
Ways a VC says no without saying no - RobbieStats
https://unsupervisedmethods.com/15-ways-a-venture-capitalist-says-no-68632ba021c3#63748
======
AndrewKemendo
These are all still pretty fast No's in my experience.

The worst No's are the ones where they ask to do Due Diligence and then never
open the dropbox folder. Or if you are on your fifth meeting and they just
keep trying to pump you for competitive information.

 _So how do you know when you get a Yes?_

When you get a wire or a check. That's the only way.

Even a signed note or Equity docs don't mean anything until that money clears.

The best No's I've had were from Bessemer and a16z years ago. Almost immediate
and right to the point that they wouldn't invest, with specific
reasoning/metrics behind them. A++ would get told no again.

~~~
fao_
> The best No's I've had were from Bessemer and a16z years ago. Almost
> immediate and right to the point that they wouldn't invest with specific
> reasoning/metrics behind them.

Don't you mean " _without_ specific reasoning/metrics behind them"?

~~~
kornish
He's saying that they made a decision, then explained the reason for their
decision. That's the best possible way to receive a No as a founder.

------
chris_va
From the VC side, it looks like this:

"LOOK AT ME LOOK AT ME LOOK AT ME! Ok, what do you have? 40 slides that tell
me nothing other than you have a big vision and if you own 10% of <insert
market here> it will be worth a lot."

At this point, VC options are:

1) Hard pass (crazies, maybe 60% of people pitching), but you want them to
still refer their friends for better deal flow, so <insert excuse here> that
makes them feel better about rejection.

2) Soft pass (30%): maybe they have something, hard to tell without spending
weeks figuring out what they really meant, and if the team is even the right
team to be solving the problem, much less actually competent. Give them some
<come back when> that doesn't ruffle them too much.

3) Next stage of funnel: The 10% that actually got their concept across,
explained why they are a good team to implement it instead of the other 10
people you heard with the same idea, and why now is the right time. Enter
diligence, and hopefully you can convince the other partners that you aren't
crazy by taking a chance on them.

~~~
athenot
Would it be helpful if a team adds a slide to the effect of "Here are reasons
why you might NOT want to invest in us"? i.e. stating the deficiencies we know
we have and addressing them head on instead of waiting until reality differs
from expectation.

~~~
chris_va
Usually the better pitches have a discussion on risks/challenges to overcome,
and how you are going to use the current VC round to do that (and the
timeline, etc). "Big risk item is delivering T tech by D date, requires P
person for M months (usually a specific person), who we will hire at time T_1
after getting our funding round"

If most of the VC's concerns are on your list of challenge milestones, then
they will be more likely to believe the rest of your pitch as being accurate.

~~~
swyx
I have never pitched a VC but this was surprising. A pitch that requires a
specific person who hasn't yet been hired? What if the person is unavailable?
This seems to be misleading specificity.

~~~
jonnathanson
Somewhat common in pitches from seasoned entrepreneurs. It shows they've
thought things through, have identified specific individuals they believe they
should attempt to onboard post-funding, and are operating as though they
actually know what they're going to do right after they get the giant check.

------
yodon
As an entrepreneur, I find it valuable to have coffee with entrepreneurs I
don't know and listen to their pitches, founder-to-founder. When I do this,
just like VC's, I find most of the pitches I hear are terrible ideas pitched
by people with no knowledge/experience of the industry/problem they are trying
to solve.

Why do I find this helpful? Because I watch my own reaction to the experience.
I've just met this person. They've just told me their dream, the thing they
quit their job to do, invested years of their life in, and it's an absolutely
terrible, terrible idea. What do I do?

If I can, I give them good advice within the confines of what they are trying
to do. And in almost all cases that's as far as I can go.

I just met this person and they just met me. It's not my job or my place to
crush their dreams and the odds are vanishingly close to zero percent they'd
listen to me if I tried, so I don't (think about all those VC rejections, how
many of those VC rejections caused the entrepreneur to drop the idea? The
answer is probably pretty close to zero).

Even with close friends, it's very dicey whether to say "I think that idea is
a mistake" because most entrepreneurs are so driven by passion (and need to
be).

