If you're an entrepreneur, especially one seeking VC funding, you may not be the sort of restrained, proper person who always follows the rules. That's fine. But some entrepreneurs take individuality a little too far, according to Will Hsu, co-managing partner of the seed-stage VC firm Mucker Capital. He's had some strange, disturbing, and sometimes downright scary meetings with entrepreneurs in the three years the company has been around.
Here's a look at some of the oddball behaviors he's come across and never wants to encounter again. (He's hoping you read this column before your next pitch.)
1. Demanding that the investor burn the evidence.
"I've actually had a founder ask me to burn the pitch materials, and even worse, prove that I had done it," Hsu says. In fact, he says, it's not unusual for entrepreneurs to either ask that all pitch materials be destroyed or that the investor sign a confidentiality agreement before the meeting takes place.
There are three problems with this request. The first is that it's insulting. "It implies that I am not trustworthy," Hsu says. The second problem is even bigger, and it has to do with what it takes to start a successful company.
"There is this myth in the startup world that the idea is everything," he explains. "If you have a brilliant and unique idea, everything else just falls into place. However, this is far from the reality. The idea is just 1 percent of the project and everything else depends on whether or not the team has the knowledge to get a business off the ground, operate it effectively, and set it up for long-term growth."
So when Hsu gets a destroy or NDA request, "it signals that the entrepreneurs believe the idea they have is everything. More often than not, they are more focused on protecting the idea than on growing a business."
The third problem is what the request reveals about the entrepreneur's expectations. "Issuing a burn request before a meeting starts tells me that the entrepreneur does not expect the deal to go through," Hsu says. "I look for entrepreneurs who are confident and believe in themselves, not those who expect a 'no' from the outset."
Besides, Hsu says, there really is no need to ask. "For the record, Mucker Capital always destroys pitch materials, but we do not burn them. I'm trying to reduce my carbon footprint."
2. Not hearing a subtle "no."
In an investor meeting, yes pretty much always means yes. But VCs are notoriously bad at saying no when that's what they mean. It's not just that they're trying to spare founders' feelings, although that's part of it. The bigger issue for them is not wanting to go down in VC history as the person who turned down the next Uber.
If you pay attention, Hsu says, it's easy to tell the difference. "If investors are interested in your startup, they will follow up, ask for more information or additional meetings, and bring up next steps," Hsu says. "For the most part, anything that is not a definitive 'yes' is a 'no,' and entrepreneurs need to understand when it is time to move on." Even if you're not sure, he adds, moving on is your best strategy. "The way to get VCs to chase is to walk away."
Unfortunately, many entrepreneurs have trouble taking an unspoken "no" for an answer. While the fault for not being forthright certainly rests with the VC community, the truth is you'll only succeed in annoying the investor and wasting your own precious time and resources if you hang in there when they don't seem all that into you. So don't do it.
3. Accosting an investor during off hours and launching right into a pitch.
"As an investor, it can sometimes feel like entrepreneurs are lying in wait to pitch me," Hsu says. "I was once flagged down during my vacation in a foreign country at 5 in the morning by a man on a motorbike who wanted to tell me his idea. My initial reaction was fear that he was trying to rob me -- but I guess trying to get me to part with a few hundred thousand U.S. dollars for some paper stock certificates could end up much worse."
The founder had recognized Hsu from his blogs and podcasts, and chose the moment to launch right into the pitch for his company. "I spent part of my vacation meeting with him -- time that was supposed to be spent away from work," Hsu says. Although, he admits, he wound up liking both the founder and his company.
"There is an appropriate time and place for pitching, and those boundaries should be respected," Hsu says. "Even if you feel like this is your one chance for an investor introduction, you will start off on the wrong foot if you show disrespect or disregard for the investor's personal life. My advice is to jump on the chance to meet, but take no more than five minutes of the investor's time. Ask for an email address and send a proper introduction as a follow-up. If the investor is interested in taking time out for a meeting, he or she will reach out."
4. Turning into a stalker.
"Many entrepreneurs find it difficult to know when to give up because so much rests on their ability to secure funding," Hsu says. "Sometimes their passion for their company compromises their ability to know when they have gone too far or when the game is over."
Entrepreneurs have shown up at the Mucker Capital offices every day for a week, he says. In another instance, an eager entrepreneur was sitting front and center at every presentation he gave for three months. "Had no idea how she got my schedule," he says.
Although these behaviors made him nervous, Hsu now says they were OK because the founder's approach to talking with Hsu was casual and respectful of his personal space. "It is when entrepreneurs, in their excitement, end up putting their hands on me, or suddenly taking prototypes or presentations from jackets and bags, combined with stalking, that it creates cause for alarm."
Persistence may be a good thing in an entrepreneur, but only up to a point, he notes. "Founders should try to look at their behavior objectively, or get an objective third-party opinion," he says. And whatever you do, don't paw an investor.
5. Bringing your girlfriend or boyfriend.
"Founding a startup is stressful, fundraising is stressful, and it is great to have someone to lean on," Hsu says. "However, this can go way too far. Every month or so, a founder brings his or her significant other into an investor meeting when this person has no connection to the business."
Hsu always asks what the person's connection is to the business, and if there's no legitimate response, takes that as a warning sign. "This is especially true when the significant other ends up answering questions and speaking for the entrepreneur even if he or she does not have a full-time role at the company," he says. "If someone can't even handle a pitch meeting, I can't trust that that founder can handle building a business."
6. Showing up in costume.
"Perhaps the most memorable investor meeting I have ever had was when the founders showed up wearing dancing panda suits," Hsu says. "They thought that this would attract attention and make them stand out. While they were undoubtedly memorable and get points for creativity, it was not enough to seal the deal."
No amount of razzle-dazzle will make up for the lack of a well-thought-out, well- researched, and well-presented business concept. In this instance, it took Hsu only a few minutes to see that the dancing pandas had only a limited market for their product and an unworkable business model.
"Many entrepreneurs think that getting a meeting is half the battle, but this couldn't be farther from the truth," he says. "You have to show up prepared to make a strong and compelling case, whatever you happen to be wearing."
What a VC wants from you is straightforward, Hsu says, if not always easy. "Be well-prepared, with a strong idea, a strong pitch, and a strong case for how your team can execute on that idea. That does not require panda suits or motorbike chases."