As a venture capitalist, I thought it might be interesting to explore our lack of social graces when it comes to deal-flow interactions, particularly since so many of us like to say to limited partners, to CEOs, in panel discussions, and on our websites how our mission is to be Good Partners to Entrepreneurs.
If your best buddy had a new girl he was dating, you probably wouldn’t say “Oh yeah. I dated that one—I dumped her.” But apparently, when it comes to business, an insecure pimply adolescent still exists in some of us. “Oh yeah. We saw that one—we passed” is a ubiquitous mantra in venture conversations. I always get the feeling that the firm in question may have “seen” the deal only in the sense that they put it on a list somewhere (i.e. he spoke to her in the hallway and she smiled).
I submit that the same rules of conduct that apply in everyday social interaction (should) apply in venture. Unless you really dug in and identified an inherent flaw that you think your colleagues will miss, telling them that you passed on a deal they are potentially interested in does not make you seem smart or plugged in, just impolite and insecure. Why not try: “Sounds interesting” as an alternative. Entrepreneurs will also appreciate it (believe it or not your having “passed” will often get back to them). If it’s a creative entrepreneur or scientist who will be turning out many ideas, they will not come back to you with the next one.
By the way, if you’re doing market research for one of your portfolio companies by meeting with potential competitors, people can usually figure that out after the fact. And it doesn’t help if at the start of meeting you say “for full disclosure we have another deal in that space.” Social etiquette test: are you really interested in the deal or are you just curious? Just as you wouldn’t order five expensive entrees just to taste them if someone else was paying, if you’re doing market research for one of your portfolio companies, don’t waste people’s time or hurt your reputation by taking the meeting.
On a similar note, if you have the management team of a company fly across country to meet your partners, try to have your internal politics worked out before the meeting. A deal presentation to the partnership is like having your future spouse over to meet your parents. Some planning and prepping of your fiancée is required. If you have a crazy family member (e.g. a partner who will check his Blackberry through the whole meeting and then ask irrelevant questions) and you can’t ask that person to behave, at least let your fiancée know in advance. Prepare your partners with the help of the associate who has been driving the management team crazy with diligence requests for the last two months. Get your partners’ questions and convey them to the management team prior to the meeting. This may take some time from your partners but, given that you’re asking a cash- and time-sensitive young company to travel and spend a couple of days on you, doing a bit of homework with your partners beforehand is common courtesy. Finally, a really great way to make enemies of entrepreneurs is to a) turn on them during the meeting if sentiment moves against the deal, or b) march them out and then back in again like in “Project Runway” to give them “feedback” as to why you won’t be moving forward (there’s a top-tier California firm that actually does this).
Somewhat unrelated but something I’ve been chewing on is a checklist to figure out if the consultants you rely on are not as good as you think. More on that one later.
Finally, to entrepreneurs: if the venture firm doesn’t follow up or return e-mails after a meeting where they seemed really interested, then they’re just not that into you. Most of us are uncomfortable with conflict and would prefer to just avoid having to say no. Think of how you act when a service provider comes in to tell you about legal or IT support services that you don’t really want. You are polite and say “how interesting” and “let’s definitely follow up”—this is just human nature. If someone is actually interested it can be measured by responsiveness and follow-up.
The Venture Insider is a venture capitalist who prefers to remain shrouded in mystery.
