You're an entrepreneur--not a venture capitalist--so why do you need to take a gander at VC lessons learned? If you're a smart entrepreneur, you know that scoring a VC in your corner is the equivalent of a writer's getting a literary agent with a serious in at Random House: It's going to make your startup successful much faster and easier. In fact, whether you're plotting your first startup or your hundredth, it's important to practice empathy.
Empathy: The seemingly easy but nearly impossible task of thinking from someone else's perspective. In this instance, that someone else is the potential VC you'll be wooing.
Venture Capital has always intrigued me. I've personally come up with seven billion-dollar ideas, but we didn't have any network to capitalize on from Kansas City in the late 1990s-early 2000s. Now I'm working on idea number eight, in HR tech, but that's a different story for another day.
I hope you value this article as much as I enjoyed the time spent putting it together.
1. Mark Suster, partner, Upfront Ventures.
The best training I ever got for running a company was as president of my fraternity. Leadership skills come from doing, not reading. I had to deal with everything from litigation to fundraising, to collecting dues, to accepting and kicking out members, to planning social events. Doing that at age 19 was the best training I ever had.
Does this mean you're doomed if you didn't go Greek in college--or you didn't go to college at all? Of course not. But the more experience you have in leadership, the better off you'll be. It's never too late to hone this skill more.
2. Fred Wilson, co-founder, Union Square Ventures.
Venture capital is about capturing the value between the startup phase and the public company phase.
That's it, in a nutshell: As an entrepreneur you need to appeal to VCs during this (sometimes very short) time frame. It's tough because you have to "prove" you're a future success that's just not quite there yet.
3. Eric Ries, author, The Lean Startup.
There's nothing wrong with raising venture capital. Many lean startups are ambitious and can deploy large amounts of capital. What differentiates them is their disciplined approach to determining when to spend money: After the fundamental elements of the business model have been empirically validated.
This springboards off number two. If you're wondering when the iron is just hot enough to strike, Ries defines it for you.
4. Jeff Clavier, founder, SoftTech VC.
Understand the rules of engagement. And the rules of engagement are that it doesn't really matter if you get my attention at a conference; what matters is that you find the person who will introduce or reintroduce you to me. If you figure out who in my contacts are the guys I spend a lot of time with, and I trust, and you get those guys to introduce you because you know them well, I will use their credibility as a proxy for you.
Clavier is a "kingmaker" in Silicon Valley. His firm, SoftTech VC, boasts investments like Eventbrite, Mint, Fitbit, and Fab. Meeting Jeff at a conference isn't going to get you in his good graces. Believe that--I tried in 2007 at Web 2.0. He cared very little to meet me. Hah. Give him respect through the proper channels, and respect and connections may come a little easier.
Here are the venture capital firms that invested the most in the past six months.
(This is taken from Crunchbase data and created with phrase frequency analysis and a custom word cloud generator. Image by author Travis Wright)
5. Larry Cheng, managing partner, Volition Capital.
The most important lesson I've learned is to follow your convictions above and beyond the consensus. When I first joined the VC industry 17 years ago, I was at a firm where every investment professional had the opportunity to write a personal check into every investment the firm made.
Based on your role in the firm, you had a different maximum amount you could personally invest (the more senior, the higher the maximum amount). The learning came when after the firm had closed each investment, they would publish to everyone how much each person invested personally. There is no greater truth serum for people's opinions on an opportunity than how much they personally invested.
After playing this scenario out over 50 investments during my time there, to my surprise, I learned that when everyone personally invested at their maximum amount, that was much more likely to be a predictor of failure for that company, rather than a predictor of success.
And, the best predictor of success was when one person invested at their maximum amount while nearly everyone else chose not to invest personally at all. This lesson has taught me how important courage and the willingness to be contrarian is to the success of any investor. I've since followed this approach with startups like Ensighten and Visual IQ.
6. Sarah Lacy, author, Brilliant, Crazy, Cocky, and founder, PandoDaily.
You know what works in venture capital? A group of incredibly smart, connected people who have the financial wherewithal and risk appetite to make multimillion-dollar bets on unproven ideas and inexperienced founders. People who can make decisions quickly, and who spend their time trying to help entrepreneurs make the most of that cash.
It's a relatively simple equation in theory, but the tough part is getting those parts (and people) aligned.
7. Nolan Bushnell, founder, Atari, Chuck E. Cheese
I think Something Ventured is a nice piece because it celebrates venture capital in a unique and powerful way."
This is a great documentary on VC and how it works. Bushnell gives a ton of great advice in the film. Bushnell's adoration of the intricacies of VC is refreshing. If you're not passionate about what you do, from your startup to a VC's investments, then why bother?
Be open to all avenues of support.
There was a time when banks were very wary of VC, and that stigma still lingers in some circles. However, as an entrepreneur, you need to be open to all avenues of support--whether traditional, via venture capital, or not, crowdfunding.
When working with a venture capitalist, remember to offer what he or she would find most interesting. Right now, you need them more than they need you. What are you putting on the table?
Also remember that your network is your net worth. If you found this article valuable, feel free to share it with your network.