The way VCs filter out potential investments seems fairly similar to the way Ivy League schools filter out potential students. (Probably because they are comprised of the same people.) It is not really about technical brilliance, or innovation, or anything that is written on their website as a core value. It's more about whether you're smart enough and can follow instructions and fit into the overarching institutional structure of school and work.
For companies that are at the point of raising venture capital, this might be what is actually needed. But it certainly seems like it filters out a lot of the more idiosyncratic, brilliant types that aren't concerned with (from their perspective, irrelevant) details, like the date on a pitch deck. It seems like a good way to get institutional operators, not rare but not-quite-conformist innovators. I can't imagine someone like Steve Jobs or Nikola Tesla passing these VC/Ivy League kinds of tests.
> can't imagine someone like Steve Jobs or Nikola Tesla passing these VC/Ivy League kinds of tests.
My "favorite" "test" is the one more for soft studies (think law or public policy) rather than STEM: for example UN internships typically have no compensation and they often require you to relocate to extremely expensive CoL areas, meaning there is an automatic filter built in where only children of very well-off parents can do these kinds of internships and segue into the jobs connected to them.
VC Analyst Internships are very well paid because they are competing with IB Analyst and FAANG SWE/PM internship offers.
Imo the easiest way to get a VC Analyst internship is to do EECS@Cal/MIT or CS@Stanford with a Business (or in Cal+Stanford's case Econ or MS&E) minor, do a SWE internship in Frosh summer, and be prominent in your university's entrepreneurship or hackathon scene.
That said, my question would be WHY would you want to do that as an undergrad? I'm firmly in the camp that you need to build domain experience in the industry you are investing in, and that takes a decade of SWE, PM, and Sales experience - and that is reflected by the career trajectory of most VCs I work with.
Edit: This is not a snipe at Top Programs and VC Analyst roles. They have value in incubating new founders (plenty of successful YC founders have been VC Analysts who leveraged their VC network to start a successful startup).
My wife found a workaround for it, which is when she realized she didn’t want to continue her PhD she landed the UN internship and used her stipend money for that year to live in Queens off the 7. It paid off in the long run since it gave her an opening to do contracting for them, which gave her the knowledge to pass the entrance exam (which is its own soft studies filter, since many who passed had received formal private education that included how to pass international org entrance exams)
I used to live next to the Vienna duty station and have never heard of unpaid internships at the UN. They usually pay well above market rate (esp. IAEA and such) - can you please provide more info?
In the tweet the wrong date was not a red flag due to lack of detail as such, but because it signaled:
a) they had been raising for a while now
b) the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit)
So ”the market” did not consider the startup investable, and they did not think about their sales pitch strategically enough … this VC would have liked to be sold to, not just a source of funds.
The implied peer signaling is the key thing here IMO.
> b) the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit)
We can be as cynical about this part as we want, but I think what is meant here is that startups should try to raise investment from VC's or investors who are a good match. If I'm down to the 20th VC on my list - that list is sorted a way for a reason by the startup founders.
It's easy to assign this to ego but I think being a rational actor, it is also a signal like the pitch deck date.
Early stage vcs are successful when other vcs think the outcome is a good investment. Taking a bet that other VCs have already rejected will usually lead to a mixed payout.
I wrote it in another post here, but a bunch of these VCs are cut from the same cloth. They went to some Ivy League school, worked as investment bankers / management consultants / etc. and spent their first year(s) aligning images/tables/etc. and checking power point decks for typos.
If you do stuff like that 100 hours a week, it kind of becomes ingrained.
It might seem weird, but most VCs are fairly low-margin businesses day to day, then they either get a big payday or not (mostly not), once the fund starts to wind down. The odds of making it big as a general partner in a VC fund are not great.
A VC has to live of management fees for the fund, which are a tiny fraction, typically half a percent, and that needs to cover both the initial investment process and all management of the portfolio, and it's not a lot.
You can't afford to spend a lot of time scrutinizing every pitch deck, because you'll be inundated by them, so you look for quick filters. Many of which will be bad, because they're wild guesses. Yes, that means they'll miss amazing opportunities. But they're gambling what will be left will at least not be worse.
Upside is, VC's wildly disagree on which things make decent quick filters, so what will get you binned one place will often interest another, or at least not annoy them.
VC management fees are typically 2%/y. if a VC fund has $100 million in committed capital, the annual management fees would generally be between $2 million and $2.5 million. it's a lot of money.
Nikola Tesla received funds, in fact quite a bit of it. JP Morgan invested $150,000(~$5M in today terms) for just one project[1]. He died penniless because of his too much confidence in his ideas and he overused the money he got. Even with hindsight, funding Tesla was a bad decision for investors return wise.
