Three things you should *always* tell a VC if asked

This started as a comment to Fred’s very refreshing post Three things you should never tell a VC when fundraising but I realized that it was turning into one very long comment, so thought it better to write it up as a full length post.

As Fred knows (despite and also because of his energetic comments on an earlier post of mine), I have the utmost respect for him and his years’ of investment experience which far exceeds mine.  However, while I credit his intention to tell entrepreneurs what they don’t need to succumb to if they’re simply being interrogated for the sake of it (or as part of a VC power play/meeting), I must respectfully disagree with his advice of generally not providing the information.

Perhaps I misinterpret his advice — and I see Fred has clarified following Hacker News’ remarks that he meant entrepreneurs should simply be selective in disclosing the information (and not *never* disclose it as the title actually states), but frankly I still think the advice isn’t practical for several reasons.

Regarding the first point about cash position and when you’re running out of money, this is indeed a tough and potentially awkward issue, and I’d agree that in the very first meeting it’s probably not going to score you many points nor leverage if you’re already in debt and out of cash for payroll.  However, if that is indeed the situation then I’m only one meeting or phone call away from finding it out anyway, so why spin it or misrepresent the facts?  I think an entrepreneur really needs to be very upfront about this.  If I were to be told in a first meeting the cash position was fine, but then learned through the course of further dialog that in fact this had been misrepresented, I would be forced to call into question anything else the entpreneur ever said !  Not a great sign.  It’s basically lying.  Call it spin if you want, but then why are you spinning this very crucial matter?

In turn, what I can offer on my part is that I won’t rule out investing in something that is out of cash (I’ve done it before and will do it again).  Much more important (and far more impressive) to me would be to tell me the truth of the situation and also the circumstances behind it.  For example, are you out of cash because you were too obsessive about your product and literally couldn’t or didn’t manage your cash responsibly?  Or is it because you underestimated the cost of your development and freelancers?  Or because your user acquisition plan was overly-optimistic?  Or maybe because when you got your last round you had an investor who said they’d be supportive and bridge if needed, but when the markets collapsed they pulled out?  There’s a reason for the current state of affairs and I’m more interested in that rather than some spin that’s going to start us off with untruths.

Regarding Fred’s second point about what other investors you’re talking to, firstly, as naive as it may sound, I truly believe that the VC community should work more closely together anyway.  I don’t think its efficient or ideal that VCs operate in silos and may be effectively offering deals/terms in absence of talking to other prospective co-investors, competitors, partners and/or people who may also be looking to value the same deal.

Because of my first point, I personally always try to “compare notes” with other investors about a deal or opportunity that is “going around”.  I’m not proferring any confidential information nor am I leaking anything, but I simply like to know what other smart people think of a specific opportunity, team, or executional plan.  In the course of doing that, I’m hopefully going to find out who else is interested (which is a good testament or reflective of other factors) and who’s in discussions with the same team or not.  So if I ask an entrepreneur who else they’re talking to (which as other commenters have noted I and others almost always do), I’m asking because I’m curious and that will outline who I might do some “comparing of notes” with, who I might be able to partner and syndicate with, but also because frankly I want to see how upfront the entrepreneur is.

Honestly, if an entrepreneur were to respond back with Fred’s suggested “We are talking to a selected number of investors who we feel understand this space and are getting good engagement right now”… I would seriously struggle not to furrow my brow with a “wtf” expression and wonder what exactly they’re trying to hide, for example, Does this mean they’re not talking to anyone?  Are they afraid to admit that no one else is interested? Are they thinking that’s how they can respond to a question directed with good intentions of fact-finding and I’ll move on?  Are they implying they have so many active discussions underway that they don’t need to tell me or be honest with me?  In that case, I’ll probably leave them to it.

And regarding the last point about cap table and last round valuation, I really don’t know why an entpreneur should hide this either.  Again, I’m only going to ask this if I’m genuinely interested and/or trying to consider what my possible position could be — and with whom else I’d be working and associated.  Trust me, if I’m not interested I won’t bother asking just for the hell of it, because at that point, I’m instead just trying to wrap up the meeting.  So if I’m asking, I’m genuinely curious.  And if I’m asking, interested and curious, I’m hoping for a follow-up meeting.  I’m going to find out eventually, so why are we drawing things out?  Why would an entpreneur want to hide this from me or give me an evasive answer?  I will be forced to wonder Is it because they don’t know?  Were they not paying attention?  Is this not important to them?  Do they have an investor who is now a convicted felon? Did they give away too much equity to their friends and family?  These things are all very crucial data points.  Much much better for me to know upfront than to have to dig/find it out in subsequent meetings and then call into question why the entrepreneur was not upfront when I asked in the first place.  And to be really honest, if an entrepreneur is not wanting to respond to very reasonable and direct questions like these, I’m probably not going to be inclined to sit through many more meetings of begging for the information.

