

VCs are liars.  And so am I.  - jbreinlinger
http://acrowdedspace.com/its-all-about-team-but-ever-wonder-why-no-vcs

======
mindcrime
Feh, just be honest with people. If they get defensive, they get defensive, so
what?

I'd _love_ to hear you tell me "I just don't think you have what it takes," as
that's just going to pour fuel on my fire and motivate me to work that much
harder just to spite you.

I love negative feedback like that... fuck all ya'll, because when I'm running
a billion dollar company and rocking up to your shitty office in my Maserati
to ask "how's it going?" I'll be laughing to myself at how pathetic and stupid
you were to doubt me.

~~~
Jitle
This response perfectly demonstrates the need to lie as stated in the article.
As an investor, you say "no" A LOT. I can't have the 99% of people I talk to
walking away with an attitude.

I received the introduction to one of our best investments from a CEO we said
no to. Do you think that CEO would have made the introduction if I had told
him he doesn't have what it takes to be a founder at a VC backed startup?

~~~
mindcrime
_Do you think that CEO would have made the introduction if I had told him he
doesn't have what it takes to be a founder at a VC backed startup?_

Maybe, who's to say?

------
tlogan
The reason why VCs will not tell "team is not strong" is because they can be
wrong about the team (people can learn, be better, or they can be misjudged
etc.) but that mistake might burn bridges.

Only real friends will tell you "you suck": so step 1 - get some friends.

------
pcrh
This kind of behavior occurs in all walks of life, e.g. in dating.

It just goes to show how much investment is based on vague impressions. For
example, why shouldn't a founder get frustrated with fund-raising, or be
desperate for funding, it's not a reflection on the business idea or
feasibility.

------
jerhewet
> And I see the flip side, people that are past the age of 50 [...] are not
> capable of creating compelling social products.

This tells me everything I need to know about this ass monkey.

~~~
cookiecaper
Your ellipses excludes some important context:

>people that are past the age of 50 _and are trying to start a mobile, local,
social startup but really_ are not capable

Not "all people past the age of 50 -are- incapable", just people who are so
incapable they don't recognize the credibility they lack due to external
influential but not necessarily exclusive factors like their age, background,
and appearance. I think all of us could rattle off a list of 50+ year old
"geezers" that could pull something like this off, but the reality is that
many of them can barely use a cell phone. If your presentation doesn't include
measures to address that assumed, pre-programmed credibility gap, which often
means just talking about things in a way that demonstrates you know what you
are talking about and actually _can_ navigate around Android, then you likely
don't (yet) have the realism or the drive necessary to make something go.

The 50+ remark is just a way to say "This guy looks like he can barely use
Outlook", or "This guy is out of touch". Perhaps not the most well-considered
illustration, but I think we can get the OP's point without throwing a
politically correct hissy-fit.

~~~
mindcrime
_I think all of us could rattle off a list of 50+ year old "geezers" that
could pull something like this off, but the reality is that many of them can
barely use a cell phone._

What a load of crap. A 50 year old today could easily have been a 20 year old
AI programmer in 1980, and he probably knows more about technology than the
rest of us put together. Computers aren't actually that new, ya know, and are
not the exclusive domain of the GenY kids.

I mean, for crying out loud, COBOL first appeared in 1959, LISP in 1958,
FORTRAN in 1957, and ALGOL in 1960. There are folks around who have been
programming longer than most HN readers have been alive.

There are technically literate and technically illiterate people of all ages,
the 50+ thing is pretty much bullshit as any sort of generalization.

~~~
cookiecaper
Obviously I never meant to imply that there were _no_ programmers who are 50+.
In fact, I work with some of them, and I respect them greatly.

I don't have any hard data, but I can say, anecdotally, most 50+ are not
"techies" and they don't know their way around a computer system. I believe
this belief is rather common.

I think some 50+ year olds would make exceptional startup founders. However,
an older person who may be founding a "social, local, mobile" startup because
he's looking for a career change is going to have a credibility gap because of
the general impression that older people are not technically minded. If the
pitcher doesn't have a strong compsci background or history to counteract that
notion, he'll have to make up for it in the presentation.

We are all free to pontificate on whether this is a fair generalization or
not, but I think it is clearly that it is commonly held and something an older
founder will have to face and address if he wants to succeed.

