Adam Ruins Venture Capitalists

Some Rage-Plaining on How Craptastic VCs are at Life, their Job, and Everything

“If you’d have spent that much time selling, instead of asking for money, you’d probably still have 100% of your company for the same effort.” — ShitMyStartupSays

Whenever the topic of “How to Get Investment” is raised there is generally more BS flying than at an old fashion Wisconsin cow chip throw. I’ve been an entrepreneur for 3 years and now I’m on track to raise a seed round, and it is because I did 1 little thing and ignored everything else. In this article I will share some of my personal experience, hopefully clear the air a bit, and orient entrepreneurs towards what actually helps them raise money from investors: Traction. But first you’ll have to wade through a bunch of rage about how backwards, egotistical and fart-smellorific investors and their organizations are, or just scroll to the end and I’ll tell you some constructive stuff.

“We Invest in the Team”

So this sentence is some nice smoke investors blow up their audiences’ asses. The phrase itself accomplishes many fascinatingly douchey things:

  1. Getting the jollies off of all the founders they have invested in.
  2. Nothing makes you feel more superior than being an “excellent judge of character”.
  3. Continuing the messianic complex of all founders and investors. Investors believe they have the preordained power to make divine kings the rest of us schlubs will bow down to. Founders think their dicks are magic flesh wands.
  4. This sentence is code for: “I don’t have to think, I can just invest in Stanford and MIT Grads.” I guess investors did not get the memo from Google who now no longer cares where you went to school.

If investors truly invested in the team, then they would just start “innovation companies” and hire “the best” through intelligence and personality tests. But they don’t. There just has to be a team (for some reason it is absolutely necessary there be two founders) and these two have to have a pulse and keep showing up to meetings.

VCs Can’t Even Beat the S&P500

Investors are always telling you to look at the metrics, but look at theirs. Harvard Business Review reported that from 2003–2013 — the largest tech explosion in history — US Venture Capitalists performed worse than the S&P 500 — that is the average of the whole global economy. That means that you could have invested a hundred million dollars in a Chinese plastic donkey factory in Shenzhen from 2003–2013 and you would you would have made more money than investing your hundred million in these fancy-pants VC ‘execs’. If you are investing in VCs you are basically paying them to lose your money and line their pockets. This metric shows that VCs objectively suck at their jobs. And have you noticed they don’t try to get better?

Investors are Not Innovative

Have ever thought about how investors invest in “innovative, disruptive technology” but investment itself is the same as its been since the advent of capitalism?

  1. Get referrals from a trusted, personal network.
  2. If they have traction in a big market,
  3. Invest

Isn’t there a part of that that could be disrupted? Shouldn’t explosive, disruptive VC investing make just a smidgen more than the S&P 500? Maybe a nice AI could do the job better?

*pant* *pant* *pant* . . . and I’ll tell you what else is crapola . . .

. . . whatever. . .

OK STOP SCROLLING

So, here’s where the rage stops and the constructive stuff begins.

Rich folks and capitalism aren’t going anywhere. So how do we make the process of getting investment less like getting raped in the ass and more like a colonoscopy: as quick, painless, and clinical as possible.

Traction, Traction, Traction

You could be a three headed dragon named Exzandor with puffy red baboon butts all over your body instead of scales and if your company had traction, you’d get your seed round in three months (lightening fast in investor land). You could have failed college because you wrote all your tests in cheese whiz and monkey spittle, gotten a negative score on the GRE, GMAT, and MCATS, and had a viral video of you peeing into your brother’s mouth and you’d still get the goddamn money.

Why? Because Traction is REAL and MEASURABLE SUCCESS. Not ideas, not theories, not prototypes, not positioning, not potential, not blah blah blah. Its the goddamn cat’s pajamas.

So what constitutes the famed Traction? Just one thing:

>7% Net New Active Users per Week

So that is not total users, or net new users, or total active users (those are all BULLSHIT). Its:

>7% Net New Active Users per Week

That adds up to about 33% Net New Active User growth per month. If you are hitting this you can walk into any meeting with your dick (or vulva) wrapped in a goddamn black satin ribbon and no one will blink.

Remember:

>7% Net New Active Users per Week

What is an active user?

Ahhhhh an intelligent question. This depends. You will have to judge that for yourself or ask your mentors, but I can give you some examples that make it crystal clear what you’re aiming for.

If you are doing ecommerce or a marketplace, an active user is someone who transacts more than once in some period of time. Lyft and Uber probably aim for about once a week. Ebay and Amazon probably once a month. Airbnb probably once a quarter.

If you are doing a game its how many people actually open the game and play it more than once within a week.

If you are a media site like videos, pictures, or news, an active user is just the number of return visitors from the same IP addresses per week.


If you are bootstrapping your company right now and feel like investors should start innovating, stop investing in their friends, and start beating the S&P500, please recommend this article and share it as widely as possible.

Thanks.

Adam Braus

Show your support

Clapping shows how much you appreciated Braus’s story.