The Lady Doth Protest Too Much

I may have to replace my VC Cliche of the Week posts someday with a series on great Shakespeare quotes to keep in mind while you are doing venture investing.

This one, from Hamlet, is some wisdom that I should have kept in mind but didn’t.

The story goes like this.

Once upon a time, we had a very early stage company in our sights.

We met the Company shortly after it was formed.

We became users of the service, promoted it to a lot of our friends, and got to know the management team really well.

When it came time to consider an investment, we did what all good VCs do.  We got on the phone and called ten people in the industry that we knew really well to get their take on the Company’s service.

We heard pretty much unanimously that they "would never use it".

We passed on the investment.

But it was a huge headfake.

Because within six months all of the people we called had become customers.

What happened?

Is due diligence actually a bad thing to do?

I told this story last night at a dinner party with some friends and asked that very question at the end of the story.

Our friend Tom Evslin played a bit with his beard (which means he’s thinking) and then suggested that when you get unanimous rejection you are actually hearing fear.  And fear should be interpreted positively, not negatively.  It meant that all of our friends didn’t understand the company’s service and were afraid of it.  Probably because it was highly disruptive.

To which I replied, "the lady doth protest too much"

To which Brad replied, "that’s the title of your blog post"

And it is.