Blog Post

Read 'Em and Reap: Decoding the VC Poker Face

There are a lot of different words that can be used to describe the venture capital community and its relationship with entrepreneurs. Many of them, however, cannot be printed. For example, I once heard a VC say to an entrepreneur: “It would be easier to build a nuclear reactor at [UC] Berkeley than to execute on this idea.” And I once heard an entrepreneur say of a VC: “If I ever see that guy in a parking lot, I will speed up to hit him.” You get the idea.

The Sand Hill Road crowd does have a reputation. In an unscientific opinion poll, the collective sentiment was probably best described by a friend of mine this way: “Let’s just say you probably don’t want to grab a beer with a venture guy, or want your sister to marry one.” Yikes, I am a VC. No one wants to have a beer with me? Where did this rap come from? I think it all starts with the clumsy poker that gets played out in pitch meetings.

FoundRead LogoVCs are trying to get big returns for their limited partners. That’s all. If they can save the world or cure cancer in the process, even better — but that’s not their goal. Entrepreneurs, on the other hand, are trying to convert their dreams into reality. We all have deeply “vested interests” and all these intents converge in the pitch meeting, where everyone shows their proverbial “poker face.” (According to Joe Navarro, a former FBI counterintelligence agent and author who specializes in decoding nonverbal communication, “double-thumbs” is the “tell” for a player happy with the cards he’s seeing.)

Pitch meetings go something like this: Entrepreneurs bound into a conference room, show their PowerPoint deck, bear their souls, ask for a few million dollars and leave, not quite knowing where they really stand. And so they wait. And wait. And wait. Some receive the big checks to get their company off the ground, but more often than not, they wait only to be rejected. Worse, they never hear anything at all. Big checks are rare, so this scene of deafening silence is played out a hundred times a day in the venture world.

But from what I’ve observed on my end of the table, VCs can respond to a pitch in one of three ways — each of which is fraught with peril:

  • Enthusiasm: If the VC is excited about the idea and the prospects for the company, the entrepreneur believes the money is sure to come. If the company is funded, hallelujah, but if the money doesn’t come, the entrepreneur feels betrayed and led on — pins in the proverbial VC voodoo doll.
  • Criticism: When a VC tries to make recommendations or give feedback, it can be like telling the entrepreneur the baby is ugly. Often there is a sense that the VC, who probably doesn’t know much about this business, just criticized the best idea since alligator clips.
  • Stoicism: If the VC doesn’t say much or react at all, the assumption is that the VC didn’t pay attention and doesn’t care., prompting the entrepreneur to think, “What a waste of time, money and stress.”

It’s a quandary that every VC has to deal with. Other than handing over a term sheet straight away, any response risks damaging the VC-entrepreneur relationship. Can you blame us for sitting still and saying little?

Even Warren Buffett once famously said: “When the phone don’t ring, you’ll know it’s me.” Of course, even if the phone don’t ring right away, it doesn’t mean we’re going to say no. But saying as little as possible is still the most efficient, and benign, option we have —which is why it’s the response most entrepreneurs get, most often.

So, in your next pitch meeting, expect the VC poker face. We might appear indifferent, or stoic, but don’t read too much into our immediate reactions. (Except maybe those double thumbs.) Like the old saying goes, “Patience is a virtue.” And champagne gets better with time. Meanwhile, I will be careful in parking lots.

Richard Moran is a partner at the VC firm Venrock in Menlo Park, a former Accenture consultant, and the author of “Nuts, Bolts and Jolts: Fundamental Business and Life Lessons You Must Know.”

10 Responses to “Read 'Em and Reap: Decoding the VC Poker Face”

  1. Things I know not to expect from a VC:

    1. Keep my idea private. Solution? Announce the product. It’s complicated enough to be pretty difficult to execute in my case.
    2. Get a meaningful response after a meeting. Solution? Use high pressure sales techniques that require a response prior to moving on to the next segment. We call them “buy in questions”.