Each time I hear one of those terrible pitches, I try to remember this is why
VC's don't want to tell people solid no's, and this is why I should be so
appreciative for every hint of criticism I've ever received. Because people
will absolutely tell you your idea is great and they'll almost never tell you
what's profoundly wrong with it. I put as much truth and as much insight into
my answers and observations on those painful pitches as I think the
entrepreneurs can hear, and hope they'll eventually internalize it and pivot
in a better direction, because "please, for the love of god and your family
and mortgage, stop what you're doing now" simply isn't an ansewer the
entrepreneur will be able to hear from a stranger (or probably even a close
friend).

~~~
AustinLA
I would really like to agree with this description because it does capture
part of the human element of hearing someones dream, but it misses one key
element of scenario. You're chatting with them as a friend, whereas it is part
of a VC's professional responsibility to take a clear position with founders.
Each pitch I hear is an investment of time – mine and the founder's. Neither
one of us have much incentive to drag it out if it is really not going to
happen.

One thing to note that may be non-obvious… Typically when I provide a detailed
reason for the pass – regardless of if it's team, market, strategy, etc. – I
don't exactly expect to receive the response "that's a great point we haven't
considered, maybe it won't work out for us." Instead, I expect that the
response will be a challenge to the point's I have made. Sometimes valid, but
most often it comes down to a matter of perspective, but it is unproductive to
engage in email debate with every founder where we don't pursue an investment
in their company. It comes comes down to the tradeoff between professional
responsibility and limitations of my time.

~~~
yodon
Yes, I was sloppy in using the term VC to refer to investors generally, my
comments were more targeted at angels who I generally viewed as less
explicitly professional in their investing profile. With a true VC at the seed
stage, I would set the bar of professionalism at a prompt and explicit
desision after the pitch and/or partner meeting. Anything less is a sign the
VC firm is insufficiently efficient in its own processes to be agood partner.
Later stage there is more data and a bigger check to write so I'd expect the
decision to take a bit longer.

------
lisper
He left out an important one: sometimes VCs say no by saying yes. It goes like
this:

VC response: We're really interested and we want to do the deal, we just need
to wait to hear from partner X who is currently out of town.

Translation: We are about to fund one of your competitors, and we want to
string you along as far as possible in the hopes that we can distract you from
other fundraising efforts so that you will be less of a threat to our baby.

Comment: It's not a "yes" until the check clears. (And even then you should
probably wait two weeks just to be sure.)

~~~
cookiecaper
Yeah, the most successful business people you've never heard of will rarely if
ever come out with an explicit denial (the ones you have heard of may also
practice non-denial generally, but are playing by somewhat different rules).

Saying "no" makes people really mad. People remember how you made them feel,
not necessarily what you said or did. Thus, it is most important to look after
the _feelings_ of the people you contact, even at the cost of saying or doing
things disingenuously.

If you make people feel like you're interested in them and their ideas, that's
much better than making an enemy who has sworn to prove you wrong. The best
way to do this is to make them think you're 100% on board and that you're only
being stopped by a technicality or some high-friction process that you're
helpless to overcome.

Only a relatively small handful of people will eventually put two and two
together and realize that you're intentionally stringing them on; most people
prefer to believe the flattering interpretation that the deal is pending, it's
just hung up somewhere along the way.

The reluctance of <AVERAGE_PERSON> to misrepresent things for commercial or
political convenience only allows those with fewer scruples to rise to the top
of the heap.

------
lpolovets
Most of these basically bucket into "I'm not interested" or "I'm not
interested at this time, but I think that might change in the mid-term
future."

Why are there so many ways to say No? Because just saying "no" is rude --
although some of the 15 alternatives in the Medium post are even worse because
they waste a founder's time. It's like if a recruiter reaches out to you: most
people don't reply, or they reply with something like "sorry, this is not a
great fit" or "I'm not looking at this time."

FWIW, there are many VCs (though probably not the majority) that give concrete
reasons when saying No. When I got into venture capital 5 years ago, many
peers told me to be vague in order to maintain option value in a company's
future fundraises. That sounded dumb to me because if I were a founder I would
want feedback, so I try to give useful feedback when I'm passing. That's
worked out well over time, and founders whose companies I passed on often
introduce me to other founders, or reach out when they're fundraising again.

------
kinkrtyavimoodh
I don't like the tone of this piece.

It makes it sound like all startups out there have a RIGHT to be funded, and
annoying, idiotic VCs just say no them... how mean of them.

But plenty of startup ideas are BS, plenty of founders are incompetent, and
they don't automatically deserve a VC's ear, let alone their money. Why do
they think they have the right to an audience? I know that you can have
exceptions (Harry Potter was rejected by some 12 publishers before Bloomsbury
took it), but if no VC is willing to even listen to you, consider that you are
the problem, and not the VC industry.

I know that a bit of boundless optimism on behalf of the founders is needed
for startups to succeed, but exercise that optimism in your own time and on
your own dime.

