I listened to an interview with a prominent founder of a VC fund a few days ago, and it turned out to be a threat to my life. It was so ungodly boring that I had to turn it off because I almost fell asleep driving the car… Twice… It’s unbelievable for me in a way, because on the one hand, a man has phenomenal experience and unquestionable successes behind his back, but on the other hand, he is completely unable to talk about it. It’s boring, clichéd, and even ChatGPT would do it better. For a moment, I thought that he may have had a bad day, but when I went through a few of his other materials, it turned out that this was his non-media – predictable, trivial, purely analytical. There is no inspiration or intrigue in it – and this is an industry that changes the world every day. I began to wonder whether, if I were a startup CEO, I would really want this man to be my first investor – and honestly, I had my doubts at first.
On the other hand, do the values and narrative that the funds communicate really matter? The effectiveness of VCs at the end of the day is evidenced by their returns on capital – this is the purpose of their existence. You can either do it or you can’t. There are funds that try to be ‘founder friendly,’ i.e. as strongly as possible focused on the benefit of their portfolio startups. Others are the exact opposite – they threaten, press, punish, but thanks to them companies also grow – and quickly. In my hundreds of negotiations, I have heard that what I say and write as a partner of my fund inspired someone to talk to me because they look at the world in a similar way. It’s a great source of deals.
However, I believe that this was of absolutely no relevance at the later stage of the talks. If the founder receives two or three term sheets – on the one hand, they compare the offers (classic: highest bidder) – on the other hand, they look at the portfolio, i.e. in which most valuable companies the fund invested. I have never encountered a situation in which someone consciously chose a VC with much smaller achievements, because of character traits or vision of the future. Many times, this was the reason why I was eliminated in the competition against the better options. It becomes even more apparent today, when valuations are going down and capital is like a cure – the perception of startups is changing.
The best funds are the ones that have the most success in their portfolio. Fullstop. Top founders and investors cling to them. They also have the most requests and follow-on opportunities. That’s what shows that they can play this game. There is no point in deluding yourself – despite what is commonly believed – the other elements are secondary or tertiary for startups.
The comment section had to add:
Some tell stories and others make history. It is rare to meet someone who does both well.
Probably, this founder wouldn’t win in the competition of presentations, but does he have to? There are also those who can tell beautiful stories, but there is absolutely nothing behind it, zero efficiency. That said, I do realize that a beautiful package can help you sell anything, but at the end of the day it is the effect that counts, not the oratorical skills.
And I think I’ll counter. Personally, I need to be on the same wavelength with the people with whom I work. I would rather choose a person with whom we understand each other well and have good energy. Then I work best and achieve top results.
Kostiantyn is a freelance writer from Crimea but based in Lviv. He loves writing about IT and high tech because those topics are always upbeat and he’s an inherent optimist!