“investors – they’re all the same – they only want me for my big data!”
Beware, it’s your algorithms they’re after! The truth is, and this one might hurt a little, founders, that there is more than reason why an Angel or a VC might arrange a meeting with you to discuss funding your company.
They might want to buy you coffee and champagne and write you a cheque for a zillion squids, like the bat-sh*t crazy billionaires in HBO series Silicon Valley, but the fact is, not all VC’s established a position of pre-eminence in a notoriously dog-eat-dog world by being totally straightforward and up-front.
Never forget, founders, being a VC is not so very different from being a start-up founder. In both worlds, you borrow big chunks of money from people or organisations a little further up the food chain from you, and this is done by promising that you can deliver them above average returns.
Which is a little bit scary. It’s scary for a founder to look a VC in the eye and tell them “we are the next Skype, and in five years we will have broken China”. And it’s scary for a VC to look a hedge fund manager in the eye and say “our portfolio is packed full of winners and we can return you 300% over the next five years.”
But that is the way the world of VC-fuelled start-ups works, peeps. Bravado is sometimes just as important as certainty – at least bravado isn’t a myth, like certainty is. VCs like to “eat their own dog food”, as the saying goes…well, start-up founders, similarly, have to believe their own bull-sh…you get the picture, I’m sure.
But to return to the point, this doesn’t mean that VC’s or business angels skimp on the due-diligence. But there’s due-diligence, and then there’s due-diligence.
You might attend a meeting where you are invited to open up the hood and show off your ground-breaking tech – don’t do it!
Many VC’s will be, unbeknownst to you, dear, innocent, founder, about to invest in your biggest rivals, and just want to get a feel for what the competition is like – show us your algorithm – thanks, and would you mind uploading that to a dongle for me. Wonderful, that’s great – here’s the number of my PA, they have skin so thick they make a night club bouncer look like bambi on ice. Good luck!
And off they go, never to be seen again.
Others may have heard that a rival VC is taking a look at your business – by egging you along that they plan to invest, when in reality they have no intention of doing so, they end up stymying the deal you had lined up with their rival.
Its nasty, but it’s also effective – remember, when it comes to the “wild west” of the start-up world, the rules are – there ain’t no rules.
Finally, a VC may be running out of time to make a certain number of investments before the tax window closes for that year. They have investors’ money and they need to demonstrate that they are actively investing in companies.
This, founders, is worse than no investment at all. The VC is not funding you because he is impressed with your idea or business model, but because their own lack of organisation has caused them to panic buy – you have a business that needs a £50k cheque, sure, but you also have a business that needs careful nurturing and the right people getting involved with it.
Repeat after me; “I am not a bargain bucket start-up, the VC trolley dash is not for me!”
Now before we finish let’s be clear about one thing – there are more good people than bad in the start-up eco-system, and broadly speaking, everyone is invested in the same thing – building great companies – in that respect the world of early stage companies is a meritocracy.
But you must get to know the in-jokes, the double dealing and the horse-trading. It’s all part of the “fun”, and by “fun” we mean sleepless nights, plenty of disappointments and a whole lot of baked beans on toast.
What you may not realise now, as you trudge back to the office contemplating another case of misplaced trust and enthusiasm for a deal that wasn’t, is that one day it will be you on the other side of that table, doing a bit of dissembling.
Hey ho, nobody’s perfect, but out of all the confusion, every now and again, something beautiful, unique, and game-changing is born.
Something like a phenomenon. Something like a Unicorn, perhaps. Something that gives us all the horn, whatever stage of the food chain we find ourselves at.
Try not to hate the players, or the game, and keep on hustlin’