Bottom line, as with any interpersonal/direct exchange, most of the discussion and question-and-answer dynamic is actually to gauge *how* one answers a question.  As in a lot of other cases, there is not any right or wrong answer to the questions, but if someone were to try to evade a question of mine with lines like “Management own XX% and we have carefully budgeted our options requirement and feel another YY% will take us through the next 24 months of company building”, I’d take serious note.  If they genuinely don’t want to share the straight answer, I’d prefer they just tell me why they don’t want to share it.  And also, if that’s the way they really try to talk in a meeting, it’s just not my style … It’s too sales-y, too evasive, and frankly too bullshitty (word?)

I understand Fred’s point that disclosing this information may affect your negotiation position and leverage, but frankly you’re already sitting in a meeting with a VC, so it’s already clear where the most leverage lies.  I want to talk to people who want to work with me, and I know it’s a sales pitch on both sides and a process to get to know each other, but evasive answers don’t help that along.

 

Confessions of a Twitter convert (for now)

For ages I’d rolled my eyes with arrogant disdain at the “Twitter fad” and thought “Who has time for that?”  since I was convinced that people were simply whinging and rambling and ranting about what they ate for breakfast.   I’d created an account ages ago and occasionally used the search functionality to gauge reactions/feedback on portfolio companies, investments and other trends or “real-time” events, but I didn’t see any point in actually tweeting or participating.

My view was that Twitter was full of so much random noise, mostly utter crap, so why should I contribute to it?  I also felt it was an incestuous circle of people tweeting things back and forth with their friends and existing contacts.  And I certainly didn’t care about what those people were eating for breakfast, what sunrises they were seeing, dreams they’d had the night before, when they were going to bed, on and on and on (you can’t imagine how many things I really didn’t care about).

But then I decided to give it a try.

I decided I would not tweet “random crap” (mostly) and even committed not to tweet song lyrics (which is seriously such a temptation!) and I’ve slowly started to realise a few things.  Thought it would be worth noting them down before I become  a complete convert (god help me) and forget what it was that I used to resist.  Here’s what I’ve realised and started to appreciate:

1. It’s what you make of it. Like anything else (and certainly any other communication medium), it is entirely what you make of it.  If you want to follow what people are eating for breakfast and offer them the same in return, you can do only that.  If you want to see what news items people are consuming, you can do that.  If you want to find new music, bands or follow gigs, you can do that too.

For me I use it to ping/draw attention to news items/blog posts that I like and feel are worth other people seeing [namely entrepreneurs and others in the tech community].  So my modus operandi is simply to “pass things along” or spread the word.  I know none of my tweets have been so earth shattering that they are “must reads” and that no one would really be missing out if they happened not to see a tweet of mine, but all the same, I’d like to think at least occasionally 1 or 2 people thought “interesting!” in response, and that’s good enough for me.

In this vein, I’ve also realised that Twitter has replaced a bit of what I used to do with IM/Skype chat.  Much of my Skype chat activity is actually pinging URLs/stories or snippets to friends on my contact list in order to gauge their reactions or impressions — and converse.  Now I can “broadcast” that with one tweet … although to have a fulfilling conversation and get their honest reactions I do still send a ping on Skype chat.

2. Twitter is valuable and useful [for now] because it’s still relatively small. While this might be debated, Twitter is still in its early stages (relative to other more established modes of communication such as email, Facebook messages, blogs, etc)  Even though some would argue that it’s already gained critical mass with celebs involved and appearances on Oprah, I would still point to how relatively speaking it’s a self-selecting twitterverse (recently highlighted in the Prospect magazine poll) and that as a result most active participants feel an inherent “connection” or familiarity with others on Twitter — simply because they’re there (as liberally-minded early adopters, somewhat engaged in social media, follow the same person, or what have you).  A result of this is that it’s still manageable to filter out noise, spam and bots.  Facebook is past this point, and obviously so is email.  Twitter will eventually fall to the same “critical mass” and noise,… and will diminish in value as a result.

3. The ecosystem is more valuable than Twitter itself. As a result of the point above, Twitter (as an ecosystem or “protocol”) is going to need third party apps, utilities and methods to filter out the spam and noise.  I’d tweeted last week arguing that the ecosystem is actually quite vulnerable to Twitter itself, but even so at some level there will need to be applications and utilities that are necessary to manage Twitter, clean it, mine it and of course monetise it.  These will have more economic value in my mind than Twitter itself — which may find itself relegated as a protocol or simple a medium.  Think email (as a medium), web pages, Mosaic/IE/Firefox or even blogs.  Those are not economically valuable in and of themselves — It’s what they enable, create or how they are manifested in other applications and extensions.