~~~
tomschlick
Exactly. Someone has to tell the founder of "Uber for vegan dog food" that
they have a shitty idea.

Sometimes its harder to crush someones dream than to just lie to them and not
respond to their emails later.

~~~
kinkrtyavimoodh
No VC wants to become famous as the VC who said no to the next unicorn. That's
another reason they don't explicitly say no. A 'no' is not a judgment on your
whole existence, and it's mostly not personal. It's a judgment on your current
state.

But most people don't say it that way. They go all "See mom you didn't believe
in me but I told you I'd become something".

Well your mom didn't believe in you because you were smoking pot and failing
all your classes when you were 16 and had half a foot in prison. Good for you
if you managed to turn your life around but don't blame mom for her lack of
confidence.

------
jscheel
I got some good advice in 500 a few years ago when trying to raise a Series A.
We were getting the "location" excuse over and over. It usually went something
like, "we love what you are doing, and we would probably invest in you, but
your location is a non-starter for us." The truth, as was illuminated to me
during, is that they just aren't interested. If you were a compelling enough
business for the investor, your location would not be a factor. If you can
prove that you are succeeding in your location, then the location obviously
isn't an issue. Too many investors saw our location as an easy out, and it
took a while to understand that. We had way too much hand-wringing about
upending our families and moving to the Valley to try to secure investment,
when we should have just been looking inward at our own shortcomings.

~~~
logicallee
it's only an excuse if you moved your company to silicon valley and it turns
out they were lying and still didn't want to invest.

As it is you got a hard "no, because of your location."

I am shocked that you think location doesn't matter and that it was not the
truth.

whoever advised you of that is wrong. of course it matters. why do _you_ think
more deals happen in silicon valley than elsewhere? because there are no good
startups elsewhere?

shockingly misinformed/in denial. you should have believed the reason you were
very clearly given. or falsified it by moving to silicon valley. or realized
that actually, you are the one saying no.

~~~
bhnmmhmd
I also cannot fathom the reason this comment got downvoted. I would be happy
to hear about the reason.

------
jedberg
The most frustrating no I've gotten, repeatedly, is "We'd love to get in on
this as soon as you find a lead investor".

Translation: We don't really believe in your idea or you, but if you get a big
player to put some money in we'll be happy to follow them.

~~~
jartelt
Alternative translation: We believe in your idea, but have a small fund and
cannot take up the majority of your funding round. Thus, we would love to
invest a smaller amount as part of a syndicate.

~~~
emiliobumachar
Why not be willing to lead then?

~~~
ryandamm
"Lead" implies taking the largest position in the round, often but not always
around 50% of it. VCs typically have a strict profile for the size of check
they write -- though I think this is more prevalent at the seed stage, where
funds top out pretty quickly at fairly small check sizes. I think the dynamics
are probably very different from this at later stages, but then again the
article (and all this discussion) is about seed funding, as far as I can tell.

------
jacquesm
The reason VCs say no 'without saying no' is because they would like to keep
the door open in case you and your crazy idea - against all odds - succeed and
need a follow on investment a while from now.

The reason they say no to begin with is because you are not pitching in a
vacuum, you are pitching together with another 1,000 or so companies in a
year, 900 of those will get 'no' right off the bat, 100 will get a meeting (or
two) dedicated to reviewing their proposition in more detail, 10 of those will
enter due diligence (at substantial risk to the VC in case the deal does not
go through) and maybe 8 out of those 10 will get funded.

The amount of time wasted on worthless pitches by people that don't stand a
chance of getting funded is very large, and no amount of feeling that you are
entitled to funding is going to get you funded _unless_ you manage to convince
the other side of the table that you are one of those 10, which means you need
to look better than the other 990. Good luck!

~~~
ericb
What is VC due diligence like?

~~~
cynusx
Essentially they will build a hypothesis around what makes your company worth
investing in (e.g. great goto market, passionate customers, technology likely
to be bought, ...) and will focus on double-checking what they believe needs
to be true for that is actually true. Essentially it's broken down into:

Technology due diligence (by an outside contractor)

\- understand architecture

\- interview CTO

\- understand technology choices

Essentially the technical DD is whether your CTO knows what they he is doing
and can actually deliver the roadmap.