Yeah I was going to say this- idiosyncratic geniuses like Tesla are behind some of the most important technogical advancement of the human species, but isn't what VCs are optimising for.
For sure, there's a wider question about how society can reward more than just the ability to return profit. That would help with a lot of today's issues, like climate change, but it's a much bigger issue than just one of where VCs put their money.
> Even with hindsight, funding Tesla was a bad decision for investors return wise.
He invented the brushless motor and types of transformers that were instrumental to building Westinghouse's empire. When Westinghouse was running low on money Tesla tore up the patents he'd sold to him to save the company.
Tesla was definitely not a "bad decision for investors", the ROI for his inventions is some significant fraction of the economic value of the global electrical system.
But yeah, a couple of his projects failed at some point. Surely a terrible investment!
It sounds like he had to talk to a number of people first:
Tesla made the rounds in New York trying to find investors for his system of wireless transmission, wining and dining them at the Waldorf-Astoria's Palm Garden (the hotel where he was living at the time), The Players Club and Delmonico's. Tesla first went to his old friend George Westinghouse for help. Westinghouse seemed like a natural fit for the project given the large-scale AC equipment Westinghouse manufactured and Tesla's need for similar equipment.
Tesla asked Westinghouse to "…meet me on some fair terms in furnishing me the machinery, retaining the ownership of the same and interesting yourself to a certain extent". While Westinghouse declined to buy into the project, he did agree to lend Tesla $6,000. Westinghouse suggested Tesla pursue some of the rich venture capitalists. Tesla talked to John Jacob Astor, Thomas Fortune Ryan, and even sent a cabochon sapphire ring as a gift to Henry O. Havemeyer. No investment was forthcoming from Havemeyer and Ryan but Astor did buy 500 shares in Tesla's company. Tesla gained the attention of financier J. P. Morgan in November 1900.
Morgan, who was impressed by Guglielmo Marconi's feat of sending reports from the America's Cup yacht races off Long Island back to New York City via radio-based wireless the previous year, was dubious about the feasibility and patent priority of Tesla's system.
In several discussions Tesla assured Morgan his system was superior to, and based on patents that superseded, that of Marconi and of other wireless inventors, and that it would far outpace the performance of its main competitor, the transatlantic telegraph cable. Morgan signed a contract with Tesla in March 1901, agreeing to give the inventor $150,000 to develop and build a wireless station on Long Island, New York, capable of sending wireless messages to London as well as ships at sea. The deal also included Morgan having a 51% interest in the company as well as a 51% share in present and future wireless patents developed from the project.
In my little experience, most of the deals I see closing with VCs are because they/we were already linked to VCs through strong trust networks or directly. I see more deals that are close just by phoning/messaging someone that following the typical startup funding round that is read on Internet.
Not saying that most of the cases are not hard work from the startup team but saying that if I would have to raise funds I will put laser focus in the people I know instead of trying to reach VCs that are not in my network.
I will repeat this a little bit differently: I see many yes that are related to the team links, not their product or market.
Finally, when I talk about the team, I don't talk about their real capacity to execute but to sell to a VC like selling to an important customer.
If you're brilliant and idiosyncratic and delivering something truly compelling, then vcs are more than happy to look past these things. God knows how many very eccentric founders have received funding
That usually happens once you already gain traction.
Getting the critical capital to get there is big problem, and I recall some places explicitly snubbing VCs after having to get to "impressive" without them.
VCs manage risk differently than bankers, but they still need some form of assurance that their investment will bear fruit. They are not as rigid as bankers but they are still in the same position of having to rely on proxy signals to predict the future.
They can catch more non-conformist value builders† but not every single one.
†For a VC, innovation is a means to building value, not an end to itself. Often the 2 are used interchangeably but only the finances matter in the end.
That's not really how the Ivy League works. Ivy League admissions balances a number of conflicting goals:
1. Legacies: this is the single biggest group of admitted students (eg ~36% of Harvard's undergraduate class). This by itself destroys any merit argument;
2. Athletes: people forget or don't know that the Ivy League is an athletics conference, despite the academic prestige and social proof. Ivy League schools don't offer true atheltics scholarships like you might get for D1 football recruits at, say, UAlabama or USC, but it is an important part of the admissions process;
3. The nebulous idea of "diversity". I don't mean in the DEI sense because it's much broader than that, like you can have better odds of getting an acceptance from an Ivy League school by simply coming from a low-population (and thus low applicant) state like Wyoming or Montana rather than Texas, California or New York;
4. Extra-curriculars, many of which are a proxy for wealth and privilege. For example, not everyone can do an unpaid internship living in NYC or LA or take unpaid opportunities requiring international travel;
5. Other random factors like filling out an orchestra. There's an old cliche that you should study the viola instead of the violin if you want to get into Harvard because there are fewer viola players.
