

Ask HN: VC are calling later today, how much should I reveal? - mooneater

We have a number of competitors in our niche.  The VCs are calling us out of the blue, I guess to size us up, saying they are interested in the niche and us because we have a presence in it.  I wouldnt mind the investment (though I've read about the downsides of VCs here and elsewhere), but I also dont want to give too much away in case they end up funding a competitor.  What should I/should I not reveal?  Plans for 09, new features, new customers in the pipeline, core competencies and tech, etc.  There is no NDA at this point.  Thx!
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cperciva
Be very careful. It sounds to me like the VC is considering investing in one
of your competitors and they want to use you as 'due diligence' to verify
whether there's enough of a market for them to invest in.

If I were you, I'd go into the conversation with the working assumption that
everything you say is going to be passed on to your competitors.

~~~
curiousgeorge
It is extremely unlikely they want to fund you. I'd ask at the outset what
their motivation for the call is. Ask them to give you their own understanding
of the market: how your product compares to others, what they think about the
industry, etc..

What they tell you will make it clear if they have looked at your product in
more than passing detail. It is more likely that someone has named your firm
as a potential competitor in their business plan and they are just doing due
diligence as parent-post suggests, in which case they may not even have
visited your website.

If they cannot tell you anything interesting about your own product or market
then what is the point in talking to them? Politely tell them you'd be pleased
to talk when they have a better understanding of the industry and understand
what sets you apart. Then get back to coding.

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pumper
1\. go to the funded.com and do some research on them. 2\. find out if you are
talking to an associate or a partner. I wouldnt reveal much to an associate as
they are almost definetly doing research. Either way, ask them up front what
their intentions are 3\. Decide ahead of time what you want to tell them. I
would think about a couple of interesting tidbits that might hook them into
taking a meeting with you.

Good luck!

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jfarmer
I was going to type a long list of things to do, but it really boiled down to
this: what can this call get you?

Who is calling? Is it someone who can put a term sheet in your hand next week?
Or is it an associate out to impress the higher-ups at the firm? How good is
the firm itself? World-class? Mid-level? etc.

Know who you're talking to and what they can possibly give you. If you're
giving them something, get something in return.

And keep in mind you _don't_ have to take this call if you don't want to. Ask
them what the call is about and if it doesn't sound sincere just back out
gracefully.

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invisible
I would only tell them your business model plans and that you're planning to
make X amount this year (or that you made X last year). Don't go too far into
your plans for 2009 unless they're public knowledge. New customers can be
explained by $ amounts, not names. Only discuss your technology if it's common
knowledge again (or if it doesn't matter to you that your competitors know).
Be frank you'd love to go down the possibilities of an investment but you're
not giving them an open door into your company until after there is a signed
contract for the investment.

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swombat
"So, what can I help you with?"

"We're wondering how you've sized the market."

"I'm afraid that's confidential information. I can't really tell you that
until we get to know you better."

"Umm, ok. How about your biggest name clients?"

"I obviously can't reveal that kind of information at this stage."

(etc)

Option 1) "Look, we really want to invest in you, that's why I'm doing this
research. How can I make you more comfortable talking to me?"

Option 2) "Ok... thanks. I need to go now, do you mind if I call you back
later?"

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mooneater
Many thanks for the comments. The conversation was short and sweet, I heard
them out, we didnt say too much, and they said to call them back if we want to
pursue it further.

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walesmd
Don't reveal the fact that they are calling _today_ and you have no idea what
you are going to tell them.

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sachinag
Seriously, if you don't think they want to fund _you_ , then cancel the call.

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jwesley
Don't reveal that you wouldn't mind the investment. Act like you have no
want/need for it.

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opticksversi
We need to research VC's before we talk to them. Try researching your VC's by
talking to the people who have been funded by them.

.

 _There is no NDA at this point._

You are thinking of asking a VC to sign an NDA?

.

[http://robertplattbell.blogspot.com/2007/10/to-nda-or-not-
to...](http://robertplattbell.blogspot.com/2007/10/to-nda-or-not-to-nda.html)

 _Simply put, when you sign an NDA, you are signing a CONTRACT, and any
contract may obligate you to perform certain acts. More importantly, for each
contract you sign, you are exposing yourself to potential litigation liability
for breach of contract.

Thus, as a large company, if you sign hundreds or thousands of NDA contracts,
you are incrementally exposing yourself to more and more liability. In a
country where you can get sued for serving hot coffee, the odds of getting
sued for signing all those NDA’s is pretty high.

So there is no point in a large corporation agreeing to sign an NDA with a
solo inventor, unless the NDA is one of those bogus “disclosure agreements”
referred to above.

If you think about it, it makes sense. And if you were to advise a company,
you’d advise them NOT to sign an NDA. For example, suppose you represent a
carmaker. Most of the ideas submitted will relate to cars. If your client
signs all these NDA’s with potential inventors, chances are, one of them will
submit an idea similar or identical to an idea already under development in
your client’s lab. You’ll end up getting sued, as the inventor will claim you
“stole” the idea. Better off to advise your client NOT to sign any NDA’s.

Venture Capitalists (VC’s) historically have refused to sign an NDA, and in
fact, to ask them to do so is considered an insult and a sure way to put an
end to your “elevator pitch”. Again, since VC’s listen to hundreds, if not
thousands of invention pitches over the years, the chance that they will hear
the same idea more than once (or a similar idea) is pretty great. If they sign
NDA after NDA, they slowly paint themselves into a corner, to the point where
they cannot back any new idea without the chance of some previous inventor
claiming a breach of an NDA.

Frankly, the proposition of an NDA is a bit absurd. Someone comes to you and
says they want to tell you a secret. BUT, before they will, they want you to
sign a contract agreeing to draconian consequences if you tell the secret to
anyone else. Suppose the secret is not all that great? Suppose everyone
already knows about it, or more to the point, someone in your company does? It
really is a risk not worth taking.

So, there are various good reasons why people will refuse to sign an NDA. If
you think about it, chances are, you’d refuse to sign one, too!_

~~~
defunkt
I second the research point. They're researching you, right? Why not do the
same?

Early on my company was talking to a VC. We weren't sure we wanted money, but
we did want to explore the option.

We called up a few companies in the VC's portfolio to ask about their
experience and the information we received was incredibly useful. It
ultimately helped us make our decision.

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rishi
enough to get investment

