On being a bipolar VC…

So, it’s been almost a year since I moved to the dark side. People still often ask me how I like it. The short answer: I love it! Can’t believe I get paid to do this. But it struck me yesterday that I need to be bipolar in this role. And I am sure most VCs, especially those that work at the early stages, feel the same way.

Early stage, seed VCs focused on web are ever-present on the web themselves. From their blogs to Twitter, Quora, Namesake, etc, etc, etc. They’re out there. Sure, they’re building their brand and hopefully generating dealflow for their funds. But they are genuinely and deeply giving of their time and expertise to entrepreneurs of all kinds.

Offline, many of us are active supporters and builders of our local communities. Attending, promoting and sponsoring events. Bringing in startup celebrities to give them a taste of what we have going on locally. Trying to shine a spotlight on our communities.

Now compare that with what we have to do the rest (and bulk) of our time which is to say ‘no’. When we look at potential investment opportunities we need to do so with a healthy dose of skepticism. Entrepreneurs have more than enough optimism. Our job is to challenge that and really dig into the founders’ thinking, potential, vision and ultimately deem who is worthy of our investment $.

So far, I have invested in just under 7% of the deals I have been introduced to. When you factor in cold submissions from people that I don’t know the number is closer to 1%. So, this means that the vast majority of entrepreneurs walk away unsatisfied. These are the same people we are trying to support when we’re not making investment decisions.

There’s no getting around this reality. And as I have learned now that I am on the other side: the decision to invest has a lot of subjective and personal elements. The timing has to be right. I have to “love” the team and space. It has be something I can personally add value to. And all the partners in our team have to be solidly behind it. In many cases, when we pass on an opportunity, it does not mean we think the business is bad. It just means it’s not right for us.

As I said, there’s no changing this reality. Many VCs try to add as much value as possible even for the opportunities they reject. I will try and do that through the questions I ask but I’m not going to waste someone’s time giving some prescription as part of a decision to pass on their company. Not sure how receptive those people are to my pearls of wisdom. And I’d rather focus my time on our portfolio. So, I guess, I’ll have to resign myself to continue being bipolar…

  • http://twitter.com/shaver @shaver

    Learning to find the value in things you don't want to hear is a critical task for any professional, but doubly so IMO for people trying to carve out something new. It's going to be more comfortable for them to practice that with a VC who declined to invest than it will be with the ones who *do* invest, or their future board members.

    Even if they don't appreciate it at the time, or even remember it later, you'll have helped push them a bit in that key direction.

    • http://startupcfo.ca Mark MacLeod

      Great points Mike. For sure. And in fact a key part of our decision process is how open the entrepreneurs are to input. So little is baked at the seed stage. If an entrepreneur is rigidly focused on one path they are not likely to win. It's not that what we say is 'right'. It's just that everything's going to change so if we can accelerate finding the right path, that's great. But not if the entrepreneur does not want to hear what we have to say – positive or negative.

      Also on the diligence side, we will often push back hard not because we have a huge concern, but to learn how people think. Not everyone likes that.