I am a young venture capitalist (33) but have been doing this since 1998. So, I have heard a maybe a thousand entrepreneurs answer the standard question VCs use to wrap up a meeting: “What are you looking for in a financial partner?” Every now and then, a VC meets a real wild man who answers the question honestly: “Valuation.” The wild man gets bonus points for honestly, but that is all. I bet even corrupt Congressmen taking bribes don’t like to hear the yellow envelope labeled a bribe. Call it “constituent management” or something if you plan to bribe a Congressman. We all like perfume.
So, when entrepreneurs are asked what they are looking for in a VC, they usually supply some mealy-mouthed answer about how we don’t just want the highest price or the prettiest face, but we want you because you are so great at X, oh, and customers… we want intros to customers and we think you could help since you invested in company Y.
In other words: BS, BS, BS, and customers. I have heard hundreds of entrepreneurs
raising money from VCs say that customer intros are the primary non-financial value
proposition they are seeking from VCs.
Well, I have to say, with the exception of a few VCs that
deliver on that (notably, I am told, Kleiner Perkins in selective cases), high
level customer intros on a sustained basis should rank about last on the list
of benefits you should expect to get from a VC. It just isn’t what we do. We do a lot of things, some of them we as an
industry do really well. Corporate governance,
interviewing IPO bankers, and self congratulation come to mind. But, we do NOT, as a general rule, make many
customer intros. That isn’t the world
most of us traffic in. Sure, each of us
has 1-2 CIO friends or 1-2 VP friends at carriers. Every mobile VC knows or at least knows he
needs to pretend to know Paul Reddick. Maybe
we can get you meetings with serious prospects to be 1-2 of your first 10
betas, but if you get more than 5% of your first 100 customers from VC intros,
well then you need to tell me who your VCs are cause I have not met them and I
One thing we VCs can do well (most don’t but we can) is executive recruiting. Some VCs are great at that. And that is a real and sustainable value proposition to the entrepreneur. More on that in future postings I hope…