    I would much prefer to have a relaxed discussion rather than to basically turn my idea discussion into a high pressure sales meeting. Believe me, I have expertise in inducing feedback from those who don’t want to give it.

    Attempting to explain a technical idea and driving it as a sales meeting is simply stressful on both parties. I can in fact do it, but I’d wager most people, especially with purely technical background, cannot.

    Unfortunately, it seems that’s what I’ll have to do. Why can’t we be partners rather than poker players?

    This is frustrating already and I haven’t even started pitching. I am lining up my introductions to VCs, preparing an investors’ packet, and other stuff while I would much rather just talk to someone like a human being and not be distracted with this nonsense that is keeping me from building the business. I am one of those silly people who believe in having a decent mockup of a prototype first and successful market test with the intended audience before asking for funding.

    Fortunately, thefunded makes the process a little more transparent. I’d been getting ready for fund raising for about 5 months now and I think I am just about ready.

    Still, this just makes me want to ask for more money than I really need just so I don’t have to do it again for 2-3 years and that’s really why all the advice I read tells me to do the same thing – ask for a lot more money than you think you’ll need.

    “Find angels”. OK, let’s pretend I am not me and I know zero people who would qualify as accredited investors. It would take someone months to just get connected at that level initially.

    I am simply applying the same logic as I do in consulting business – it takes as much effort to land a $20/hr client as it does $120/hr client. Except the latter are more likely to pay their bills on time. Hence, I am looking at bypassing the seed stages and going straight for series A. Foolish? Perhaps, but I see no reason not to try.

    Still… Fund raising is more frustrating than it should be. Let’s see if making the process more transparent will ease the stress on both parties.

  2. andrew

    A series of expletives flew out of my mouth when I read this article, and then I realized it made sense to practice what I’m about to preach and respond, instead of asking where you park.

    Richard, there’s a simple way to thread the needle between zealousness, humiliation and ignorance:


    @Shan talks about it in his first paragraph, and I cannot reinforce how important that is. I have sat on both sides of a much smaller table than you play on (as an angel investor and as an entrepreneur) and not much else matters unless there’s honesty. Respect comes next, but I believe honesty breeds respect, and if it doesn’t, run, don’t walk, away.

    I’ve talked to VCs who have given me very honest, constructive feedback. Granted, many entrepreneurs don’t listen well (this can be a virtue) so it may fall on deaf ears, but at least they have the opportunity to respond.

    @sbrown sounds like you’ve been lucky. There are plenty of VCs who seem to be smart people (between the degrees and the glass tombstones), but are caught in a trap similar to what you allude to above, and end up doing the “safe” thing — staying silent. I’m not sure that “come back to me with more traction” is really anything different than silence — it really is a “I can’t be honest so here’s my default answer.” Ultimately I believe silence can backfire, turning the “game” into more luck and showmanship than something more deterministic.

    I would suspect that most pitches that get funded had constructive “no” answers along the way, so I guess one could argue it is in the VCs interest NOT to give good feedback, sort of like the girl that “fixes” the man and then loses him to the next one. But good entrepreneurs are tenacious, persistent and intuitive — if a VC gives valuable, constructive feedback, I’d want to work with them much more than one that was silent or cookie-cutter in their response.

    Why play games at all? This is business, and unlike poker, we’re not trying to “beat” each other – this only perpetuates the dysfunction – we actually are symbiotically on the same side, when you think about it.

    @Richard, what’s next is up to you… stay silent or be honest?

  3. Denny-

    Thanks for the encouragement. Just to be clear, I didn’t mean to indicate that VCs cannot be value-adds. I will be the first to claim that the process of working through investors (very savvy ones at that!) has been an immense value to how we think about our idea. Perhaps it will be in vain as we learn from customers, but there has been a lot of valid input and a lot of learning based on others perspectives. We are not letting that cause any wavering in our beliefs.. but the process has provided us with great feedback.

