Robert V. Binder

VCs Say the Darndest Things

August 2, 2011  |  Blog, Business, Software Products

 

Exit sign Sand Hill RoadAs the fundraiser for startup mVerify, I contacted over a hundred venture capital (VC)investors and then had serious discussions with several dozen. Although I came close to getting a terms sheet a few times, all the discussions ended in a brief email or call saying “pass” or “pass, let’s stay in touch.” Sometimes, I got a coherent explanation of the objections.

But before getting the brushoff, I also heard things that seemed strange, irrelevant, or just plain goofy.  Context is given in parenthesis.

  • We don’t invest east of Sacramento.
  • We like to drive to board meetings.
  • Chicago? That’s fly-over country – I used to live there and I’m not going back.
  • People in San Francisco don’t fund businesses that sell to the military.
  • Software development tools are tough – nobody does that anymore.
  • I’m not going throw money down another development rat hole.
  • By early stage, we mean at least $10 million annual sales and growing.
  • You’d have to turn over all development to our Indian affiliate.
  • We’re not making any venture investments because we’re heavily involved with mortgage based derivatives. Fortunately we have bets against subprime as well as on increasing volatility.
  • We want twice our money back in 18 months.
  • Pay us $100,000 and write options on 50% of the company now, then we’ll start working on an investor syndicate.
  • We’ll help you hone your pitch, but I want 90% of company now.
  • Tcl? Sounds like a bad acid trip (See my post about Tcl for the rest of this story.)
  • The market is too fragmented (despite 80% of the market being serviced by a half-dozen firms.)
  • Hitler lost WWII because he opened too many fronts – you have to focus on only one platform (which we were.)
  • Bob, you’re just too brittle (this after I expressed frustration over repeated insults and sundry rudeness.)
  • You guys are all drinking the kool-aid.
  • I really can’t tell you why we’re passing, because everything looks good.
  • This is the best business plan I’ve ever seen, but my partners are only interested in social media, so we’ll have to pass.

A recent Silicon Valley Bank study of VC funded software startups from 1996 to 2010 found that about half failed. This reminds me of Ross Perot’s comment: “I know half of the money I spend on advertizing is wasted — I just don’t know which half.” I suppose these kind of odds would make any investor picky, but quirky too?

(With apologies to Art Linkletter’s “Kids Say the Darndest Things”.)

 


3 Comments


  1. Excellent set of quotes. Some of those came up at yesterday’s Venture Club meeting here in Indy. We get a lot of the “flyover country” stuff too from time to time (depends on the firm).

    -Mike

  2. Great list, Bob (chuckle).

    Best investment I ever made (returned $46,000 for $1), was in a hi-tech start-up where the ceo/cto had searched fruitlessly for vc funding.

    If anyone wants to try the vc approach/ordeal, I know a few who are actively investing and have very deep pockets and more importantly great connections.

  3. as i comment to my former investors, the problem with the vc industry is that there is no quality control. i’m sure there are some good ones out there and may be someday i might even meet one.

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