Go-to-market DD

\- call with your channel partners if you have them

Product DD

\- call with a sample of your customers

\- Actually try the product themselves

Team DD

\- reference calls on all founders + backdoor references

\- CV's of core team

Business audit

\- P&L

\- cashflow

\- cap table

\- sales activity (growth, churn, acquisition)

Due Diligence should not raise any surprises and confirm what you have pitched
them. It's a very rational thing to do before you wire a few million into a
company you have met only a few times.

~~~
jacquesm
> Due Diligence should not raise any surprises and confirm what you have
> pitched them.

This is key and something that I have explained multiple times over the last
couple of years to people that really did not get why a surprise or two during
a DD were a 'big deal'. DD is confirmatory, not discovery.

------
dfjpitcher
Gave a presentation to an analyst at DFJ. Showed her an alpha prototype. She
said, very interesting, but we really wanted to fund <competition>. That other
company was in a similar space, but did not have the product that we demoed.
Then they got funded by DFJ and in 6 months, that company released an inferior
clone of our demo. In 2-3 years they got acquihired by Google (the founders
did not do very well judging from their subsequent LinkedIn jobs), and Google
shut the product down. Our product grew bootsrapped and has been feeding us
for 10 years, without making anybody rich, just comfortable.

------
jroseattle
Best "no" conversation I ever heard.

Us: how did you like our pitch?

VC: we're a no, because we don't trust your unit economics.

Us: fair enough. Could you please share some scenarios you've invested in
where there were parallel unit economics to us? We'd like to understand what
you know about our space and where those economics make sense to investors
such as yourselves.

VC: certainly! We have an investment in <X> that's in your space, and their
unit economics look great! The assumptions you have and the ones they have are
about the same, but look at their margins!

Us: ummm, so that's a function of revenue/price that we don't believe is even
feasibly attainable. Our margins are smaller because we think the per-unit
revenue is going to be challenged. It's why our numbers are fairly skeptical.

VC: well, we believe they can reach that (unfounded) level of revenue.

Within a year, the company this group funded was raising a Series A to stay
alive because -- drum roll please -- the unit economics were not panning out.

I say this is the best "no" because we had hard feedback on what worked for
them. It also let us know they didn't really understand how price in our
market space was going to have downward pressure. Our approach was to start
very cheap, then improve over time. These investors weren't interested in that
approach; rather, they went with the team who had "better margins".

We learned a lot, and kept learning, from this investor's "no".

------
keithwhor
I think the thing to realize here is that "no"s aren't personal.

Well, I mean, sometimes they are. But they're usually not. A $1B fund has
roughly three years to allocate that $1B in resources --- that's nearly $1M a
day. You need to make sure that the speed at which you're expected to invest
doesn't detract from the quality of deals, so your bar has to be extremely
high.

I think a valuable skill to develop as a founder is to recognize the
difference between; "no, but I like you" and "no, and I don't like you / don't
care." This industry is built on relationships. Unfortunately there will be a
ton of people who just don't give a shit about you. But the ones that do,
they're going to help unlock doors for you, and even if you get a "no", focus
on recognizing real "clicks" with people.

------
tommynicholas
There are two versions of this one:

"VC response: We’d love to get in on this as soon as you find a lead
investor!"

The first is "talk to us when you have a lead". That's not helpful and it's
bullshit. When you have a lead you can always raise as much money as you want
- I do not contact these VCs back when I get a lead.

"We are 100% committed for at least $X00,000 if you get a lead or fill out the
rest of the round" \- very helpful, shows conviction, etc. This version is
still not great, but look everyone can't be a lead, and having good folks 100%
committed with $$ amounts shows a lead you have interest and will quickly fill
out a great round around their check.

Don't do the former, only do the latter.

------
emiliobumachar
Pg:

"Here's a test for deciding whether a VC's response was yes or no. Look down
at your hands. Are you holding a termsheet?"

From
[http://paulgraham.com/guidetoinvestors.html](http://paulgraham.com/guidetoinvestors.html)

------
KirinDave
Best "No" I've heard recently: "Are you way too early this time? Because last
time you were way, way too early."

------
redm
The one that was missed is where the VC is really excited during the meeting,
does more research after the fact, and then switches to one of the provided
answers. In my experience, VC's don't do any research UNTIL they are excited.

------
Alex3917
Trying to recognize noes from investors strikes me an being a bad framework
for thinking about business. Of all the investors whom I've asked if they'd
like to receive an email update every time we add a zero to our core metrics,
I've yet to have a single one say no. It's your job to make a good product
with good economics, marketing, retention, etc., and to consistently grow your
metrics. If you're not willing to actually do this and demonstrate progress on
a regular basis then why would you expect anyone to fund your company?

------
EGreg
Seriously, with all the new crowdfunding and ICO options, why fight to
convince the gatekeepers like VCs when you can first try to convince some
percentage of the population to each put in a small amount?