~~~
mindcrime
_I don't have any hard data, but I can say, anecdotally, most 50+ are not
"techies" and they don't know their way around a computer system. I believe
this belief is rather common._

OK, that might actually be a fair point, if you're talking about the
population of 50+ people at large. But in the context of "people founding tech
startups," my guess would be that pretty much any "50+ tech startup founder"
probably _is_ a techie, or is at least pretty tech savvy.

Now if you had J. Random 50+ guy who had spent his entire career as a tobacco
company accountant and he suddenly showed up saying he was founding "The Next
Instagram," then _maybe_ there would be some reason to go "hmmm... wait a
minute." But, honestly, I think you could subtract the "50+" part of that and
the point would be exactly the same. Would it matter if J. Random 25 year old
tobacco company accountant showed up and said "I'm founding The Next
Instagram?" Wouldn't the reason for the skepticism be the individual's
background and experiences, and not their age?

 _We are all free to pontificate on whether this is a fair generalization or
not, but I think it is clearly that it is commonly held and something an older
founder will have to face and address if he wants to succeed._

Probably, but I wouldn't want to be in the business of helping perpetuate this
kind of ageism.

------
kposehn
Interesting.

To the author: I'd definitely want the blunt, unvarnished and harsh truth. No
joke! The only way to get better is to get the truthful opinion of people that
matter.

~~~
mdda
The problem with the standard "the truthful opinion of people that matter" is
that if you don't like what you hear, you might just reclassify the speaker
into the "people that don't matter" group. Even the statement of your
enthusiasm for the unvarnished truth is a veiled threat...

For this comment, all down-votes will be considered up-votes :-)

~~~
kposehn
> The problem with the standard "the truthful opinion of people that matter"
> is that if you don't like what you hear, you might just reclassify the
> speaker into the "people that don't matter" group.

I've done that before - and it is one of the things I most regret. I ended a
friendship because of that kind of mistake and swore to myself I'd never do
that again.

After all, if I do that I'm exactly the kind of person I despise. How can I
seek to improve myself if I won't listen when I might get butt-hurt from the
words I hear?

> Even the statement of your enthusiasm for the unvarnished truth is a veiled
> threat...

I'm not sure how you figure that. It is actual enthusiasm, don't confuse it.

------
bearritto
Markets are not efficient which is another way of saying that information
asymmetry exists.Successful financiers would prefer to keep it that way. What
would be a rational reason for divulging why you turned down a potential
opportunity? You can't really formulate one.

Also, this doesn't have anything to do with VC's per se. It happens in Private
Equity, Fixed Income, Credit, Public Equities ...

------
craigyk
Why VCs judge people: 1\. The team/people do matter 2\. They aren't
smart/knowledgeable* enough to truly evaluate the merits, weaknesses, etc. of
a pitch, so they use people as a proxy.

    
    
      * smart/knowledgable are used here loosely to encompass the wide range of reasons why a VC might judge an idea poorly

------
daemon13
I saw that some comments pick-up on VCs being adamant on founder's nervousness
and such.

Probably, OP should have mentioned different pointers, but still I think that
such comments are missing an important point of this post by Josh - honest
feedback almost never works.

I have managed up to 30 people, [colleagues and HQ people not counting] - 95%
of the time honest feedback does not work, mostly because of the:

\- ego, or

\- hidden agenda

5% it worked with people, with whom I had working relationships, based on
mutual trust AND they were all GetDone high performing individuals.

So what do you do when you know that honest feedback will not work?

Are you going to hit a brick wall with your head?

No... you come up with some nice words, etc.

You can like such people, value them, but if you feel that they can not accept
your honest feedback, you don't give it.

