer and a good speller but I make tons of mistakes from simple typos or writing too fast, and it’s hard to read and catch your own mistakes. In my case my mind moves ahead of my eyes and knows what I intended, sometimes missing glaring errors. But having somebody else look at it is a very good idea. It shows respect for the reader.

In the age of email, and IM, and txt, I suspect the "oh lighten up, you know what I meant" trend will continue. So at least today I’m glad to see Stephen’s post.

Here’s the link to the full post; Academic VC: Spelling Counts

— Tim

VCs, Decisions, Useless Information

Venture Capital

How often do you — consciously or not — delay a decision by gathering useless information? How often do you then skew the decision by overvaluing that useless information.

Will Price in Decision Making and the Venture Capital Process cites some scholarly research on this and relates it directly back to the venture capital decision. Wait for information, delay, receive the information, twist the decision. The skewed decision ultimately justifies the delay. And the beginning assumption is that the extra information shouldn’t have affected the decision, not by delaying, not by affecting, anyhow.

This is definitely worth reading for its impact on venture capital decisions, but also, any management decision. Take it back to your own business, whether or not you’re raising capital: do you do that?

He concludes: "The key take-away is that all of us, when making a decision, need to carefully think through what we absolutely need to know in order to make a good decision, rather than delaying decision making and leaning on the crutch of more time to gather non-essential data that may contribute to a poorer decision."