Confessions of a reality TV VC bad guy

Arne H. Tonning
Alliance VC
Published in
4 min readMay 4, 2019


I’d like to congratulate the team of LeadX, Smart Innovation Norway, and Nordic Media Lab on the documentary miniseries from their recent Silicon Valley tour, published by It’s a fun story and production, so check it out here. I’d also like to thank the team for meeting up and giving me the chance to debut as a “reality TV star” in the “bad guy” role. See episode 2, “The Investor” below, (un)fortunately only in Norwegian.

Watching myself on video generally makes me cringe. Let me assure you that the reality TV bad guy doesn’t come naturally and feels highly cringe-worthy. Thanks to this episode, I now have a new perspective on myself 👇😱.

To park the bad guy persona and explain the rational VC, I’d like to elaborate on some recurring reasons for declining new investment opportunities, somewhat based on the example in the miniseries, hoping that this background may be helpful for entrepreneurs as a guide to understand the VC perspective. Consider it confessions of a reality TV VC bad guy. There are three interrelated issues that tend to impact a VC’s interest:

  • Investing at idea or concept stage. It is well documented that the cost of building and launching software-based products, and therefore startups, has dropped massively over the last 20 years because of open source software, cloud services, etc. Mark Suster’s presentation from Upfront Summit 2019 is a recent masterpiece that provides data on this, as well as a more complete picture of the effects on seed stage investing. The most obvious effect is that ever more products/startups are launched in the market, leading to increased investor expectations in terms of product maturity, launch, and deployment to trigger interest. Except for more fundamental tech cases, many startups now successfully bootstrap a basic product to launch before raising seed funding. Product development funding for “normal” software-based startups is now generally outside the domain of VC activity, left for bootstrapping and angel funding.
  • Missing or external tech team / outsourced development. Further to the point above, investors generally believe that a founding team with a strong technical co-founder is ideal in the early development of a startup. While investors appreciate a mix of skills, a lack of in-house tech capabilities, at least one strong tech co-founder/employee, is viewed as a clear weakness and may be a red flag for both VCs and experienced angel investors. It is also “bad” to be dependent on external resources for outsourced development, certainly for core product development. There are multiple reasons for these beliefs: 1) “a tech company must have a tech team”, 2) a core tech team is critical for lean, fast, and effective execution of product development and experiments to bring a viable product to market while depending on external resources will be too slow, unreliable, and difficult to control, 3) investors are insistent that startups build core teams with capabilities to deliver future success. Money spent on external resources in critical areas is seen as a missed opportunity to build strong in-house capabilities and thus value leakage. Spend associated with the core team is seen as an investment in an asset, which outweighs potential advantages in flexibility or lower cost of external resources. It should be noted that this is a more fundamental view in Silicon Valley than in Europe, where alternative models such as venture studios with shared resources and capabilities have more traction.
  • Importance of customer proof/metrics in crowded markets. The decrease in cost of launching products and startups has led to a significant increase in numbers, as highlighted above. For many product categories, the competitive field has become congested and numerous similar offerings compete for the same customers. As a result, differentiation has become difficult both in terms of communication and fundamental capabilities. From a metrics perspective, this impacts cost of acquisition and churn for suppliers. On a macro level, the bulk of the investment risk has shifted from technical risk to market risk associated with this dynamic. It is therefore rational for VCs to invest only after there is some level of predictability around market risk; i.e. some proof in terms of customer value, differentiation, and/or effectiveness in go-to-market — preferably metrics-based. LeadX, the startup in miniseries, is bringing a new sales engagement and productivity tool to market. Despite a novel approach (check it out), this fits into the “martech space” from a broad category perspective, which is one of the most crowded SaaS product categories as seen in the Martech 5000 overview. Kudos to LeadX for going hard at it regardless.

It is easy to say that the three issues highlighted above are pretty generic and that the logic outlined represents simple VC pattern matching that may lead to missed opportunities. Regardless, the market dynamics described are real, and investors’ views about these factors are hard to argue against. All VCs seek to back the best entrepreneurs and startups pursuing big opportunities, where team, traction/growth, and ability to execute are the strongest success indicators and risk mitigators. This typically means following the playbook in crowded product/startup categories. A fair challenge to the VC community is to be more open-minded and exploratory when it comes to underserved opportunities, both in terms of founding teams, markets addressed, new product categories, and deep tech.

Last thought: Hollywood, if you’re watching this, let me know if I’m made for the “bad guy role” full-time ;-)