

The arrogant VC: entrepreneurs share their horror stories - waderoush
http://www.xconomy.com/boston/2009/12/08/the-arrogant-venture-capitalist-a-view-from-the-trenches/

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grellas
The horror stories are real but the environment has changed to the relative
advantage of founders/entrepreneurs.

In the 1980s, founders who approached VCs were more like supplicants who had
comparatively little knowledge or sophistication about how to deal with an
elite group on whom they utterly depended and whose power in relation to
theirs was lopsidedly overwhelming. Due-diligence cycles, for example, could
easily extend a year or more as the founders hoped for the best that their
much-needed capital would come to them one way or the other.

Today, founders have far more knowledge and sophistication in dealing with VCs
and, even more important, a typically broader range of choices. It is much
easier today to come up with winning business models that either bypass or
defer VC funding in ways that give founders potentially more leverage than
they once had. When dealing with VCs today, founders also have a much greater
understanding of potential pitfalls and abuses (such as those highlighted in
this piece).

It is the same dance as 25 years ago but the average founder no longer is led
(more or less) blindly as before. The dynamic has tipped more in the founders'
direction, and this change is here to stay. Think of it as a _relative_
empowerment of founders in relation to those of the past.

~~~
pwnstigator
I think entrepreneurs had more leverage in the '90s.

In 2009, with the economy in such a damaged state, VCs know that entrepreneurs
would be in severe pain if they entered the traditional labor market right
now, and they're using this as leverage. Taking the $120k job at mid-size,
promising startup is not an option for as many people right now.

Knowledge (of VC tactics, terms) doesn't help the entrepreneur very much. This
is about power, not knowledge. Everyone knows that multiple liquidation
preferences are evil, but how many people are going to select death over bad
terms?

~~~
grellas
Of course, during the bubble, the leverage shifted greatly in favor of
entrepreneurs.

The main advantage today for entrepreneurs (if their business model allows it)
is to use bootstrap/angel-based methods of working around the VCs while
building the core parts of their companies and dealing with VCs later, if at
all. In other words, many entrepreneurs today have the luxury of being able to
work around the VCs and to use them only when and if it suits their purposes.

Believe me, this is huge. I have many _serial_ entrepreneurs coming to me
today who used to go strictly through large firms because, in the old days,
their only option was to work with such firms and their VC allies. Today, they
readily avoid such large firms precisely because they want the independence of
developing their companies in a more flexible way.

It is the power _not_ to have to come to the VC table at all that gives the
new-found leverage (of course, for some companies, this is not possible). This
is very new and very significant in today's climate. When combined with the
added knowledge available to entrepreneurs today, the power balance is
definitely shifted to a degree in their favor over the old ways.

------
ulf
A classic leveraged 1:n problem. Every VC has many entrepreneurs to worry
about and so in conclusion does not give a damn about most, especially if they
show early signs of failure. Every entrepreneur depends heavily on his or her
VC, so from that perspective, the relationship is naturally a different one...

------
mmt
The unabridged version, linked at the end:

[http://www.freddestin.com/blog/2009/12/the-arrogant-vc-a-
vie...](http://www.freddestin.com/blog/2009/12/the-arrogant-vc-a-view-from-
the-trenches-full-length-version.html)

------
pwnstigator
Here's the problem: most technology entrepreneurs could, with a couple years'
training, do the VCs' jobs as well as they do. The only thing they lack is the
connections necessary to get the job.

Yet VCs hold the cards, and the reason for this is that they have rare social
resources, which are (unfortunately) valued more highly than talent.

I'm not disparaging VCs as a class. Some of them are great, but I'm a 26-year-
old with no MBA and know for a fact that I'd be a better candidate for an
entry-level VC position than 95% of the people getting them (because I've
worked on Wall Street and know some of these people).

