What’s the worst thing a VC has ever said to you when you were fundraising?
By David Frankel, Managing Partner — Founder Collective
“Tell me more.”
There are colorful horror stories about founders being dismissed by someone with an oblivious, ageist, sexist, or racist agenda. Those are horrible, but at least they provide an instant glimpse of the investor’s character. These incidents serve as lessons that the investor would have been horrible to work with.
Thankfully, this kind of story is rare. Good VCs want to preserve optionality and being dismissive towards the next Zuckerberg isn’t conducive to that strategy. Rude investors can quickly gain exactly that reputation.
The far more destructive comments actually appear constructive at first. These take the form of requests for information, but often these innocent seeming queries will become distracting wastes of time.
Any good investor will ask you for information. At a more advanced stage, personal and business references and a criminal background check are a given. If you’re in an atypical business, e.g. mattresses or 3-D printing, they should ask for market data to help understand the business. This process will proceed relatively quickly and you’ll detect a sense of purpose.
In the worst cases, questions will be asked, and asked again, like you’re on a treadmill. There are three primary motivations for these endless inquisitions:
- A VC might genuinely be interested in your company, but they lack decision making authority at their firm and want you to assemble mountains of data to help make the case for their partners. Or they just have a nervous disposition.
- Other times, VCs will be genuinely interested in the market you serve, but not thrilled with you or your company. They’ll treat you as an unpaid analyst, sending you on wild goose chases to educate them on the market with almost no chance of funding you.
- In the worst case the VC will have funded a company in your market which has not launched yet and they’re fishing to get you to divulge information that will be of use to their portfolio company.
So how do you avoid this?
Look at the Portfolios: Most reputable firms that have backed the big, market-defining companies don’t play this game. Their time is too precious. If a top-tier firm is interested in you, answer their questions.
Surround yourself with BS detectors: These might be angel investors or fellow founders who are a bit further down the path. They can usually help you understand who’s legitimate and who will waste your time.
This story was originally posted on Quora.
