9 VCs You're Gonna Want to Avoid
Editor’s Note: Fundraising is tough. So more and more of you bootstrap as long as you can. But once you get close to $1 million in revenues, VCs will come calling. That’s right: they’ll come to you. Cash flow positive startups remain hard to come by. But you won’t want to talk to all of them, says Found|READ contributor, Larry Chiang. So he offers this list of VC archetypes you’ll definitely want to avoid, just as soon as you hit the $900,000-mark.
1) Mr. Armchair. He’s a Friday afternoon Chairman. He knows exactly what he’d do as board member of facebook, Google, MySpace.,YouTube. Too bad his portfolio company’s don’t get the same enthusiastic coverage.
2) Mr. One-Hit-Wonder. Yes he sold Postage.com for $200 million (and kept $15 million) so if you wanna hear war stories from the ’90s, take this GSB alum’s money.
3) Mr. Spray-n-Pray. He cites being founding CEO as his Operations experience. (Translation: He was a interim CEO for his last venture firm before company/portfolio implosion and subsequent fund implosion. His fund is a catch-all and he tries to participate in every Sequoia backed deal.
4) Mr. Revisionist Historian. Knowing Pierre Omidyar, living near him in Hawaii and investing in eBay after it went public doesn’t count for didly.
5) Mr A**!@#!-BFF all rolled up into one. He remembers to comp you tickets when your alma mater rolls into town for Stanford hoops. He’ll choke stock outta your co-founder just to up his percentage from 42.5% to 46.25%. On your board, he roasts you one quarter and sing accolades the next. He’s three times divorced and a heck of a good time to go to Vegas with.
6) Mr. Blue Blood. His IQ is double your 155. He’s 5th-generation money. He’s so far ahead of the curve that he married the trophy wife 1st (vs. other VCs whose Trophy is 2.0). His kids (age 2/4/7) can debug your DB using their PlaySchool Mac and will be smarter than you by June.
7) Mr. IRR. He’s old school and he’ll hit his rate of return goals even if he has to give birth in the first person. He goes into deals at a 45 degree entry angle. His bio doesn’t list his alma mater because the 30 companies he IPO’ed take his alloted two pages.
8) Mr. X-Product Manager. He says he’s seeking alpha, but has zero stomach for beta. Beta here, of course, meaning risk not software version. If team + market opportunity + cap table + due dilligence + angel syndicate are in perfect order, he’ll pull the trigger. Number of winners = 0, but he can pee on a parade seven ways to Sunday.
9) Mr. Regurgitator. At HBS, he did well by parroting and that talent has served him well. Once, he culled the wrong case study resulting in a buy rec on BioPay and wallah! Exit-a-mundo! He’s so lucky that in ’08 he’ll be reverse-justifying his funds success.
OK, I lied. There are 12 of them, but if I told you this, I didn’t think you’d keep reading…
10) Mr. Imitator. Read the GSB case study about a young vc getting 20% of a company for nothing (an urban myth) and has been trying to replicate it ever since.
11) Mr. Retired-on-the-Job. He’s rich but mentally checked out. Has ‘income on his cash’ is greater than ‘carry on his fund’ even if they “discover” all 3 of the next Googles. Has tracking software for houses, property, assets. One time he bought a car that he already owned. Uses duck9 sms alerts — not for credit card bills, but for which girlfriend in Austin, San Fran, New York needs ‘xoxoxox.’
And now, A Parlor Game: Match the statements below with VCs above. (Answers will be posted tomorrow!)
* He’s caught in ‘Never, Never Land’ between no real operations experience and no real finance experience.
* Extra dangerous cuz he’s never had a W2/1099 over $200,000.
* Woo him by buying his kids SAT test prep books.
* Thinks pretexting is a great way to do due diligence.
* Brings a checkbook to the Menlo Park Starbucks.
* Has his assistant print out email cuz he needs the 24 point font.
* Would interrogate your dad and calls registrar’s offices when reviewing VCs or … product demos.
* Knows the MIT of India, China, and Timbuktu.
* He’s not big on Sand Hill, but in europe he’s huge.
* Makes you work for the money by slicing his $2 million into 10 pieces with water marks you need to hit for another traunch.
* Knows all of your present and future mistakes.