4. Twitter is the best discovery platform available today. I was wrong (ahem) for thinking that the twitterverse was completely incestuous and full of people simply following one another and tweeting back and forth the same articles from CNN or BBC News (i.e., sources that everyone reads anyway).  I have witnessed now that all you need is 1 out of 10 people (following someone or something) to be outside of a “tight circle” — for example in the art community versus the tech/startup community — and you can immediately access their other networks, sets of friends/followers and … a whole new world or a different “circle”.  Discovery through fewer and fewer degrees of separation (courtesy of Twitter) has been phenomenal for me.

5. Twitter is the first communication platform (protocol) that requires no authentication. This is a difficult for me to put into words, but possibly the most significant conclusion I’ve drawn.  (Sometimes I’m a bit slow!)  Simply put: I can ping anyone I want to.  I just need to find their handle/Twitter username and send a message, for example to @eileenshero — How easy is that?  And because of point #2 above, even if a message or a DM merely generates an email to their email/inbox or SMS on their phone, chances are (for now) @eileenshero is prioritising Twitter communication over email these days, so they’ll quite likely get back to me!

To write or send someone a letter, you need their postal address.  To ring them up, you need their phone number.  In the days of landlines and everyone-being-listed you might have been able to find this in the phone book, but in these days of mobile phones, where’s the mobile-phone-directory?  Since it doesn’t exist, you need them to give you their mobile phone number.  To send them an email, you need them (or someone else) to give you their email address.  All of these require some level of authentication or in other words the intended recipient granting you in/direct permission to make contact.  While sometimes you can send a Facebook message to a “non-friend”, this is only if the user hasn’t changed their privacy/contact settings to prevent that.  Twitter is *always* an open platform.  If you find the person you’re looking for (and the search works reasonably enough), you can contact them — without their expressed prior consent.  (I’ll go into the ramifications for online stalking in a later post.)

So as a result of these points, initial inspiration from @salimmitha, @renate and @alexkelleher and after only 1 month 2 days and 145 tweets I’m going to stick with it [for now].  But I do believe the value is fleeting … Facebook was “useful” and valuable for me for less than 2 years (and now has too much noise for me to even bother with), how long before Twitter gets to the same point and before the next “communication medium” or “discovery platform” comes along?

 

Keep your clothes on (in public)

Take two

Well this has proven to be a pretty pathetic attempt at blogging so far (oops).  But now I’m re-motivated again and feeling slightly [over?-]confident having finally dusted off my Twitter account late last week.  If I can microblog (does anyone remember that’s how they used to describe it before it became a word/concept/culture unto itself?), I should be able to properblog, right?

Blah blah blah

That said, my excuse for the past 7 months is that [almost] everything’s been written!  Matter of fact, I think more people should just shut up and stop talking, rambling and blogging… Why should I contribute to all of the noise, fodder, naval gazing and random thoughts?  At first I thought perhaps I could offer some interesting commentary on the world of tech/startups/VC/company building, etc, but let’s be honest — everything under the sun is already being written about 1000 times more than necessary by people much smarter than me such as the team behind askthevc, Fred Wilson, Dave McClure and literally hundreds of other people more prominently in “the scene”, so what could I possibly have to add to the discussion regarding paying to pitch [don't do it], fees [get at least 2 term sheets so you can have a chance at negotiating for respectable terms], ideal term sheets [it's all out there if you Google a bit], how to build great founding teams [ditto], how much VCs need to change [agreed that funds are getting too big], how they’re coming back [Q32009 looks good] or how Europe [UK] is different than the US [where do I start?]

Keep your clothes on

However, I have been thinking about something lately that  hasn’t been written about (at all) and that is why women in the London tech ecosystem should not participate in the Nude London Tech Calendar 2010.  I know my opinion is going to annoy some people, and I’m sure it will really annoy the organizers (and I know it’s all for charity) and they have much more web presence than I do [none], but still it needs to be said out loud.  I know for a fact that there’s a lot of discussion, chatter, snickering and opinions being offered 1:1 and in small group discussions, and while there’s great PR so far in support for the calendars, no one’s coming out publicly to call this out and just say firstly “Come on, get real” and “For god’s sake ladies, take a pass”.

On the first point, let’s be real and brutally honest here.  If you want to raise money for charity, there are a million other ways to do it.  Organize a 10k, half-marathon, marathon, 3-legged race, whatever.  Set up a contribution basket/box at the next TechCrunch event.  Organise an event, lunch, drinks and have people contribute there.  I mean seriously, is there a business plan around this calendar?  How much money is the team seriously expecting to make?  How many calendars do you have to sell to make up for the value of the time of all the tech people who will not be working, building companies, investing or consulting while they work on this calendar?  (Just take the value of their salaries, options and carry and put that into the charity.)