------
raffi
_shrug_ I used to be part of the "please give me permission to start a
business by letting me into your seed program" crowd. My company made it to
the final round for a program and the end feedback was they didn't think we
could deliver on what we were building.

At first, I took it as le insult. An insult against my mad pr0grammer skills.

In hindsight, I look at it as: my technology may have been OK, but it wasn't
astounding enough to qualify as a revolution in the area and lead a big
stampede to my door. It was a harder problem area (NLP). Something simpler
with the same amount of persistence and execution may have led to much greater
results.

In hindsight I appreciate the honesty. They saw it before I did.

The challenge is, people aren't ready to hear certain things until they're
ready to hear it.

~~~
rexreed
So are you saying you would rather have not heard the honest, but negative
feedback at all? It sounds like in hindsight you are grateful for the honesty.
Would n-years of lying have helped you any more? Would you have the insight
you have now if you were simply lied to and told "great team - show me more
traction", when they really think "gosh, what a sucky team"?

------
Monotoko
Yeah... honesty is certainly the best policy here. The people who don't have
what it takes will either give up and go onto something else, or cause them to
plug the leaks and turn the startup into a successful venture. It's win/win
here for the founder I think...

------
mikeleeorg
While I totally understand the human nature behind it, I find it a shame that
more investors don't offer personal criticism with their rejections. It's a
great way for startup founders to grow their skills, at least when it comes to
pitching to investors.

------
damoncali
In order to believe that "we need to see more traction" is a lie, you have to
believe that you are able to identify "good teams" with certainty.

 _That_ is what ticks people off about VC's.

------
cookiecaper
Most people should not be told just to give up completely. I'm not sure why
the OP wants to focus on "you just don't have what it takes to run a company"
instead of "your presentation skills were lacking, rehearse more", or
something like that. For many entrepreneurs, the offense is not in "x needs
improvement", but "We believe you are too stupid to improve on x". Even if you
believe that, why not just say "x needs improvement" and then wait to see if
they really _are_ too stupid to improve on x or not? Why does _everything_ the
VC thinks, including have to be shared?

There is nothing productive about "you're incapable, just give up" or "you're
incapable, go deal with someone who gives people less money first and see if
that gives you some capability". These are all deflections of the real
problem. Why not try "We were concerned that you appeared nervous when asked
how your site would handle potential copyright issues" instead of "you just
can't do it"?

~~~
redthrowaway
>There is nothing productive about "you're incapable, just give up"

I disagree. For some people, hard as it is to take, this is _exactly_ the
right advice. Some people simply aren't cut out for what they're trying to do,
and changing tack sooner rather than later is the optimal course of action.
Any advice which precipitates that decision is therefore good advice, no
matter how hurtful it might be to receive.

~~~
cookiecaper
Some people may need to put in a lot of work at something to become competent,
but I don't believe that wholesale just some people can never succeed at
something as generic as entrepreneurship unless there is a physical or mental
disability or some really exceptional background involved. Most normal people
really can become successful entrepreneurs if they try hard enough.

As the OP said, just saying, "You'll never make it, just give up" is very
unlikely to yield positive results. So even if you think the founder really
_will_ never make it, why is that an important criticism to share? They may
surprise you if you actually provide helpful criticism on action points where
real progress can occur. "Stop being you" is, of course, not actionable.

------
bambax
The discussion between VCs and entrepreneurs is difficult because it's handled
by everyone concerned, directly.

That's why we have lawyers; that's why artists have agents. People who don't
care one way or the other and for whom nothing's ever personal.

Entrepreneurs need professional pitchers -- agents who would be able to gather
honest feedback and tell it like it is.

------
deepakprakash
Honest question: How does YC give feedback to companies that are rejected? Is
it pretty much like the author described? Or do they take pains to be
truthful? (given that PG is known to speak his mind)

------
erikb
Is the hint to Epimenides on purpose?

------
rwrwrw
Sorry, what is a "VC"?

~~~
rwallace
Venture capitalist.

------
nirvana
Dear OP:

You always say the team is important. I couldn't agree with you more.

