Having been on both sides of the table as both a venture capitalist and most recently an entrepreneur, I think I can safely say nothing is quite as terrifying for an entrepreneur as raising money. It’s like holding your baby up in a crowd and letting folks take turns criticizing her. No one wants to hear their baby is ugly.
When raising money, entrepreneurs will encounter all sorts of feedback. One key to surviving the process is to understand with whom you are speaking. I have found there are three types of VCs.
1. The entrepreneurial VC – This person (okay, so far it’s usually a man) has started and run a company before, emphasis on the start; they like to talk more about the big picture, trends, vision and innovation
2. The big company VC – This person has never started or run a company but has worked in a large company and run a division; they like to talk more about product and market penetration
3. The investment banking/consulting/private equity VC – This person has never started or run or company and their background is mainly as an investment banker or management consultant; they like to talk more about your financials and scalability
Admittedly, my classification system is overly simplified, but it’s to demonstrate a point. It’s important to understand who you are dealing with because all of their comments will be shaded by their own experiences–none better or worse than the other, mind you, but realizing where these comments are coming from can often put them in a context that’s more helpful and frankly, easier to hear. It may be obvious, but it can certainly get lost in the mix. It’s important also to remember their comments and concerns will continue to be influenced by this point of view even when they are on your board.
In the end, however, who you want to encounter is someone across the table who acknowledges your effort, whether you’re an investment fit or not. In my experience, the absolute best VCs, no matter their backgrounds, are those who are first and foremost decent human beings who treat others with respect and empathy.
The entrepreneur’s challenge is to find that VC, because he or she will make all the difference. Really.
For more on raising money and the like, see www.aliciamorga.com.