A VC in Vacationland

I am often asked by an entrepreneur…multiple times…about making the same decision. It may be about firing an employee, entering a new market, or some other tough call. The same question, again and again…

In a start up, taking time with some decisions is important. Others? Get it done…fast..How does one tell the difference?  Consider the following:

• Will making the decision help us get moving forward? Often, having the wrong employee can really hold back a company. Get rid of them, fast.
• Is it better to make the decision now or later? Too many entrepreneurs get into the fast decision mode, when they would be better off waiting a few weeks or months. I've seen decisions on new market entry be scrapped after a few weeks, only to be reversed in future months. Wait for the data, people!
• Should some decisions never be made?  I've seen entrepreneurs jump in bed with stupid money, only to miss the opportunity to get smart money in the door a few months later. Be sure and make sure that you carefully consider the implications of these decisions before you jump in the wrong direction.

Decisions can be roadblocks to success, or they can be enablers. Be sure you sort out the two types as you make your decisions.

One of the problems I often see in early stage start ups is the lack of co-founders on a team. Someone has a great idea, but is not a developer, or vice versa. Or someone needs a business developer, or a CTO or CFO. You get it.

I have known about Co-Founder Labs for a while, but have been reluctant to recommend them without recommendations from people I trust. I was with one of my serial entrepreneurs/fellow investors yesterday. She was waxing eloquently on how she found her CTO on Co-Founder Labs for her new start up. Good enough for Dave.

Give it a try.

Whenever I'd have a 'brilliant idea', I'd ask my Mom if it made sense. If I had to go on for over a few minutes, I knew that the idea needed more work to make it easily explainable. Now that Mom is passed, my CFO (and wife of 47 years) has taken the place of Mom. She is just as tough to convince as Mom, but now it's real money being invested every day, so she has become my go-to sensible investment guru.

She gets to listen to one-half of my phone calls with entrepreneurs pitching their start up(I use my great LG wireless headset) since we share an office. After a call, I ask what what she thought of 'my side of the call'. She says she can tell a lot about investment sensibility by the kinds of questions I am asking. 

So here's Lindy's hints for entrepreneurs pitching a VC:

1. Be interested in the VC–don't start the pitch immediately if you don't know Dave. He'd like to tell you something about himself and learn about you before we look at your business idea. It irritates him when he has to stop an entrepreneur and 'go back to the beginning'.

2. Don't go all-technical–Even though I asked where you host your software, I'm not really interested in the deep tech details of the host. We can get to that and all the other technical details during due diligence.

3.Don't go through the 50 page slide deck unless Dave asks–Dave's read the pitch. He has a lot of questions. Answer the questions. Get on with the demo, if appropriate.

4. Don't try and explain the industry– Dave spends a lot of time during a week keeping up with the tech industry. Skip the 5 slides saying its a billion dollar market and get to YOUR share of that market and why you can capture it pretty quick.

5. Keep to the allotted time–Dave has a lot of back-to-back calls. He's given you an hour or two. Stick to the agenda and leave plenty of time for questions. Ask Dave up front how he would like to manage the call.

Hopefully, these ideas will help you prepare for any VC meeting as we all are frustrated by the same things during entrepreneur pitches.

One of the frustrating problems VC's face is the entrepreneur who sets unrealistic deadlines. Whether its a business plan revision to evaluate, a monthly update on the company, or legal docs for signature, I seem to be always chasing people who promised them to me weeks ago.

I realize that entrepreneurs have a lot more to worry about than these thing–building the business, keeping customers happy, developing the next insane app, etc. Making a company successful involves a lot more mundane stuff, like making sure you are following all regulations. What worries me is that entrepreneurs that are ignoring me may not be paying enough attention to their employees, customers and other investors.

So, under promise and over deliver on deadlines, please. It makes your board and advisers more comfortable with progress and your investors able to update their LP's on-time.

Often, entrepreneurs approach me with the singular reason of having me write them a check. I can always tell in a few minutes that they are not that interested in what I might have to say about their company, as they are constantly going after the 'close'. I often wish I was an impolite person and just end the conversation–right then.

Why? Advice may be more important than money for many start ups. As I have said in previous posts, I rarely see a bad idea, but I often see an incomplete business model or a team without the requisite experience. So when I offer up suggestions that will make your idea more saleable, don't act like I am calling your baby ugly. I'm not. I'm just trying to help you.

I always offer to look at a next iteration of a business plan ot team, once changes have been incorporated. rarely do I get taken up on my offer. You are the loser, not me.

Here's a few thoughts on conducting a first meeting with a potential investor:

1. Choose the right person–I'm a fan of having initial meetings with strategic investors–ones that can give you more than money. That way, you can get insights on why your idea and plan may lack some essential aspects critical to market success. As a bonus, they may offer to be a mentor.

2. Be interested in the investor–too often, entrepreneurs launch into their pitch without asking anything about me. I'm a person as well and deserve a little respect, besides being a guy with an investment fund. Try polite questions to make the investor think you care about him or her.

3. Be open to advice–don't get all defensive. Remember that the person across the table listens to many pitches in a week and thousands over a decade, has had some good successes (in your space–see 1. above) and is painfully aware of the pitfalls that can trip up a start up. Ask probing questions about why or why not the person thinks you can be successful, or what else is needed to achieve that goal.