~~~
dmitrygr
Just because a new method of running a ponzi scheme has not yet put anyone
behind bars does not make it an OK thing to do.

~~~
igorgue
Just because you're ignorant... You're allowed to make that comment :).

Also, you think all VC deals are fair and square? Naive.

------
rdlecler1
Of all the VCs I spoke with, ba16z was the best. They were proactive in
reaching out (2nd3rd/4th+ teir VCs are lazy), they gave you a quick no,
acknowledging their fallibility, and telling you why they passed. That said if
you randomly email a VC and don't hear back, they're not obligated to respond.
They get hundreds of inbounds each month and 99%+ are simply uninvestable.

~~~
ganeshkrishnan
How did you get their contact? Were you networked by someone?

~~~
rdlecler1
They had reached out.

------
Mz
I have had a class in Negotiation and Conflict Management. If you haven't had
any training in negotiation, at least get a copy of the book "Getting to Yes."
It is short and research-based.

It takes time to broker a deal. (Of course, that doesn't mean every single
person is being straight up honest with you every single time they
communicate.)

This article kind of admits to being perhaps unnecessarily snarky. ("Note: I’m
normally not this cynical, but this article was fun to write ") I don't have
experience trying to woo VCs for an investment. But closing a big deal tends
to be time consuming due to the slow process of gradual exposure of pertinent
info on both sides.

So, I am reluctant to take this article too seriously.

------
pcsanwald
There are a bunch of variants for B2B as well:

"We see you have X reference clients, and usually like to see X+2 reference
clients"

"We'd like to see you get a little further along in terms of product/market
fit, and then let's talk"

------
netvarun
"Let me circle back."

~~~
gfodor
the worst

------
dccoolgai
Having never been around the West Coast tech scene much, it sometimes seems
that there is almost a tacit expectation that someone "owes" you money for
your idea. Without commenting on whether that is "bad" or "good", it's just
interesting to compare it to the attitude most of the people I know who start
businesses on the East Coast who would find it at least odd if not right
outlandish that someone would give you money before you demonstrated in some
concrete way that you have the ability to tender it back with some form of
interest.

~~~
someone7x
I don't know about the entitlement you describe, but isn't getting in on a
startup more about 10x payouts instead of incremental "interest" payouts? I
can only imagine a VC is not interested in a concrete demo of marginal
profitability, and would prefer a pitch for some disruption that has some
worthwhile chance of success.

Different types of investors attract different types of entrepreneurs would be
my guess to explain the difference you see.

------
miiiiiike
It's not just VCs. Over the past three years I've noticed that more and more
people in general are giving "positive sounding words" instead of a yes or no.
Designers, developers, writers, business people, from every part of the world.

The best people I've worked with have always gotten back to me right away with
a concrete yes or no. I do the same, anything else is a waste of time. As soon
as someone starts giving me anything like the responses in the article I move
on.

~~~
jsmthrowaway
It's the California No. Look it up. It's well-known and endemic in the Bay
Area and Hollywood, in particular.

My personal annoyance is how prevalent it is in dating now, given the number
of people who respond violently to rejection (thereby training people to avoid
dishing it out). I gave this serious thought and realized I'm 100% on
California No style rejections ever since moving here, while in other places
I've lived I'd get "sorry, I'm not interested," or something similar.

California No creates ambiguity -- do I continue asking? Did this person get
hit by a bus? If you think you're doing a favor by avoiding saying no, you're
not. Say no. Every time.

~~~
miiiiiike
Dating is very different, I wouldn't pass judgment. There's a real risk of
physical harm at every stage. If you're unsure give 'em one more "I'd love to
hear from you." before deleting their contact info and moving on.