The Team is important not only in the startup, but also in the group of people
that make up your investors. Thus, given that we've decided your team is not
strong enough to be investors in our company we're going to pass.

In the future, it might be wise to hire partners who are not biased based on
age, or prone to making decisions based on irrational conjecture (such as a
presenter in an important meeting being nervous.) Also, be aware that one of
the signs that a VC firm is not going to be a reliable partner is a pattern of
cargo-cult investing. Just because Instagram just got sold for $1B does not
mean you should be investing in every social-mobile-location-picture sharing
startup (not run by anyone over 50, of course!) The best opportunities, by
definition, are the ones with a novel approach.

Thank you for your time, and if you should have a major turnover in partners,
feel free to contact us again in the future.

Signed-

Startup Founder

~~~
jayliew
This response just proves the OP's point. Give him credit for opening up,
instead of this response (which is not constructive), and comes off as an
attack back at him.

For VCs to make money, they need to have as many founders like them, so they
lie .. exactly because of responses like this. It does the VCs more harm to be
honest with what they think[1], because it pisses off the founders.

[1] Sure they could be wrong about you (by passing on you), but nobody claims
to be perfect. If you're just unable to accept rejection, then well, there's
your first problem.

~~~
notJim
The most-analogous situation I've been with this is in hiring, and if one of
my coworkers gave age or "fidgeting in chair" as a reason not to hire, I would
call them out on it. I'm sorry, but that's simply not a valid measure of
competence.

If these are the reasons VCs choose not to invest in companies, then the
reason VCs lie is because their reasoning is bullshit, and they don't want to
get called out on it.

~~~
jayliew
1\. The value/measure of a VC to their bosses (their LP / investors) are
whether or not they provide a good return. Period. Their bosses do not
incentivize them based on great interviewing skills. There is nothing to be
"called out" for here. They could have the crappiest interviewing skills, as
long as they make their investors money. This is not a contest on meritocracy,
or skill, as it pertains to interviewing.

2\. I'm sorry, but your response isn't even relevant to my response. I wasn't
commenting on the VCs interviewing skills at all. I was commenting on
nirvana's response.

3\. This is the real world. In a perfect world, every candidate would be
interviewed by the world's best interviewer that can see past all our weakness
and only see all your strength (interviewees would want that, no?)
Unfortunately, you work with what you have - not with what you wish you had.

Cheers.

~~~
1123581321
Regarding #1. The author of the essay left out that he and the other VCs have
learned to identify behavior in the interview that equates to ability, or lack
of ability, to make money. For example, the fidgeting he observes in response
to a certain question indicates that the founder is less likely to make money
because of an unaddressed problem, possibly unaddressable due to the founder's
character or way of doing business.

The essay jumps straight from interview behavior to a decision to not fund,
leaving the reader to work out what is the assumption. There is simply no
other reason the VC would consider such behavior important.

~~~
rexreed
The reality, as indicated in a recent Kauffman report is that the majority
(actually, a super-majority) of venture capital forms perform poorly to the
extent that they are not worth the management fees or continued investment.
[1]

This would indicate that VCs, on average, make poor judgement on the quality
of their investments. The use of arbitrary indicators and qualitative
characteristics as a primary decision factor for who they invest in or not
would seem to be contributory to their overall poor performance. Perhaps VCs
should learn to resist their early (and probably incorrect) assumptions about
entrepreneurs based on age, nervousness, or other factors and instead look to
the underlying premise of the business and existing capabilities of the
management team. Or at least they should realize that they are not
particularly good evaluators of those characteristics, based on their past
performance, and factor that in accordingly.

[1] [http://www.kauffman.org/newsroom/institutional-limited-
partn...](http://www.kauffman.org/newsroom/institutional-limited-partners-
must-accept-blame-for-poor-long-term-returns-from-venture-capital.aspx)

