VC Industry


Picking a VC is hard. You don’t really have much to go on to decide who would make a good fit. Reputation of firm? Of partner? Deals done in your industry? It’s a bit of all of these.

I had an enjoyable conversation this morning with a young team straight out of college this morning and they were calling to ask advice on how to approach fund raising (angels vs. VCs, how to select a VC, etc.) and I realized that without years of experience it is tough to answer this question.

So I thought I’d write about out with what I would look for in a VC knowing what I know now and why.

Brains?
Most VCs are book smart. It’s insanely competitive to get into our industry so most have degrees from institutions like Stanford, Harvard, Wharton and University of Chicago (blatant plug ;-). Smart is simply not a differentiator. In fact, book smart can be a negative. The last thing you want is a know-it-all telling you what to do when they are at 50,000 and haven’t had to deal with your exact circumstances.

I call them “VCs Seagulls.” (you know … fly in, shit on you and then fly away). VCs should be more of a coach than proscriptively telling you what to do. I’ve seen too many companies go off track by a VC hell bent on the team pursuing the VCs strategy which at times is about chasing the next shiny object.

You want a VC who will spar with you but then STFU and let you get on with things. Smart? Sure. But don’t over index on brains. In the end it will be up to you to figure out what to do. If you’re looking for somebody else to tell you the answers you’re in the wrong business.

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In my recent post “Why Am I So Lucky? Why You Need to Be Sure You’re Not the Sucker” I talked about how VCs (or other investors) get deals sent to them and how to interpret a referral.

I tried to make a simple point: People have motives when they send you a deal. Sometimes those motives are positive (they really want the chance to work with you, they think you have unique skills) and sometimes they are less positive (their first-tier of “go to” referrals passed on the deal, they don’t want to write another check themselves, etc.).

As I said in the post, I really appreciate referrals and I take meetings introduced to me from a wide variety of people. I simply wanted to make the point that if a deal referral seems “too good to be true” it probably is. If the deal is from out of your geography and/or out of your focus area or a deal is being referred by a well-know investor who normally co-invests with similar syndicates – at least ask yourself, “Why am I so lucky to be getting this call.

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By now you will likely have read Andy Dunn’s scathing post about Venture Capitalists in which he decries the industry’s masses.

I read Andy’s post with a knowing smile on my face. After all, I am no stranger to publicly expressing the frustrations of dealing with the downside of this industry as I wrote about in 2006 when I was an entrepreneur.

But VC is like congress. It’s easy to hate it en masse yet many people love their local congressman.

Why?

Because they know him or her. They see how hard she does her job. They know her personally and know she cares about her constituencies even if she has to make tough trade-offs from time-to-time.

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Early today I gave a keynote at the VCJ Venture Alpha conference here in San Francisco. I was asked to speak about the topic of “what is going on in the venture capital world and what is the next big thing after social networking?”

// Future of VC Internet

Tough topic, but what the heck?

Next week I promised to follow up on PE Hub, one of the main journals VCs read about our industry, with a detail description of some specifics that are happening. Watch out for that – I will have a lot more details.

I’ve listed some great VCs in the presentation. I’ve left off many great ones. It isn’t intentional. You can’t cover everybody in a prezzo. Please don’t read anything into that. Some of the big ones I left off was Tim Connors of PivotNorth and Aydin Senkut of Felicis Ventures.

And all feedback welcome! See you in the comments.

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This article was originally published on TechCrunch.

Venture Capitalists typically have partners’ meetings on Mondays. Why is that? Who knows. But probably because as a group we travel a lot. So the industry formed around a day of the week when all partners could avoid having company board meetings or traveling.

Yesterday was a Monday. And not a pleasant one.

Rewind. When I first got into the industry it was 2007. Valuations were enormous relative to progress in companies. Web 2.0 was still a term being bandied about. Companies with less than $2 million in revenue were asking for $50-60 million valuations and getting them. My partnership was pretty bearish and scratched our heads a bit at price tags.

It was a great learning time for me.

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Today I’m announcing that GRP Partners is doubling down on the Twitter ecosystem by investing in DataSift, a company who provides a real-time data platform and tools to third-party developers and corporations.

Our goal is to make the enormous volume of real-time information more manageable for the 99% of companies that lack the infrastructure to process these volumes in real time. Think of DataSift as turning the fire-hose into a cost-effective and manageable tap of running water. Or in utility speak, they are transmission and we are last-mile distribution.

And better yet, the company has a product that will turn the stream into a lake. What does that mean? The Twitter stream like most others is ephemeral. If you don’t bottle it as it passes by you it’s gone. DataSift has a product that builds a permanent database for you of just the information you want to capture.

Finally, DataSift has an enormous about of historical data already stored we we can help you go back and retrieve some older data for analytical purposes.

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