How I Came to Know “Everyone” in Venture Capital
As outrageous as it sounds, over the last 8 years, I have come to know almost “everyone” in Venture Capital. What I mean by that is that I have at least one warm relationship in 90%+ of VC firms whether they are active or even semi-active. For an immigrant kid from the Midwest — that’s not too shabby. How did I go about accomplishing this?
Before we jump into the context of VC, let’s remind ourselves that VC, in and of itself is an industry. What wins in VC is the same as what wins in other industries — better pricing or stronger differentiation. In the absence of better pricing (a strategy that is only available to the $1B+ funds) success in VC requires differentiation.
One such differentiation is in the area of relationships, a differentiation that 100% of VC’s claim, but few execute upon.
Before we go further, let’s define relationship in the context of Venture Capital.
Relationship — a connection, ideally based upon a previous commercial transaction, that gives assurances to the entrepreneur that the VC will provide value-add, be easy to work with, AND not stab the entrepreneur in the back.
Please note that the definition above says nothing about warm feelings, charisma, or anything superficial. It also says nothing about taking the other party to lunches and creating “rapport” around similar likes and dislikes. These forms of supplication have either a neutral (doesn’t move the needle) or negative effect on the relationship (is he trying to pay his way into the relationship?).
In an hyper-competitive relationship, entrepreneurs (and buyers of any kind) do not have the luxury to choose who they like and must focus on doing business with who they trust.
The following is a list of “strategies” (as cold as that might sound) that I utilized in order to build great relationships in Silicon Valley:
- Start by dating before asking for marriage.
Make a small commitment, and execute upon it. Make a larger commitment, and execute upon it.. and so on.
2. Build relationships with people not firms.
Some of my closest relationships have come from individuals have left a firm or been fired (for issues unrelated to performance). When I keep the relationship with the individual, the other party feels valued on a deep and human level. Depending on the skillset of the VC I also usually make introductions to 3–4 other firms.
3. One Big Favor = 1000 Small Favors.
Continuing on the point above, placing someone at a new employer = 1000 times grabbing coffee and covering superficial topics. People always remember who helped them and who betrayed them during tough times (just ask the Lannisters — which there are non left living).
4. Relationship Building > Long Tail Optionality.
Kill the rational voice in your head that keeps every party waiting for the 1/100 chances a deal might turn around. The other 99 times you are destroying your trust and relationship capital. Optimize on transparency and relationship not optionality.
5. Seek to Learn.
People hate being used for their position or access. In fact, being used/discarded feels like emotional abuse.
Instead of making people feel this way — focus your time on people that you like or that you can learn a lot from in a win-win manner (hint: if the other person doesn’t think it’s a win, it’s not a win-win).
6. Seek to Teach.
Self explanatory. Make sure what you teach is something that the other party wants to learn.
7. Obey the 90/10 rule.
The higher status (read: higher up in the organization) the individual the less time they have for your priority. If you want to have success at the top of organizations, you must obey the 90/10 rule, and do 90% of the legwork in the relationship. All emails, introductions, etc. should be “gift-wrapped with a bow on top” before ever reaching the individual. It’s not uncommon that I take phone calls in the middle of the night for VC’s / Growth Equity guys that are traveling.
Does this mean that you will spend an enormous amount of time on opportunities that will never see the light of day? 100%.
Obeying the above rules is intuitive but not easy. Many of these rules require a high level of empathy, and all of them require a high level of humility. Mostly, it requires a belief in the value of the long term relationship, a belief that happens to be self-fulfilling in this business.
The good news is that those that follow these rules start to benefit from the network effects almost immediately with intros to other VC’s, having VC’s say good things behind your back, etc.
Now go and implement. Good luck!
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