VC Cliché of the Week

I am a big fan of try before you buy. The Gotham Gal and I lived together for almost five years before we got married. And that worked out pretty well for both of us.

I also love to try out music before I buy it and I do that a lot on Rhapsody and The Hype Machine.

Try before you buy
is a good tool in business as well. We prefer to work with a company and use their service for a while before we invest. That’s not always possible and when it isn’t we often will pass just because we can’t take the time to get comfortable with the opportunity. I think its also generally a good thing for the entrepreneur because they get to know their investors well before they get stuck with them.

There are times when it’s a useful hiring strategy. I know of many cases where someone was a consultant or even advisor or board member before joining the company full time. In most cases, those hires have worked out very well.

I also think it’s a good strategy for large corporations looking to make strategic acquisitions. If they can engage with a company as a customer, supplier, business partner, and even minority investor before they purchase the company, it is likely that the acquisition will work out better for them. The trick for small companies is how to engage with a large potential buyer in a meaningful way without getting suffocated by them. I generally advise our companies to engage with multiple large companies at the same time if possible.

Of course try before you buy has its risks. You’ll never get the same level of committment from a partner who is in "try mode" that you’ll get from one that has made the decision to "buy". And what if the trial works out badly? Then you are back to square one. But, of course, that is often the same place you end up when the "buy decison" ends up badly. Except in "try mode" the split is often much easier to manage.

So I recommend everyone think about how to try before you buy. I think in most cases, it’s a strategy that works out well for everyone involved.