6. Whether admissions believe you will enhance the reputation they've so carefully cultivated. An Ivy League degree is a powerful form of social proof. Being a Harvard grad will help you get into any graduate program. The prestige of your medical school greatly affects your ability to get a residency in a competitive specialty. The point is that social proof diminishes if the perception of your graduates turns sour so admissions will absolutely look at how may reflect on them in future.
The only commonality with VC funding seems to be the power of social proof. That is, MIT and Stanford grads will have an easier time. VC firms will go and do presentations and recruiting at those schools.
That doesn't mean you can't get funded if you went to an unremarkable state school. It just means it's a more difficult road. Stanford or MIT will make it easier to get an internship and thus a returning offer at a prestigious Big Tech company. You'll potentially know more of the people in the VC and startup spaces because you went to school with them or someone they know. There's a real network effect here.
But the point is the similarity to Ivy League recruiting seems to be fairly superficial.
I'd say Jobs would have blown them away. He was a businessman and an obsessive who knew when to focus on the design versus the product versus the money. If investors in his era wanted a perfect pitch deck, his pitch deck would have been perfect.
Tesla might have been more likely to focus on having the tech working at the expense of everything else.
Jobs definitely didn't present himself that way, at the beginning at least:
To build the company, Jobs adroitly tapped the network of support services that has made Silicon Valley such a fertile place for fledgling businesses. Says he: “We didn’t know what the hell we were doing, but we were very careful observers and learned quickly.” Jobs pestered Regis McKenna, the area’s premier public relations specialist, to take on Apple as a client. After refusing twice, McKenna finally agreed. For advice on how to raise money, Jobs consulted both McKenna and Nolan Bushnell, his former boss at Atari. They suggested that he call Don Valentine, an investor who frequently puts money into new firms. When Valentine came around to inspect the new computer, he found Jobs wearing cutoff jeans and sandals while sporting shoulder-length hair and a Ho Chi Minh beard. Valentine later asked McKenna: “Why did you send me this renegade from the human race?”
OTOH people who prefer the conventional are not likely to recognize the most promising outliers for what they are, it can go right over their head as if there was no difference from those having below-average potential.
When you become a part of their portfolio, you are becoming part of the institution. They need to trust that you’re not going to rock their boat. Taking investment means taking on a grown up attitude towards the operations of your company In many ways. So I think this is kind of intended.
Nepotism to me implies a kind of incompetence, in that people are selected purely for their relationship to the decision maker. I don’t think these people are generally incompetent at all, although certainly some exceptions exist. It’s more that the filtering mechanism eliminates anyone that doesn’t color in the lines exactly.
You can say a lot of shit about this person. But this is so inspiring. Like, this is a good example for young people out there. You don't have to change your ways for boomers even though they have a lot of money you need.
The lesson I got here is just be you. Let others change for you.
And do not fuck with the IRS in any circumstances.
First off, there is another comment in this thread talking about how that almost didn’t happen.
Secondly, I’m talking about VCs today. Do you think VCs today act the exact same way they did 50 years ago? The industry has grown dramatically since then.
> The way VCs filter out potential investments seems fairly similar to the way Ivy League schools filter out potential students. (Probably because they are comprised of the same people.) It is not really about technical brilliance, or innovation, or anything that is written on their website as a core value. It's more about whether you're smart enough and can follow instructions and fit into the overarching institutional structure of school and work.
Its the same for the entire education system as Chomsky explains: It seeks to educate people smart enough to do what they are told, but dumb enough to not question it.
The problem with the “signal” is that it’s based on pretty much nothing. It is just as valid or nuts as any other ad hoc random tea leaves & chicken bones “signal” someone decides to come up with a dubious justification for. Whether the deck said March, April, or May changed absolutely nothing about the underlying business and thus also nothing about the actual investment opportunity.
Maybe they made the deck two months ago and spent the last two months prosecuting pipeline and closing deals? Maybe they didn’t have a great investor network, so it took them a month or two to even be talking to the right investors (which more often than not is actually what’s important, and only superficially any given pitch or deck)? Maybe the VC in question was their first choice once they learned they existed and what their thesis is?
It’s absolutely true that VCs aren’t your friends. They’re middlemen for distributing other people’s money who pick winners at such a low success rate that one could be forgiven for wondering if random lottery might do just as well.