    That said, I do believe a lot of ill will gets created between VCs and entrepreneurs and that ought to change..


  4. sbrown

    I silently move all VCs that respond with silence to the bottom of the stack.

    A founder’s time is scarce. If I’m going to spend an hour with anyone, I want them to tell me _something_ useful. Not wanting to invest: that I understand. Thinking my idea is terrible: that I understand. But offering no value at all? That I can’t understand. It doesn’t necessarily have to be a critique (although if it is, that’s great) but I should learn _something_: a person I should talk to; a way I might think about metrics; a company that I should look at; an article I should read. The VC should say something thoughtful.

    If a VC says nothing, then I always assume that’s a “no”. For two reasons. (1) It’s impossible to close a round if you’re “waiting for a call”. A good VC will always recognize an entrepreneur’s business realities. (2) Someone who doesn’t add any value after an hour, someone who seemingly considers himself unable to give his frank, honest thoughts without being insulting is a person I’m going to want on on my board (or as an advisor.)

    If you are a VC and respond in silence, don’t kid yourself that when you finally do call, you are probably that entrepreneur’s last choice.

    Actually, I’ve never met a VC who has responded in silence. If they’re interested, they say: (1) “I’ll get back to you by X (usually a weekend to a week)”; (2) “I like it, but I not sure, I’d like you to talk to X”; (3) “I like it, but I not sure, can you provide me X piece of data?”

    If they’re not interested then they say, “Why don’t you get back to me when you have more customer traction?” That’s much better than silence for the VC. It’s a nicer way to say no, and still leaves the VC some room if they company turns out to be successful.

    I disagree with Shan: I don’t care if the VC isn’t senior (Things happen, sometimes you have to send an associate. If the associate doesn’t like the company, then there’s a 99% chance that the partner wouldn’t have either.) I also don’t care if the VC doesn’t seem to “understand the business” (I knew what businesses the VC understands before I scheduled the meeting. Besides, I may be the one that doesn’t understand the business, or I may not be explaining it well enough.)

  5. Richard- I appreciate you addressing this question head on. I’ll admit though, I disagree with your assessment that these are the causes of friction between entrepreneurs and VCs. I will offer my own theory for you to consider (which happens to be timely, as we are in the midst of raising financing). At the same time, I have met many VCs in this process that I would go have a beer with. As entrepreneurs, we understand the dynamics within which you are working and we can appreciate what your motivations are. We know that you are managing other people’s money, and sometimes your own as well. Just be honest with us. We’re grown ups and professionals. This is why we talk to so many of you- we view money as a commodity and when a great investor comes along, it’s a bonus!

    Criticism to our ideas we can handle very well. Ultimately we’re used to hearing no. We don’t worry about calling our babies ugly, because, usually we are the first to call our own babies ugly. Our products never have the beauty or the richness or the simplicity that we envision in our heads– because that stuff takes good time & money. From my perspective, responses that engender ill feelings between both sides include but are not limited to:

    * When a partner sends in his/her associate for a meeting at the very last minute. Said associate has about 1 or 2 years of experience out of college at a McKinsey or some such, and claims to understand what it takes to build a start-up company. Gives you “feedback” and behaves as if they are decision makers, rather than initial filters. This is a true “waste of time”. And the kicker is when the partner doesn’t even have the good sense to send a quick note of apology for pulling the last minute switch (this has happened to me twice. I will assure you that there are at least 2 firms on my list that I will never approach again, much less ask to have a beer with).

    * When you start talking and talking about feedback without actually taking the time to dive in and understand the business. I had a VC once try to explain to me why “time” is a metric we should model when we were discussing Cost of Acquiring a Customer in a Software-as-a-Service business. He clearly does not understand the business model. Don’t talk when you don’t know something. We try not to, but often times get spun into a snowballing discussion on things we don’t know about.

    There are others, but these are certainly two big ones that cause real friction from our perspective!