~~~
1123581321
We don't know the VCs have better indicators available. The mutual fund
industry also interviews CEOs but largely invests based on data, and it has
the same performance problems even among niche micro-cap funds.

~~~
jayliew
Someone comes up to you and say, "I have a GREAT idea, it's going to be the
next Google / Facebook / Twitter / etc. I just need a CTO / web developer to
build it. Quit your job, joined me full time now."

Would you? If you've heard that a lot, you probably won't. There's nothing
wrong per se - the person could be right, but it's more likely that he is
wrong[1]. But something could be said about this person's approach to finding
a co-founder, i.e. if he's going about his co-founder search this way, he's
probably doing other more serious mistakes other battle-hardened entrepreneurs
have learned the hard way.

It's a mental decision-making shortcut. Don't get hung up over little things
such as the OP's actual words, like the way the interviewee answers a
questions, fidgets, etc. It's just a mental shortcut signal. Sure the OP could
be wrong. But he could also be right. How do you know you're not wrong? VCs
take a million meetings, make a million decisions, they have LOTS of data to
test how well they're doing. They are not random schmucks. Clearly they think
about this day and night. Is it possible that they're all wrong and you're
right?

Also - I'm not in VC so I can't comment from a position of being an insider,
but consider this: if you were a stock trader with an uber stock trading
algorithm, would you share it? No. I don't see why VCs would share their
"algorithm" either. They're competing with the other VCs for deals in
startups, and they each have their secret sauce. They also compete with each
other for more investor money (from their LPs).

Lastly, consider this: would any anti-spam vendor fully disclose all their
algorithms to detect spam? No, that would be dumb, because then spammers would
know exactly how to circumvent them.

[1] Fact: most startups fail

~~~
1123581321
I think you have gone off-topic somewhere. Originally this was about whether
this VC's shortcuts were tied to likelihood of a good return; now you are
either saying not much works or they know what they are doing, i.e. looking
for fidgeting works. Or maybe both or neither? I've been pitched on stupid
"next Facebook" ideas, tried to make one (didn't go anywhere), am now
developing one as a consultant that is going somewhere and also analyzed
securities professionally so I understand some of these difficulties, but my
concern is that the essay author's assumption (some in-interview behaviors
tend to represent bigger problems that sink startups) is recognized as the
missing link between the interview behavior and declining to fund.

------
nirvana
Do angels require liquidation preferences and other arbitrary terms (like
paying their lawyer fees) that VCs do? Do angels impose bad decisions? (I've
seen more than one company lose %50 of its ultimate market value as a result
of a VC imposing bad decisions on them.)

Are angels more or less likely to follow the heard or be arbitrary? (EG: he's
nervous while pitching us therefore, he must be hiding something)

Since Angels these days have rather large amounts of funds, and the cost of
running a company is much smaller -- I believe we'll be able to service up to
200 million customers for about $300/month operating costs excluding salaries
which nobody is taking right now.

Do we really even need to deal with VCs anymore?

Why not take a series of Angel investments? Seems many companies could be done
in three:

$100k: Seed stage

$100-$500k: Have product/market fit and getting traction.

$500k-$2M: Profitable and want to spend heavily on marketing and growing the
team.

Seems like those rounds should be sufficient for a lot of companies, like say
Instagram. And they're small enough to be handled by a syndicate of angels.
And if the company is of the type that it then needs to raise $5M-$15M for
further growth, at that stage you could probably get VCs in on much more
reasonable terms.

~~~
jandrewrogers
Many startups are not website hacked together over a few months, they require
much more time and more capital. Even limiting it to the domain of software-
based services, applications that are based on genuinely new software
technology still require building an enormous amount of software
infrastructure that cannot be slapped together with a clever bit of scripting.
Most of the really interesting stuff requires capital because it requires a
lot of very careful and very high-end code development.

I would strongly recommend bootstrapping if possible but that is not feasible
for many cases. Some people conflate the "<well-known startup> for <noun>
website" startups with the actual technology startups. If your startup
requires shipping a 100k lines of novel and bulletproof code, you are not
going to be doing it for less than a couple million bucks. Software
development of the purest kind is expensive but it also produces much of the
interesting value.