In terms of actual performance and criteria, they’re more like clergy. There are various performative religious traditions and ceremonies that have to be serviced and abided if one is to have any hope of them bestowing their blessings.
The deck from March says that they have been sending the deck around since March, and are still looking for investments. It might be meaningful, but would have to measure how quickly the typical funding rounds are made for successful companies, to have an "academic" argument about it. However it doesn't really matter, a VC can invest for whatever reasons he wants.
> The deck from March says that they have been sending the deck around since March, and are still looking for investments
You're assuming that most businesses seeking VC money are fundraising full-time.
I read this and assumed that the founder was was working on building their business full-time and passively looking for VC. For example, they might not be ready to do active fundraising, but want to "dip their toe" into VC so they're much better prepared in 6-24 months when they are ready to actively raise money?
The attention that a business needs gives to fundraising really depends on what the business is, and how well organic growth helps them now.
Also the fact they haven't updated their deck in April/May means they didn't have any huge growth in march/april/may to brag about, or even they had bad march/april/may results that they want to hide
Sure, they'd be better off just using a good source of randomness to pick the lucky ones, because then they wouldn't be self-deluding about having special insight.
Most business founders don’t need VC money and are worse off for taking VC money.
I find the mindset “my pitch deck was 2 months old so I didn’t get funding” very out of touch of business realities. It is far more likely that that type of business doesn’t need VC funding. Your SaaS can probably be built with your daytime developer salary. No VC ever says “wow, what a great investment opportunity, one of the best, but the slides were old”. You don’t even need the slides, or the rehearsed elevator pitch. Just build a business that’s worth VC money (solid, profitable, and ready to scale up) if you absolutely insist on it.
As someone who took more than a year off to build his SaaS - the days of stitching together a prototype at night are pretty much over. You need to be an incredible hustler and have a really good insight into a desperate business need.
Customers today expect polish and few bugs right out of the gate. I spent months on polish alone. If you don't, your product is going to be savaged like this:
"Former Yahoo CEO Marissa Mayer’s New Photo-Sharing App Has a Design From the Stone Age"
> ... the days of stitching together a prototype at night are pretty much over. You need to be an incredible hustler and have a really good insight into a desperate business need.
I'll take that as a compliment.. as someone that took nights to build a SaaS product solo into a multi-million dollar business (and still do it solo).
The fact that writer Jody Serrano is trying to take down another women Marissa has very little to do with polish of the app. Look at OpenAI design.. it's not much better and it doesn't matter.
That article follows a long standing tradition of women attacking other women in power based on appearance to try to elevate themselves. No insight on polishing trends can be learned here.
I'm hopeful for this silicon valley downturn because while I think you're right that most software business plans are capital-light and could be bootstrapped, the problem with the boom times is that if you try to bootstrap and validate any market you will have a VC-funded competitor come along and blitzscale right over the top of you.
In transactional financial markets "friends" is not the right word, but there is something to be said about more or less effective alignment of interests and that is purely a matter of design.
There is more than enough money sloshing around, it all boils down to designing contracts and suitable information exchanges between parties. So anybody thinking that the current system is sub-obtimal can try their hand at disrupting the VC system and making history :-)
An arrangement that better utilizes the majority of the entrepreneurial crowd's energy and time is likely to at least carve a niche, if not dominate. It may not even be that hard. The chasing of planet-scale returns (with the corresponding discounting of the rest 99.99%) is a recent phenomenon and may be just an aberration.
To carve any niche in a space like this, one needs extensive personal connections, money of their own to apply and put in the game, time to spend on it, and the belief that this is the best use of all of it.
It may well be that far better arrangements exist, but how would a slumdog or a small time farmer or a stay at home parent ever get the ball rolling? Who would play ball with them?
It would pretty much require that an existing VC or an empowered member of their ecosystem have the idea and see a path to it enriching themselves in order for them to spend time on it.
This is a major issue with pure market maximalism like the above: not everyone has agency within and access to every market, and no agent within a market would just let it change unless they personally stand to gain. Many potential solutions pass through empowerment or enrichment of different groups than those currently holding the reins, and this may mean those solutions are impossible to explore.
Goodwill is like dark matter; they have to account for value increases or decreases when doing double entry bookkeeping so they invented goodwill for that.
I do not know who Jason lemkins is but he seems like a random small fry saying bullshit to gain some clout.
I have worked with bigger vc firms such as matrix partners and they genuinely care about you and want your startup to succeed if they are interested.
Trick is to make something which is genuinely cool and matches with the thesis and talk to vcs who are respectable.
