Financial commitments send a message








Comments (Archived):

  1. William Mougayar

    I found myself agreeing with everything you said.A top VC who decides to screw the entrepreneur that way is not such a “top” VC after all.

    1. Gotham Gal

      you go it!

  2. JLM

    .Having been around the VC business for a long time and spending my time recently advising entrepreneurs/founders/CEOs, I am surprised at what a blind spot investors have as to their reputations.Of all the blindspots in the world — politicians being the other big one — VCs have a huge misinterpretation as to how they are perceived.There is no question as to how they want to be perceived as they constantly tell you but the reality of it is quite different and entrepreneurs/founders/CEOs often find themselves laughing up their sleeves at the substantive difference between self-perception and reality.The “soft sell” of the value add that particular investors bring to a deal is primarily a work of fiction promulgated by the investors themselves. There are some helpful investors who do bring a bit more but they are very few and far between.At the end of the day, VCs inventory money not personality.The distribution of interesting and charming and “nice” people amongst VCs is quite a bit slimmer than the general population but the number of delusional VCs is quite high.Having drifted into the business as an angel before that term was widely used, I catch myself often justifying certain behaviors with a crude assertion. I often hear myself telling complaining entrepreneurs/founders/CEOs — hey, it’s their money and the money always makes the rules.Entrepreneurs/founders/CEOs get that earthy sense of the order of things and go compliant which VCs may misinterpret as being embraced.The subtleties that you describe are very real but they are not nearly as damning as you suggest as there are many ill behaved VCs. It is almost expected behavior.One has to remember that VC is a business of 75% failure with OPM. There is a lot of negative energy.There is a huge difference between being a “banker” or a “backer”.JLM.

    1. Gotham Gal

      i like that. banker vs backer. very very true.

    2. JimHirshfield

      “VC is a business of 75% failure with OPM” Well said.

  3. Yinka!

    Amen to success as best revenge. You also bring up a great point for startuppers to look for (and ask directly about) when researching seed/angel investors: rate of participation in follow-on investments within their portfolio. It would be interesting to hear how such an investor would frame the “whys” of a low follow-on rate, especially if much of the portfolio companies from time period X are alive and growing (presumably with money from elsewhere).

    1. Gotham Gal

      it is hard to manage many companies, be involved, etc. big checks are generally methodical decisions. it is easy to spread the wealth early on. the checks just aren’t so big but the impact across the board is regardless of involvement.

      1. Yinka!

        True. And of course I can see the argument that spreading the wealth early on was necessary to ensure a few wins. In a context where the company’s doing well though, one would think the investor would follow-on (even if with the barest minimum amount and lowered involvement) to send positive signal to other VCs and thus, boost/protect their own initial investment.

  4. Laura Dierks

    Very thoughtful insights, indeed. It’s about relationships in the end, and good result for all involved. JLM’s comment about reputation is key as well – don’t we all need to think about what we put out in the world as it becomes part of who we are, especially when our actions match our words over time.

  5. pointsnfigures

    Interesting thoughts. I wonder how syndicates affect this thought. For example, Foundry Group has a syndicate. Suppose it seed invests in Acme Startup. What if in the next round neither the Syndicate or Foundry invest because company doesn’t fit with Foundry-and deal terms not right for next round by Syndicate? To be clear, I am not picking on Brad Feld but using their VC/Syndicate as an example because it’s unique. Most VCs don’t do syndicates.

    1. Gotham Gal

      syndicates are totally different. most do not do follow-ons at least that I am aware of

      1. pointsnfigures

        too new. no rules or etiquette. I honestly don’t know the answer. In the case of a small fund, if they are out of capital, they better help actively organize capital.