~~~
angersock
> _There 's a real risk of physical harm at every stage._

This is vastly-overinflated risk, and honestly part of the mess we're in is
due to people treating suitors as potential rapists or axe murderers.

> _If you 're unsure give 'em one more "I'd love to hear from you." before
> deleting their contact info and moving on._

This sort of brush-off means that a) you're going to be surprised when they
show up again and b) they're definitely going to be more annoyed when they
find out you ghosted them.

If you don't treat others with respect, it makes things worse for everyone.

~~~
vinceguidry
> This is vastly-overinflated risk

I don't think it is. I don't know a single attractive woman who hasn't been
physically abused by at least one of their exes.

~~~
miiiiiike
The "attractive" qualifier gives the whole comment a bad smell. Physical abuse
is physical abuse and it tells you more about the abuser than the abused.

~~~
vinceguidry
I haven't gotten to know the unattractive ones well enough for them to tell me
their romantic history. But yeah, I bet a lot of them get abused too.

------
vit05
So how do you know when you get a Maybe? Every time you do not get a yes, does
it mean you got a no?

I have contact some VC using emails and showing my MVP. Usually they ask some
questions, or give some advice. Sometimes they say No, but for now... Other
times they said that it is not a fit for us. One of them say that we are in a
different country and that he preferred to talk in person.

------
jaxomlotus
> VC: Thanks, but this isn’t a fit for us right now. Let’s keep in touch.

I don't see what's wrong with this. It's a clear no without slamming the door
on a future investment should the scenario change. If the VC would say "VC:
Thanks, but this isn’t a fit for us ever" that would be shortsighted.

------
rdtsc
Is it a pretty safe bet to say if VC-s are not calling you asking to invest,
there is little chance you'd get them to invest by calling them.

Also there 0 downsides for them just stringing you along as other pointed out.
"We are totally interested, lets see your details blah blah" then pawn you off
to Hayden.

~~~
eropple
_> Is it a pretty safe bet to say if VC-s are not calling you asking to
invest, there is little chance you'd get them to invest by calling them._

Emphatically no. Nobody's radar is that good. Waving a hand to attract some
attention directly works, if you have something to back it up.

------
websitescenes
I've experienced at least two of these responses in the last few months. Your
write up has confirmed some of my suspicions. Tying to raise funds is hard!
Luckily I have enough saved for a six month runway, that will get me to beta
and hopefully a yes on some venture capital. Thanks for sharing.

------
jaoued
So funny to read and so true. Moral of the story, best money to secure is the
one from customers. Much more difficult to get but so rewarding and the types
of answer we get from prospective customers does not exceed 3.

------
dboreham
Well, statistically whatever the VC is saying, it means "no".

------
danm07
In my experience, everything but "yes" means no.

------
kalal
I never got this business in business. If your idea is really good, then you
don't need to ask for money.

------
fuzzieozzie
Everything short of seeing the money in your bank account is some version of
"No."

Now get back to work!

------
erik_landerholm
My shortened version of the answer to this topic: if they don't say yes, it's
no.

------
Odenwaelder
Why not just say "no"?

------
ourcat
In my experience, some would just never come to Terms and just 'ghost'.

------
losteverything
Im curious, are there serial pitchers? Round after round of "nos"

------
rickdeaconx
This is so painfully accurate.

------
graycat
Here I consider just early stage information technology VC -- later stage and
bio-medical can be much different.

Yup, from my experience, the OP has what a lot of VCs do.

One thing for an entrepreneur to do is to read some remarks from a VC or their
firm about what their interests are. Then, when their interests well cover my
startup, I write them and explain how their interests cover my startup. So,
sure, I rarely hear back with anything and otherwise nearly always just as
some in the OP.

So, then I get pissed: (A) They said what their interests were; (B) I wrote
them showing how their interests covered my startup, but (C) they ignored my
contact. Bummer. So I used to, sometimes, wait a week or two and then write
them and say that they were so unresponsive that there would be no way we
could work together successfully and stated that I withdrew my application.

Since then, in part I _wised up_. By process of elimination, I began to
conclude some basic facts about VCs.

(1) Mostly their stated "interests" don't much matter.

(2) They actually do have some interests and these are nearly universal across
VCs and their firms: They are interested in traction, significant and growing
rapidly, especially in a large market.

(3) Really, the situation is essentially as in the old Hollywood line, "Don't
call us. We'll call you." Or, really, VCs want to learn about the startup from
existing buzz, virality, etc. They want to see the product/service, play with
it, and try to estimate how successful it will be in the market.

