How do we manage the venture drill process?
Discussions about Managing the Venture Drill Process
Sorry, just like in romance and dating, the answer is “No” until you hear a “Yes.” Don’t be shy, manage the relationship. Venture capitalists are very busy folks. They all have huge slush piles of unread business plans and unread e-mails, and lots of board meetings to attend. It takes at least six calls or e-mails before they return one.
If you presented at a meeting and feel that it was well received by the VCs then do not hesitate to follow up. Pick up the phone, send an e-mail or an express letter—do what you must to get a response. Although there is a fine line between being a tenacious entrepreneur and a pain-in-the-ass, work on maintaining the forward momentum. You are going against “pitch-decay,” and a serious deal killer right now is an in-flight stall. Be persistent and just get into the habit of validating your progress by asking, “Where does our deal stand right now? Are we likely to get an investment from you or not?”
Yes is great, No is OK, Maybe is the bad answer. First, if there is a Yes in the making you will hear it very quickly and early on. Very seldom will an investor say No. More than likely something in your plan needs to be either water-tested or retightened. It is not in their best interest to be saying No. They want you to feel that you do not have to go shopping elsewhere just in case you do get it tightened down and also in case you might have some other ideas.
Here is something that 99 out of 100 first-time entrepreneurs neglect: They do not ask for feedback. VCs love to provide advice. We found that the majority will provide honest, valuable feedback. These discussions can stimulate new ideas and new ways to rework your plan and deal. Soliciting feedback not only provides you an excuse to circle back to them, but it also presents a chance to place and present before other VCs. Ask them what other VCs might be interested in your deal. This is a chance to lobby hard with them, asking for names, e-mails, and phone numbers.
In research for their book, Inside Secrets to Venture Capital, Brian Hill and Dee Power found that 34 percent of the VC deals were referred by other VCs. Most likely, after they realize they gave you some good names, they will say something like, “Be sure to circle back.” Remember, they are in business to invest in new ventures like yours, and basically they say No because they are conditioned to safeguard their risks.
Work hard at learning from every No you hear. A No allows you to reposition your pitch for the next one and turn old weaknesses into new strengths. Each time you hear a No, do not walk away discouraged, and do not approach or counter the investors with an attitude that you can change their mind. Instead consider the fact that rejection is a tool you can use.
In 1996, the co-founders of Hotmail were turned down by twenty-one VCs. The twenty-first VC referred them to Draper Fisher Jurvetson. DFJ provided almost $5 million in capital, and Microsoft acquired Hotmail in 1997 for $440 million, a sweet return for DFJ.
The only thing certain for one who quits is failure. Donald Valentine at Sequoia Capital was the seventy-seventh venture capitalist Sandy Lerner had approached to fund Cisco. Mike Medavoy, an entrepreneur who happens to do his thing in movie making, said that if he stopped at No the world would be without some of his hit movies, which include three Academy Award winners for Best Picture: “One Flew Over the Cuckoo’s Nest,” “Rocky,” and “The Silence of the Lambs.”
And as President Richard Nixon once said, “Defeat doesn’t finish a man—quit does. A man is not finished when he’s defeated. He’s finished when he quits.”
Don’t quit, the world may need your idea!