Yc is a great help in this regard. They help you understand which vcs are respectable and which vcs you should treat like mushrooms: feed them shit and keep them in the dark.
I love this blog post about why Jason Lemkin’s post about passing on a pitch because the pitch deck said March instead of May is a good and normal post. Without this informative content we would not know that Jason Lemkin‘s post was not at all off putting or ridiculous, and we are rightfully brought up to speed on how cool it was, in fact.
Also, "caused an outrage" apparently means "barely got any traction". <200 likes, barely any retweets, even the 30 or so replies weren't as confrontational as I was lead to believe by that intro.
I guess "VC was wrong and nobody really gave a shit" doesn't have the same ring to it.
>I guess "VC was wrong and nobody really gave a shit" doesn't have the same ring to it.
This is a good point. When something looks like Jason Lemkin posting something ridiculous on social media, it is actually an opportunity for us to learn of both his fame and the normalcy of his opinions, as well as to be reminded of the high portion of VCs that are good human beings.
> VCs aren't your teachers nor your managers. They don't have an obligation to provide feedback or even to reply to your emails. They won't give you a second chance. They won't coach you so you can do better next time.
Some people will give a shit, some won't. I've met VCs that would scoff at Jason for trivial stuff like that, while I've met others that would agree with him - and maybe be even rigid about "small stuff".
My experience is that if the VC is someone who has background from finance, consulting, or law, then they are more likely to lose their minds over superficial stuff like logo placement, font consistency, alignment of images / tables / etc., and of course consistency in dates etc. - probably because that's all they did during their formative years in their respective industries.
Second point: There's a bunch of VCs out there with the only qualification of
A) Having founded / led a successful startup
B) Having invested in startups during the ZIRP-era
So while you have some tremendously good VCs that have stood the test of time, and have "seen it all", there are also VCs that will be washed away the next few years. So don't take it personally if / when some VC will decline you and and be all preachy about it.
Last point: Some of these stories are just made-up BS to generate content and thoughts. Half of the stuff VCs write on LinkedIn or Twitter seems to be fiction, for the sake of getting a point through to their listeners. Also keep that in mind.
In so many ways raising funding is just like applying for a job. Here's what I can do, give me money.
The only difference is that the VC pays you your salary (and all your other expenses) in advance. And let's you keep some of the upside. By contrast an employer pays you a salary, and your (work) expenses as you go.
The VC "implies" by their funding how long your contract is. The employee goes "forever".
So all the things that apply to job-hunting apply to VC funding (Amplified). And make no mistake, the VC becomes your boss.
Once you understand it in these terms you can best evaluate if VC funding is for you.
Readit News
For companies that are at the point of raising venture capital, this might be what is actually needed. But it certainly seems like it filters out a lot of the more idiosyncratic, brilliant types that aren't concerned with (from their perspective, irrelevant) details, like the date on a pitch deck. It seems like a good way to get institutional operators, not rare but not-quite-conformist innovators. I can't imagine someone like Steve Jobs or Nikola Tesla passing these VC/Ivy League kinds of tests.
My "favorite" "test" is the one more for soft studies (think law or public policy) rather than STEM: for example UN internships typically have no compensation and they often require you to relocate to extremely expensive CoL areas, meaning there is an automatic filter built in where only children of very well-off parents can do these kinds of internships and segue into the jobs connected to them.
Imo the easiest way to get a VC Analyst internship is to do EECS@Cal/MIT or CS@Stanford with a Business (or in Cal+Stanford's case Econ or MS&E) minor, do a SWE internship in Frosh summer, and be prominent in your university's entrepreneurship or hackathon scene.
That said, my question would be WHY would you want to do that as an undergrad? I'm firmly in the camp that you need to build domain experience in the industry you are investing in, and that takes a decade of SWE, PM, and Sales experience - and that is reflected by the career trajectory of most VCs I work with.
Edit: This is not a snipe at Top Programs and VC Analyst roles. They have value in incubating new founders (plenty of successful YC founders have been VC Analysts who leveraged their VC network to start a successful startup).
Most of the replies below are just salty.
It was only after Steve Jobs exploited their preferential attachment & tendency of VC to succumb to herding effects that he was given investment.
"It was only after Steve Jobs exploited their preferential attachment & tendency of VC to succumb to herding effects that he was given investment."
Here is a fun article showing everyone makes errors. https://medium.com/mba-chronicles/the-vc-antiportfolio-top-m...
a) they had been raising for a while now
b) the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit)
So ”the market” did not consider the startup investable, and they did not think about their sales pitch strategically enough … this VC would have liked to be sold to, not just a source of funds.
The implied peer signaling is the key thing here IMO.