(4) For a first step, for a VC, (1)-(3) is about all that matters.

Actually, (1)-(4) seem to be so astoundingly uniform that they must have some
common cause. My guess at the common cause is the larger LPs, e.g., pension
funds; they insist on (1)-(3).

For me, I'm a sole, solo founder, toilet cleaner, floor sweeper, ..., computer
repair technician, systems administrator, ..., programmer, user interface
designer, data base administrator, software designer, product manager, CTO,
COO, and CEO with a tiny _burn rate_. Some venture funding could have made
some of the work go faster, but really I haven't needed venture funding and
don't really need it now.

But with all the above, there is a surprising situation: My burn rate is so
low that I can continue self-funding until my Web site is live. Then, if users
like my work, soon I'll have enough revenue from routine efforts running ads
that I will have plenty of free cash for _organic_ growth without equity
funding. If I get that growth, then I'll have a _life style_ business with,
again, plenty of free cash for more organic growth.

About that time, some VCs will learn about my startup and give me a call. They
will expect that my company has about five co-founders, each with maxed out
personal credit cards, has a business bank account close to $0.00. They will
assume that the company and each of the co-founders is just desperate for an
equity check on just any terms, say, because each of the co-founders has a
pregnant wife. Then the VCs will believe that they can play hard to get,
strike a hard bargain, and grab control of my company for next to nothing.

At that time I will check my computer, confirm the name of their VC firm, and
let them know the date long before when I sent them a description of my
company they ignored. So, I'd inform them that they were too late, that my
plane has already left the runway, and no tickets were for sale.

So, now sometimes I write VCs just for fun, so that if my startup does work
and they do call me, then I can tell them that I wrote them and they ignored
my contact!

To me a biggie point is that apparently the VCs want nothing to do with any
business planning, crucial core _secret sauce_ technology, etc. To me, such
things are the keys to the big successes the VCs must have to get the
investment returns their LPs have in mind to invest in VCs. Further, such
planning, special technology are the keys to the many amazing technology
successes of US national security.

Well, again, apparently VCs want to wait for traction significant and growing
rapidly. Maybe that approach will usually be okay for VCs: At least apparently
the VCs believe that on the way to a big company, a startup will nearly always
need some equity capital.

But for a sole, solo founder with a tiny burn rate and writing software, the
VCs can miss out: That is, by the time the VCs want to invest, the founder
will no longer want or need the investment.

A big example of such a sole, solo founder success was the Canadian romantic
match making site Plenty of Fish.

------
graycat
In the last few years, for early stage, information technology venture
capital, the situation has been changing radically:

A blunt fact is, that the VCs very much need big wins, commonly, say, 30%
ownership in a company with exit value $1+ billion. Moreover, even more
seriously, to get their limited partners (LPs) excited, they need some ~30%
ownership in another Microsoft, Apple, Cisco, Google, or Facebook. That's just
the facts of life. To pass the giggle test, that's the game they are playing,
the business they have chosen.

We need to keep in mind, beyond Moore's law and the Internet, the examples
Microsoft, Apple, Cisco, Google, or Facebook don't have a lot in common. So,
we can't hope to extract much in the way of predictive patterns by just
external empirical observations.

So, if VCs or anyone is to find _another Microsoft, ..., Facebook,_ they they
will have to look deeper than just patterns from external observation.

Also we should keep in mind, say,

[http://www.kauffman.org/newsroom/2012/07/institutional-
limit...](http://www.kauffman.org/newsroom/2012/07/institutional-limited-
partners-must-accept-blame-for-poor-longterm-returns-from-venture-capital-
says-new-kauffman-report)

and

[http://www.avc.com/a_vc/2013/02/venture-capital-
returns.html...](http://www.avc.com/a_vc/2013/02/venture-capital-
returns.html#disqus_thread)

on the average venture capital return on investment. One word summary, the
average return is poor, not high enough to excite LPs.

Here is a hint at the nature of the radical change: At

[http://a16z.com/2014/07/30/the-happy-demise-of-
the-10x-engin...](http://a16z.com/2014/07/30/the-happy-demise-of-
the-10x-engineer/)

Sam Gerstenzang, "The Happy Demise of the 10X Engineer"

with in part

"This is the new normal: fewer engineers and dollars to ship code to more
users than ever before. The potential impact of the lone software engineer is
soaring. How long before we have a billion-dollar acquisition offer for a one-
engineer startup? "

So, a solo founder building a company worth $1 billion?