* He will make a half dozen intros that are revenue opps. But he alredy knows you’ll drop the ball, and so has a CEO ready to replace you after the B-round
* He just called. He left a vm that he’ll swing by in a limo and pick you up in 15 minutes for a concert at Shoreline. You better find some non-open-toed form of footwear ASAP.
Serial founder Larry Chiang is a frequent contributor to Found|READ. His earlier posts include: How to Work The Room; and 8 Tips On How to Get Mentored .
Larry’s current company is duck9, which offers “deep underground credit knowledge,” educating student borrowers on how to establish and maintain good credit, and endeavors to graduate them with a FICO over 750. Read more about Larry and his first company, United College Marketing Services, in the Oct. 15 issue of Business Week.
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What is your nickname Larry?
This is freaking hilarious. I know at least of 3-4 types in this post personally. I wish nothing more than a VC wipe-out, if not for anything other than to see some of these types go quietly into retirement.
Avoid them all, and startups the world (valley) over should institute a boycott of the VC industry. Some of the worst of them dont wear socks with their loafers!
Clearly anyone who got an MBA is qualified to identify and grow businesses. Everyone knows how rigorous a two year MBA program is. Those guys who call it a 2-year happy hour clearly didn’t take the program seriously….
;)
Larry:
Just what we need on a Tuesday in January! Thanks for your list of 9+ VCs to watch out for. Seems like you could have called your list a Rogue’s Gallery, but you chose to be much kinder in your title! I linked to you post in my blog for the Innovators-Network in hopes that some of my readers will find your piece funny and give them pause for reflection.
Anthony Kuhn
Clueless VCs and bitter entrepreneurs – the yin and yang that makes Silicon Valley the uglier, nerdier brother of Southern California. We all need to get the hell out of here.
Oh my god – I know all of these guys. This was perfect Larry.
Brilliant and unfortunately spot on. I believe that you have 13 “Parlor game” questions for 12 Mr.s. In any case here are my answers based on first-hand-experience:
1) Mr. Spray-n-Pray – He’s caught in ‘Never, Never Land’
2) Mr. Armchair – Extra dangerous cuz he’s never had a W2/1099
3) Mr. Blue blood – Woo him by buying his kids SAT test prep books.
4) Mr. Regurgitator – Thinks pretexting is a great way to do due diligence
5) Mr. One Hit – Brings a checkbook to the Menlo Park Starbucks.
6) Mr. Retired Guy – Has his assistant print out email cuz he needs the 24 point font
7) ROTJ – Would interrogate your dad and calls registrar’s offices
8) Mystery 13 question – Knows the MIT of India, China, and Timbuktu. ??
9) Mr. Imitator – He’s not big on Sand Hill, but in Europe he’s huge.
10) Mr. Revisionist Historian – Makes you work for the money by slicing his $2 million into 10 pieces
11) Mr. Product Guy – Knows all of your present and future mistakes.
12) Mr A**!@#!-BFF all rolled up into one. – He will make a half dozen intros that are revenue opps. But …
13) Mr. IRR – He just called. He left a vm that he’ll swing by in a limo
I think that the mystery number 13 should be:
Mr. Near do well – Wants to be a partner, or a more successful partner. Is likely an associate (young) with an excellent education. Thinks he knows everything because he used to be Mr. One Hit Wonder (or less). He won’t take the time to meet in person because he doesn’t really “get” the value proposition – in spite of a world class referral. He asks for a phone meeting with the entrepreneur not to get any facts straight, but to make sure that he has an answer for his superiors, or peers as to why he passed. Then he is the first joker to contact the entrepreneur when their start-up hits the press due to rapid market traction.
Larry, Thank you!
There’s another one: Mr. “People are Most Important”. Stresses in order of importance, the quality of the people, the viability of the marketplace and then the product. Probably got job because he knows or worked with VC people previously in a former job. Then as soon as the company gets started, “where’s the product, we’ll reshape the market, and people are expendable. Brings in a new management… have to satify the VC’s”
There is another one… Mr. Embezzler. We got involved with a Private Equity advisor to help us get funding through their connections. The dude turned out to be wanted by the FBI for embezzling 100′s of 1000′s of dollars from investors while the funds were en route to the bank. Unreal. Luckily, we found out early in the game, before the funds were transfered.