The One Deadly Sin of VC Firms

Its likely I will piss off more then one person in the professional equity business, but what the heck, I promised Doug I’d stay away from the normal blah blah so here goes.

There is a tactic VC and other investment banking/professional capital firms use that is probably necessary but ultimately a ridiculous waste of an entrepreneur’s precious time. This is the tactic of the boiler room like cold call or form email from an analyst in the firm knocking on your door to “get to know you” or “see about ways of working together” or any number of other nonsensical phrases designed to get you to turn over valuable information for little more then “let’s continue the dialog” in return. It’s at best a time sink and at worst a reprehensible tactic to build a firm’s industry knowledge without doing the legwork or being straight up about the call’s purpose.

It’s goes like this. Below is one of the zillion emails I get. I’ve changed the names, etc, just a bit to protect the guilty but you know who you are.

Hi Rick,
I’m Fred Flintstone. I’m with Slate Rock and Gravel Investments. SRGI is a 90 Trillion dollar fund that invests in all stages of company growth targeting technology, medical, biomass, alternate energy, alternate reality, and next generation fast food franchising.
I’ve come across your company a number of times as I’m researching possible companies to possibly discuss the possibility of coming in to possibly meet with us. I’d love to have an introductory call to get to know you, your company, your industry, you strategy, your positioning, your horoscope, and your thoughts on DNA sequencing if we have some extra time.
I look forward to a fruitful call to explore the possibilities of our possible relationship.
My best to you and the Fixmo team,
Fred

Okay, okay. Maybe not that bad but you get the point. Here are the rules on how you can defend yourself and protect yourself against this time wasting nonsense.

  • First, Google the firm. If there are no pages or a “site under construction”, delete email/mark it as spam so I don’t get one.
  • Next, assuming it is a legit firm with portfolio companies, check to ensure they deployed capital and aren’t agents. If agents, delete email/spam mark them.
  • Check to see if they are in your space. NEA is not, to the best of my knowledge, doing Web 2.0 dating sites so if a newly hired analyst calls from NEA with the blather about ‘engaging in dialog’, sorry, it’s crap and a ploy to help somebody get up to speed on something that helps them and wastes your time. NEA would never, ever do this. Just sayin’.
  • Now that we are this far, check the person on the web site. If they are not on the firm’s website, delete the mail, you are being blasted by a newbie trying to impress the partners with his/her connections and industry knowledge. This knowledge gathering will be done at your expense.
  • If they are on the website, when did they join? If 6 months or less, see previous item. You are being used.
  • Continuing to this point, check titles. Analyst? Bzzzt, wrong, thanks for playing. See previous answers, time sink alert. However, don’t just delete the email, see response techniques below.
  • If it’s a partner, you’ll know. It’s a higher class of contact from a quality perspective. It won’t be a cold call/email blast; rather it will be straight up. Hi, I’m Joe a partner with XYZ and… It’s clean and at least it is somebody that matters in the firm.

The response part is needs to be 120 seconds. You do the Bing thing above (it rhymed, sue me) and delete/respond depending. If responding:

  • Stop reading my blather and create a one pager that you’d give to your mom’s bridge club. Seriously simple and totally public information. A one page, marketing masterpiece that says what you do.
  • If they pass through the idiot, cold calling, time sucking filter, send the one pager and thank them for asking. 99% of the time, that’s it.
  • If it is a partner, and you’ll know if you do your homework, do the same thing with the one pager but add a personal note thanking the partner and congratulating them on whatever exit or accomplishment is tagged by them on the site. Yeah, it’s sucking up, but it points to the fact you actually took the 90 seconds to figure out who they are.
  • In both cases where you respond, tell them up front if you are or aren’t raising capital. If you aren’t, let them know you will contact them when you start the process.

In Canada, this stuff rarely happens because it is such a small community – much to the praise of the firms. Xtreme, RHO, iNovia, Omers, Golden Ventures, etc, all have top quality people so even if the receptionist calls you, it will be a smart person worth dealing with.

Raising capital itself is a time consuming process from the start. Trying to get this kind of noise out of your life is a critical step. Do not get sucked into the XYZ firm called turning into they are interested, liked the story, etc. A disciplined approach will be respected.

Note: Fred really did work at the Slate Rock and Gravel Company.

About the author

Rick Segal

Rick Segal, is the co-founder of Fixmo. Prior to starting Fixmo, Mr. Segal was a partner at JLA Ventures, a large Canadian Venture Capital fund. Mr. Segal was President and Chief Executive Officer of Microforum, a leader in providing integrated e-business solutions in a wide array of industry verticals.

Mr. Segal joined Microforum in July 2000 from Chapters Online Inc., a leading Canadian e-commerce company, where he held the position of President and Chief Operating Officer (1997-2000). Mr. Segal began working with Chapters Inc. in 1997 as a consultant on the technical development of the Chapters e-commerce venture. Based on this successful collaboration, he was named the President of Chapters Online in August 1998.

Prior to joining Chapters Online, Mr. Segal was a partner at the international firm of TMS Consulting from1996 to 1998. Mr. Segal worked at Microsoft Corporation in Redmond, Washington from 1992 until 1996 as Director of technical services for the Internet Customer Unit. Mr. Segal is also the author of four books on Network Management and Windows software development.

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