Monday, May 27, 2013

Dear Entrepreneur

Like many investors, I was entertained by Andy Dunn's recent rant, "Dear Dumb VC"
http://bit.ly/12bW9UY

His essay lays out his criticism of VCs by citing the following facts:

* You don’t realize you are going out of business
* You think you can help entrepreneurs
* You spend a ton of an entrepreneur’s time before deciding
* You have lots of advice about what entrepreneurs should do
* You never tried the product
* Your portfolio sucks
* You are late

I wasn't too offended because A) I'm not technically a VC, B) I've experienced many of the same things, and C) It's clear that Andy is taking a stance for effect (something I know a little about), and he criticizes his own failings in other posts.

The always thoughtful Mark Suster penned a detailed response to these criticisms from a VC's point of view, which is well worth reading:
http://bit.ly/12bX0VV

Mark lays out a persuasive case for why VC as an asset class is actually positioned well to profit over the next decade (hint: Compare the number of Internet users in 1999 to the number in 2013) and points out that while Andy's criticisms are true of some investors, the many good investors (including the ones Andy thanks in his essay) act far differently.

Rather than re-treading Mark's arguments, I just want to take Andy up on his suggestion and lay out the equivalent criticisms of entrepreneurs.  This is actually something I've done before!

You don’t realize you are going out of business:

99% of startups will fail, including 90% of VC-backed companies. 80% of entrepreneurs believe they will succeed (which begs the question, why are the other 20% entrepreneurs!).

You think you don't need any help from VCs (other than their money):

Imagine you had a friend who never called you except when he needed money.  The rest of the time, he talks trash behind your back.  Would you still like him?

You don't give VCs the full story before asking them to make an investment decision:

I have to drag financials and customer testimonials out of most entrepreneurs. These facts should help you get investment. And investors who don't bother with the details that matter to building a business aren't going to be able to help you build a business.

You ask for advice, but don't intend to follow it unless it backs up your existing mental plan:

People think asking for advice helps investors to buy in. Yes, but only if you actually listen! I put entrepreneurs who want me to be an advisor on a "probationary" period to see if they actually want my advice, or just my imprimatur. Do you know anyone who's eager to pay to be a figurehead?

You never investigated my investing style:

My Angel List profile is public and states exactly how much I invest. Yet every entrepreneur still asks me that question. How do you think that makes me feel?

Your portfolio sucks:

If you think a VC is terrible at picking winners, why are you pitching him or her?

You are late:

Yeah, there's no excuse for this one!  Investors are terrible at being on time, and it's both disrespectful and eminently avoidable.  I feel bad every time I'm late or have to reschedule (though both happen from time to time).

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