It baffles me that a person successful enough to get put in charge of an investment fund can have such incredibly thin skin.
How would you even function in the real world if you were so easily offended?
We can be as cynical about this part as we want, but I think what is meant here is that startups should try to raise investment from VC's or investors who are a good match. If I'm down to the 20th VC on my list - that list is sorted a way for a reason by the startup founders.
It's easy to assign this to ego but I think being a rational actor, it is also a signal like the pitch deck date.
If you do stuff like that 100 hours a week, it kind of becomes ingrained.
A VC has to live of management fees for the fund, which are a tiny fraction, typically half a percent, and that needs to cover both the initial investment process and all management of the portfolio, and it's not a lot.
You can't afford to spend a lot of time scrutinizing every pitch deck, because you'll be inundated by them, so you look for quick filters. Many of which will be bad, because they're wild guesses. Yes, that means they'll miss amazing opportunities. But they're gambling what will be left will at least not be worse.
Upside is, VC's wildly disagree on which things make decent quick filters, so what will get you binned one place will often interest another, or at least not annoy them.
[1]: https://en.wikipedia.org/wiki/Wardenclyffe_Tower
For sure, there's a wider question about how society can reward more than just the ability to return profit. That would help with a lot of today's issues, like climate change, but it's a much bigger issue than just one of where VCs put their money.
He invented the brushless motor and types of transformers that were instrumental to building Westinghouse's empire. When Westinghouse was running low on money Tesla tore up the patents he'd sold to him to save the company.
Tesla was definitely not a "bad decision for investors", the ROI for his inventions is some significant fraction of the economic value of the global electrical system.
But yeah, a couple of his projects failed at some point. Surely a terrible investment!
Tesla made the rounds in New York trying to find investors for his system of wireless transmission, wining and dining them at the Waldorf-Astoria's Palm Garden (the hotel where he was living at the time), The Players Club and Delmonico's. Tesla first went to his old friend George Westinghouse for help. Westinghouse seemed like a natural fit for the project given the large-scale AC equipment Westinghouse manufactured and Tesla's need for similar equipment.
Tesla asked Westinghouse to "…meet me on some fair terms in furnishing me the machinery, retaining the ownership of the same and interesting yourself to a certain extent". While Westinghouse declined to buy into the project, he did agree to lend Tesla $6,000. Westinghouse suggested Tesla pursue some of the rich venture capitalists. Tesla talked to John Jacob Astor, Thomas Fortune Ryan, and even sent a cabochon sapphire ring as a gift to Henry O. Havemeyer. No investment was forthcoming from Havemeyer and Ryan but Astor did buy 500 shares in Tesla's company. Tesla gained the attention of financier J. P. Morgan in November 1900.
Morgan, who was impressed by Guglielmo Marconi's feat of sending reports from the America's Cup yacht races off Long Island back to New York City via radio-based wireless the previous year, was dubious about the feasibility and patent priority of Tesla's system.
In several discussions Tesla assured Morgan his system was superior to, and based on patents that superseded, that of Marconi and of other wireless inventors, and that it would far outpace the performance of its main competitor, the transatlantic telegraph cable. Morgan signed a contract with Tesla in March 1901, agreeing to give the inventor $150,000 to develop and build a wireless station on Long Island, New York, capable of sending wireless messages to London as well as ships at sea. The deal also included Morgan having a 51% interest in the company as well as a 51% share in present and future wireless patents developed from the project.
Not saying that most of the cases are not hard work from the startup team but saying that if I would have to raise funds I will put laser focus in the people I know instead of trying to reach VCs that are not in my network.
I will repeat this a little bit differently: I see many yes that are related to the team links, not their product or market.
Finally, when I talk about the team, I don't talk about their real capacity to execute but to sell to a VC like selling to an important customer.
This is the most common piece of advice all VCs and Founders give. Even YC has called it out on multiple occasions
For VCs a compelling product means great traction but to get great traction you need initial funding so it's always a catch 22.
Getting the critical capital to get there is big problem, and I recall some places explicitly snubbing VCs after having to get to "impressive" without them.
VCs manage risk differently than bankers, but they still need some form of assurance that their investment will bear fruit. They are not as rigid as bankers but they are still in the same position of having to rely on proxy signals to predict the future.
They can catch more non-conformist value builders† but not every single one.
†For a VC, innovation is a means to building value, not an end to itself. Often the 2 are used interchangeably but only the finances matter in the end.
