VCs are a popular target for the media, bloggers (and even fellow VCs) to hate on. I know MANY VCs and for the most part, they are awesome, smart, engaged people. Still you always run in to the odd exception to that rule. In good times and bad, you should avoid these exceptional few douche bags. Here’s my completely biased and unscientific checklist of who not to take money from.
The banker: aka – Someone with zero operating experience: You’ve probably met those Ivy league banker types. I’m sure they can rock a spreadsheet and know the secret handshake at a lot of places but they haven’t lived in your shoes and can’t add much value as a result.
The name dropper: You want your VC to be connected. In fact one of the primary value adds we bring is making connections. But unless a potential investor is listing people he plans to intro you to, you shouldn’t be hearing names.
The dude on 20 boards: Check a partner’s background to see how many portfolio companies he or she is responsible for. If the list is big think hard about how much value you’re going to get. And speak with existing portfolio companies to see how much value they are getting.
The guy with a yacht club membership: Yep, you’ve met him. He wears fancy loafers with no socks and has a sweater wrapped around his neck. This person will not get the plight of a penniless, desperate founder.
The generalist: If you meet a VC who does software, clean tech, biotech and every other kind of tech, run. She will add no value whatsoever. We live in a specialized World. Only work with VCs who get your space.
The celebrity: Ashton Kutcher seems to have a good eye for angel investing. Still, I wouldn’t want his money. It creates too much hype. If you do take celebrity money, don’t do it with any expectation of value add.
The ‘non seed’ VC: On a similar note, it’s pretty fashionable these days to see party rounds with lots of investors each putting in a small amount of money. Mark Suster calls this collecting logos. The problem here is none of these investors are actually committed to helping you build a company. For many, you’re just an option. They will wait and see how you do before deciding to “really” invest.
The outsider: If you come across a potential investor who’s not plugged in to the funding ecosystem, avoid them. Maybe they’re great, but VC is an insular, hyper-connected World. If they’re not in, they’re out.
The penniless VC: It is unfortunately common to get “interest” from investors who don’t have money. Whether its new funds that have not actually closed or existing funds that are out of money and don’t have the returns to raise a new fund, qualify potential investors as hard as they qualify you.
The opaque VC: This is the person who does not answer questions as directly and transparently as you are expected to. The person who does not invite you to contact every founder he has ever backed. Avoid.
The blabbermouth: This is the person who shares insider knowledge gained from other companies she’s looked at. While that might be useful info for you, you can’t trust her. You have to assume she’ll be sharing your info far and wide. Loose lips sink ships…
Who am I missing? Help me complete my list of VCs to avoid…