How can VCs bring dignity and honesty into their interactions with entrepreneurs?
I think a lot of the problem has to do with “deal fatigue.” The fatigue factor comes in when the VC has sat through the cascade of derivative ideas off of an interesting and investable theme that has become afflicted with “me too” disease, and where the VC has scheduled a meeting and the entrepreneur has lost their attention.
In these situations, both sides are pissed off — the VC because they feel their time is being wasted and the entrepreneur because they perceive the VC as rude and disrespectful. This sets up the classic “lose/lose” situation that perpetuates the stereotypes of many entrepreneurs as time-wasters and VCs as egocentric jerks. The important thing is to find ways to break out of this toxic cycle.
In my experience, it is best to view entrepreneur inquiries and requests for meetings as a giant sales funnel. At the outer edge of the funnel inbound materials are screened for closeness of fit with the fund’s mission and divided into “get more information” and “not interested” categories. The “not interested” receive a quick e-mail response thanking them for reaching out but that there isn’t a fit with the fund. The lion’s share of inquiries fall into this “fast no” bucket. We have gotten a lot of feedback indicating that these “fast nos” are truly appreciated.
Those from whom we want to “get more information” are scheduled for a 30-minute phone meeting. After this phone meeting the decision is made whether or not to dig in deeper. If no, the thank you e-mail or phone call goes out thanking the team for the opportunity. If yes, the team is invited into the office for an hour-long discussion. This is where things begin to get more serious. After the meeting, there is a full team discussion as to whether to commence detailed due diligence. If not, a call is made with the news and we specifically offer to provide detailed feedback, make introductions, etc. If yes, then the diligence process kicks into high gear and if things check out, we will more often than not make an investment.
So in our construct the question is: are we doing a sufficiently good job screening opportunities such that those who come in are interesting and relevant for our fund?
I think we’ve done a pretty good job bringing in companies that challenge our thinking, add to our collective knowledge and represent attractive potential investment candidates. And we believe our feedback during the process is value-creating for the companies that come in to present, and it is part of our mission to help strong companies in the ecosystem, whether we finance them or not. It all comes down to the intersection of bandwidth and respect — if you don’t conserve enough bandwidth to treat entrepreneurs with respect, then you need to re-evaluate your investment and screening process. Because treating entrepreneurs with dignity and respect is critical regardless of the investment decision.
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