1. Legacies: this is the single biggest group of admitted students (eg ~36% of Harvard's undergraduate class). This by itself destroys any merit argument;
2. Athletes: people forget or don't know that the Ivy League is an athletics conference, despite the academic prestige and social proof. Ivy League schools don't offer true atheltics scholarships like you might get for D1 football recruits at, say, UAlabama or USC, but it is an important part of the admissions process;
3. The nebulous idea of "diversity". I don't mean in the DEI sense because it's much broader than that, like you can have better odds of getting an acceptance from an Ivy League school by simply coming from a low-population (and thus low applicant) state like Wyoming or Montana rather than Texas, California or New York;
4. Extra-curriculars, many of which are a proxy for wealth and privilege. For example, not everyone can do an unpaid internship living in NYC or LA or take unpaid opportunities requiring international travel;
5. Other random factors like filling out an orchestra. There's an old cliche that you should study the viola instead of the violin if you want to get into Harvard because there are fewer viola players.
6. Whether admissions believe you will enhance the reputation they've so carefully cultivated. An Ivy League degree is a powerful form of social proof. Being a Harvard grad will help you get into any graduate program. The prestige of your medical school greatly affects your ability to get a residency in a competitive specialty. The point is that social proof diminishes if the perception of your graduates turns sour so admissions will absolutely look at how may reflect on them in future.
The only commonality with VC funding seems to be the power of social proof. That is, MIT and Stanford grads will have an easier time. VC firms will go and do presentations and recruiting at those schools.
That doesn't mean you can't get funded if you went to an unremarkable state school. It just means it's a more difficult road. Stanford or MIT will make it easier to get an internship and thus a returning offer at a prestigious Big Tech company. You'll potentially know more of the people in the VC and startup spaces because you went to school with them or someone they know. There's a real network effect here.
But the point is the similarity to Ivy League recruiting seems to be fairly superficial.
“Smart” and “brilliant” are all highly subjective.
Pride and ego lead to an amazing amount of bias when you start to think you know “smart” when you see it.
There are no “tests” for legacy admissions and for students whose parents have donated millions.
Tesla might have been more likely to focus on having the tech working at the expense of everything else.
To build the company, Jobs adroitly tapped the network of support services that has made Silicon Valley such a fertile place for fledgling businesses. Says he: “We didn’t know what the hell we were doing, but we were very careful observers and learned quickly.” Jobs pestered Regis McKenna, the area’s premier public relations specialist, to take on Apple as a client. After refusing twice, McKenna finally agreed. For advice on how to raise money, Jobs consulted both McKenna and Nolan Bushnell, his former boss at Atari. They suggested that he call Don Valentine, an investor who frequently puts money into new firms. When Valentine came around to inspect the new computer, he found Jobs wearing cutoff jeans and sandals while sporting shoulder-length hair and a Ho Chi Minh beard. Valentine later asked McKenna: “Why did you send me this renegade from the human race?”
https://time.com/3462424/the-seeds-of-success/
If nothing else, the stench would have blown them away. He didn't bathe for _years_.
Looks like he did exceed everyone's expectations.
OTOH people who prefer the conventional are not likely to recognize the most promising outliers for what they are, it can go right over their head as if there was no difference from those having below-average potential.
So let’s add criminal corruption.
Don’t take my word for it, Carmack publicly expressed regret at not fighting it harder.
And on hacker news? I don’t really care if someone disagrees with Engine John.
So much that playing videogames during a VC meeting can swing them the "right way" if you fit the structure enough
https://www.businessinsider.com/ftx-sam-bankman-fried-league...
The lesson I got here is just be you. Let others change for you.
And do not fuck with the IRS in any circumstances.
Try imagining harder. (Or just google :-)
Sequoia was their first VC. Got the Apple II off the ground.
Secondly, I’m talking about VCs today. Do you think VCs today act the exact same way they did 50 years ago? The industry has grown dramatically since then.
Its the same for the entire education system as Chomsky explains: It seeks to educate people smart enough to do what they are told, but dumb enough to not question it.
Maybe they made the deck two months ago and spent the last two months prosecuting pipeline and closing deals? Maybe they didn’t have a great investor network, so it took them a month or two to even be talking to the right investors (which more often than not is actually what’s important, and only superficially any given pitch or deck)? Maybe the VC in question was their first choice once they learned they existed and what their thesis is?
It’s absolutely true that VCs aren’t your friends. They’re middlemen for distributing other people’s money who pick winners at such a low success rate that one could be forgiven for wondering if random lottery might do just as well.
In terms of actual performance and criteria, they’re more like clergy. There are various performative religious traditions and ceremonies that have to be serviced and abided if one is to have any hope of them bestowing their blessings.
You're assuming that most businesses seeking VC money are fundraising full-time.