Of course, there is _half_ of an example -- the Canadian, Internet based,
romantic matchmaking service Plenty of Fish with a solo founder, with two old
Dell servers, $10 million a year in revenue, all just from ads from Google. He
added people and sold out for $500+ million. So, his ~$500 million is half of
the $1 billion A16Z mentioned.

So, what are the causes of the radical changes?

(1) Cheap Hardware.

From any historical comparison, within computing or back to steamships, now
computer hardware is cheap, dirt cheap; transistors are cheap; so are compute
cycles, floating point operations, main memory sizes, hard disk space, solid
state disk space, internal data rates, LAN and Internet data rates, etc. Dirt
cheap.

(2) Infrastructure. It used to be that an information technology startup could
expectd to have to build or at least wrestle with lots of infrastructure. Now
quite broadly, getting the needed infrastructure is much easier and cheaper.

So, nearly any room in the industrialized world with a cable TV connection can
be a quite active server farm because the rest of the infrastructure, to a
local Internet service provider, a static IP address, a domain name, and
plenty of Internet data rate for a quite serious business, is right at hand.

Of course, the big quantum leap in easy infrastructure is the cloud, from,
say, Amazon, Microsoft, etc.

(3) Software. Now software is much easier. There is a lot of open source
software, excellent software for quite reasonable prices, etc. And really it's
much easier just to write new applications level software. Web pages,
graphics, database operations, algorithms, etc., all are much easier.

So, with (1)-(3), a solo founder with a good idea for a startup to be worth
$1+ billion can for darned little cash write the software, bring up the idea
as a Web site, run ads, get publicity, and, if users come, get good revenue.

It's easy to argue that at current ad rates, a server costing less than $1500,
kept busy, could generate monthly revenue $200+ K for investment by the
founder of basically just their own time. Such a solo founder with that
revenue, then, will just laugh at any suggestion that he should take an equity
check, form a Delaware C-corporation, and report to a BoD. Instead he will
just form an LLC and remain 100% owner.

Then, the main issue now is the evaluation of the basic _idea_ of the sole
founder. Or if the idea is really good and VCs wait until there is traction
significant and growing rapidly, then the VCs will be too late. Or, the solo
founder wrote the software, has one server from less than $1500 in parts
connected to the Internet, has a static IP address and a domain name, has done
and is doing some publicity things, and otherwise is running the business each
month for not much more than pocket change, for less than a lot of people
spend on McDonald's or pizza or Chinese carryout. Literally. So, the founder's
startup is just dirt cheap to run. If enough users like the site to keep the
server busy, then the founder is getting maybe $200 K a month in revenue,
plenty to grow the size of the server farm, and in a few months buy a nice
house, for cash, put several nice new cars in the garage, for cash, and spend
a hour each afternoon in the nice infinity in-ground pool. Then a VC calls and
wants to invest $10 million for 30% of the business and have the founder
report to a BoD of a Delaware C-corp. -- we're talking LOL.

Does that situation happen very often yet? Nope. But now it is just such
situations that the VCs desperately need in order to get a significant
fraction of ownership in $1+ billion exit values.

Or, put very bluntly, the VCs desperately need really exceptional startups.
For Microsoft, ..., Facebook, there are no visible patterns. The founders no
longer need big bucks for a team of developers, expensive servers, and
communications data rate.

Net, for the projects the VCs must have, by the time they want to invest
according to their old rules, a solo founder with a good idea has already got
plenty of revenue for rapid organic growth and a life style business and won't
accept an equity check.

Again, so far there are not a lot of examples of such solo founder startups,
but the radical change and the big deal for the VCs is that it is just such
startups that stand to be the exits the VCs desperately need. So, for the next
Facebook, etc., by the time the VCs call the founder, all they will hear back
are laughs, and the VCs will have to push back their chairs, think a little,
and realize that they just missed out. The VCs will see that, really, there
has been a radical change and they must make some radical changes or just miss
out and go out of business.

So, finally we discover that the core idea is what is just crucial because for
a good idea a solo founder can do the rest alone for essentially just his own
time as the investment. So, to evaluate startups, must evaluate the idea at
just the idea stage and just hope that the founder will accept a check.

------
lafar6502
Boo hoo hoo, bad daddy not giving candy when asked...

