Do You Speak VC? A Beginner's Guide to Investors
Raising money for my start-up has been one of the most challenging experiences of my entrepreneurial life. Not because there isn't any money out there, and not even because pitching is difficult. The challenge lies in the nuances of hearing what a venture capitalist says—and then translating it to what she really means.
I call the language VCili (like Swahili, but more difficult to learn). It sounds something like this:
VC: "Love the team. Interesting product. I look forward to keeping in touch."
Translation: "I don't really get what you are doing, but if someone really popular invests in you, I'll follow blindly."
VC: "Interesting approach."
Translation: "It'll never work."
VC: "How do you plan to make money?"
Translation: "If I put my money into this, it will be a never-ending sinkhole of investment, won't it?"
VC: "I'll bring this up at the partners meeting on Monday and let you know."
Translation: "I may mention your start-up off the cuff when describing who I met with this week, but I'll probably add a hand wave indicating you aren't very interesting and we should move on to the next agenda item."
When you first hear any of these lines, you might take them as a positive sign. But the truth is—if someone is really interested, she wont feed you lines; she’ll want to get moving forward as soon as possible. VCs are human beings, and they’re as uncomfortable with handing out rejection as most people, so they will tell you what you want to hear as long as it gets you out the door.
That’s why the best meetings I've had are the ones where the investor was brazenly critical of my ideas—I could address the VC’s concerns, leave knowing exactly where I stood, and learn a thing or two. (Our current lead investor is one of those, and I find it incredibly refreshing.)
But, of course, most aren’t like that. So how do you get through the minefield of VCili and get to the truth?
Just ask. When you hear a phrase that sounds hopeful but less than genuine, or the VC seems interested but doesn't bite, you need to lean forward and ask her why.
For instance, when she utters "interesting approach," ask, "what do you find interesting about this approach?" When she mentions bringing it up at the partners meeting, ask what’s preventing her from calling her partners in to see you right now. She’ll appreciate you candor. You won't always get a straight answer, but I guarantee—you’ll always be remembered.
I'm still trying to learn the language, but I'm getting better at figuring out where I’d been misinterpreting it. So don't fall for the same pitfalls as I did—if things aren’t clear, ask for some interpretation.
Photo courtesy of SCA Svenska Cellulosa Aktiebolaget.
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