I read this and assumed that the founder was was working on building their business full-time and passively looking for VC. For example, they might not be ready to do active fundraising, but want to "dip their toe" into VC so they're much better prepared in 6-24 months when they are ready to actively raise money?
The attention that a business needs gives to fundraising really depends on what the business is, and how well organic growth helps them now.
I find the mindset “my pitch deck was 2 months old so I didn’t get funding” very out of touch of business realities. It is far more likely that that type of business doesn’t need VC funding. Your SaaS can probably be built with your daytime developer salary. No VC ever says “wow, what a great investment opportunity, one of the best, but the slides were old”. You don’t even need the slides, or the rehearsed elevator pitch. Just build a business that’s worth VC money (solid, profitable, and ready to scale up) if you absolutely insist on it.
Customers today expect polish and few bugs right out of the gate. I spent months on polish alone. If you don't, your product is going to be savaged like this:
"Former Yahoo CEO Marissa Mayer’s New Photo-Sharing App Has a Design From the Stone Age"
https://gizmodo.com/marissa-mayer-new-app-shine-photo-sharin...
I'll take that as a compliment.. as someone that took nights to build a SaaS product solo into a multi-million dollar business (and still do it solo).
Now: I know this app existed.
Having no polish can't be worse than having no app.
That article follows a long standing tradition of women attacking other women in power based on appearance to try to elevate themselves. No insight on polishing trends can be learned here.
Sure. But from experience it takes 3x as long.
After a long day of coding it’s not fun to come home and do another 8 hours.
There is more than enough money sloshing around, it all boils down to designing contracts and suitable information exchanges between parties. So anybody thinking that the current system is sub-obtimal can try their hand at disrupting the VC system and making history :-)
An arrangement that better utilizes the majority of the entrepreneurial crowd's energy and time is likely to at least carve a niche, if not dominate. It may not even be that hard. The chasing of planet-scale returns (with the corresponding discounting of the rest 99.99%) is a recent phenomenon and may be just an aberration.
It may well be that far better arrangements exist, but how would a slumdog or a small time farmer or a stay at home parent ever get the ball rolling? Who would play ball with them?
It would pretty much require that an existing VC or an empowered member of their ecosystem have the idea and see a path to it enriching themselves in order for them to spend time on it.
This is a major issue with pure market maximalism like the above: not everyone has agency within and access to every market, and no agent within a market would just let it change unless they personally stand to gain. Many potential solutions pass through empowerment or enrichment of different groups than those currently holding the reins, and this may mean those solutions are impossible to explore.
Meta-comment: What a creative and effective word picture. In just 3 words there's so much information that instantly comes across.
I have worked with bigger vc firms such as matrix partners and they genuinely care about you and want your startup to succeed if they are interested.
Trick is to make something which is genuinely cool and matches with the thesis and talk to vcs who are respectable.
Yc is a great help in this regard. They help you understand which vcs are respectable and which vcs you should treat like mushrooms: feed them shit and keep them in the dark.
Lemkins seems like a mushroom.
I guess "VC was wrong and nobody really gave a shit" doesn't have the same ring to it.
This is a good point. When something looks like Jason Lemkin posting something ridiculous on social media, it is actually an opportunity for us to learn of both his fame and the normalcy of his opinions, as well as to be reminded of the high portion of VCs that are good human beings.
Dead Comment
Seems like the typical teacher or manager to me.
My experience is that if the VC is someone who has background from finance, consulting, or law, then they are more likely to lose their minds over superficial stuff like logo placement, font consistency, alignment of images / tables / etc., and of course consistency in dates etc. - probably because that's all they did during their formative years in their respective industries.
Second point: There's a bunch of VCs out there with the only qualification of
A) Having founded / led a successful startup
B) Having invested in startups during the ZIRP-era
So while you have some tremendously good VCs that have stood the test of time, and have "seen it all", there are also VCs that will be washed away the next few years. So don't take it personally if / when some VC will decline you and and be all preachy about it.
Last point: Some of these stories are just made-up BS to generate content and thoughts. Half of the stuff VCs write on LinkedIn or Twitter seems to be fiction, for the sake of getting a point through to their listeners. Also keep that in mind.
The only difference is that the VC pays you your salary (and all your other expenses) in advance. And let's you keep some of the upside. By contrast an employer pays you a salary, and your (work) expenses as you go.
The VC "implies" by their funding how long your contract is. The employee goes "forever".
So all the things that apply to job-hunting apply to VC funding (Amplified). And make no mistake, the VC becomes your boss.
Once you understand it in these terms you can best evaluate if VC funding is for you.
Only if you give them board control.