Not a girl’s girl

Now on the latter point, I do not want to be the “Woman in tech/vc/startups who just writes about women’s issues”, because if you know me, you’ll know I’d rather shoot myself in the head, but no one is saying this in public, so I might as well:  Grow up. Do not pose for that calendar, even if it’s for charity, and even if you’re so super secure and confident in your abilities to [run a company, manage people, attain huge success, etc., etc.] that you don’t mind being proud about your physical attributes as well…  (Who cares?)

Let’s be clear, my advice that you shouldn’t pose is directed at men too — Girls, guys, everyone, just get real.  Keep your egos in check, grow up a bit and even if you’re better looking than the average person-in-tech, it still doesn’t mean people will buy a calendar with your picture in it.

However, more especially for women, and not just for the obvious reasons.  Speaking of those, let’s just get those out of the way…

If you’re in this business and want to be taken seriously as a woman, keep your clothes on.  If you want to be perceived and judged as clever, quick-witted, with good business acumen, laser-focussed on your work and generally with your shit together, then keep the primary attention and focus on your cerebral achievements and don’t over-flaunt your physical assets.

That was straightforward enough, right?  So here’s the other less obvious reason you should not pose nude (even “tastefully”, whatever) for a calendar…

If you’re confident about your appearance and even feel that it might be a bit of an advantage for you (which I will never disagree with), then keep an air of mystery going…!  Why the f’k bare the goods for everyone and their brother to see in a calendar?  Keep the allure, maintain the mystery, keep the attraction going and the phermones pumping and don’t blow all that future “networking” and deal-making on a calendar.

The more things change..

This is classic “how to get a man” or basic “how to stay interesting” logic.  High heels, pencil skirts, just a bit of ankle, leg, neck, shoulder, all of it … All much more alluring and interesting than someone who flaunts it (= skank).  Maintain a bit of decorum and you’re going to get a lot more interest than if you take it all off.

I know the calendar is great PR (proven by all the mentions in TechCrunch, The Next Web even the Telegraph etc and all the tweets #LDNnudetech, but come on.  This is not high school anymore.

We’re in tech.  In theory that means we are innovative, intelligent and love a challenge.  What happened here (in the name of charity)?

 

How amusing…

Yahoo! Mail decides email from my own Yahoo! Mail account is spam…

 

FOTD (Find of the day)

FOTD from last night: Obama’s LinkedIn profile

Still not sure why I was surprised to find it (guess it should be obvious he’d have a profile), but I really dig it!  Straight and to the point.

 

“A VC” says

I was reading this post (which I somehow missed last week) and then saw the Reblog button at the bottom, so thought I’d give it a shot…. Seems to make it dead-simple for other bloggers to trackback/linkback… Nice.

Testing, testing, 1, 2, 3… And it worked didn’t it?

In that case, while this post starts with obvious statements, it lives up to its promise (you kind of feel he has a valid point to make beyond the obvious) with great examples.

Oops, that didn’t work (as I expected) after all.  Here’s the post by Fred Wilson which basically gets to the ideal team size for (web) businesses.

 

Wahanda promotion in Times Online

Valentine’s Spa Days

Share the love with 2 for 1 spa deals & gifts

ASI portfolio company, spa and wellness marketplace Wahanda, has teamed up with Times Online for Valentine’s Spa Days promotions.  Check out the Times Online Life & Style front page and take a look at that right hand rail module that jumps out … Nice!  Well done guys, and let’s hope people are sharing the love this Valentine’s Day. 

 

Exec summary

The purpose of this blog is simply to serve as an outlet for any random thoughts, ideas, or observations I have regarding the worlds of technology, online, startups, financing, angel investing, and even the public sector as I get exposed to it here in the UK.

I am aware that I flatter myself with the blog title, but I’d like to think that over time either I can directly, or my thoughts can indirectly, serve as a catalyst for innovation or even general productivity.

Stay tuned and watch this space (or ones above it)-!

 

Ideas (to do’s)

• Executive Summary
• Virtual teams
• Discipline
• Execution
• Barometers
• New funds
• March run
• Mint.com
• Mrs Moneypenny
• WFH

 

Hello world!

Welcome to WordPress.com. This is your first post. Edit or delete it and start blogging!

Sounds so easy, doesn’t it?  Another few months, another recent burst of energy to start blogging (again).  Let’s see how long this one lasts…!

Header image photo credit: Nanimo (Flickr)