How To Get Attention From Your VC
I had a funny exchange with Steven Johnson, founder and CEO of our portfolio company outside.in last week. He saw my post about the email address book rankings in Xobni and wanted to know where he ranked. It turned out he was #29 which is pretty high considering that outside.in is the smallest investment we have (by amount invested) in our entire portfolio.
That led me to a simple analysis. I took all of our active portfolio companies (both Flatiron and Union Square Ventures) and I looked at the CEO’s Xobni rating and built a simple spreadsheet table comparing that ranking to the amount of capital we had invested in the company. There was no correlation.
Now you can say that is stupid. We should be consciously giving more attention to the companies where we have more financial upside and more capital at risk. I suppose that is true, but in my experience over 20 years doing this business, that’s not how it works.
VCs pay attention to companies for several reasons:
1) The company is in trouble. I’ve heard many investors say "if you don’t hear from me, it means you are doing just fine on your own". I understand that approach but I try not to take it myself. But one thing is for sure, when a company is struggling, we certainly do our best to help them get through it.
2) The company is killing it. If I was an investor in Facebook for example, I’d be spending as much time on that company as I could. I am sure that the VCs from Accel, Greylock, and Peter Thiel are doing exactly that.
3) The company is just getting going and needs help figuring out its strategy, building its team, etc. The funny thing is that the ratio between attention and stage/capital invested could actually be reverse correlated, meaning that the VC pays more attention when there is less capital invested.
4) The company is interesting to the VC. You can read this blog and know where my mind is. And as much as I hate to admit it, when my mind is focused on something, that’s where my attention goes as well.
There’s another factor which I’ll call the entrepreneur’s ability to engage the VC. There’s a reason that Steven is number 29. He has a great way of including me in company conversations via email and face to face. He doesn’t look to me to sign off on his decisions, but he does look to get my input. He is roping me into the company. Dick Costolo, who is still in my top 20 email relationships even though FeedBurner is now owned by Google, was also a master at that technique.
Not all entrepreneurs want or need to engage the VC in that way. And that’s fine. We have one company in our portfolio that has made most of its decisions without our input and has the best financial profile in our portfolio right now. So there is no rule that says you must engage your VC to be successful.
But if you want to get more attention from your VC than you are currently getting, and you don’t want to get that way by struggling, then you should find ways to rope them into your internal discussions. I personally think email is the best way to do that even though it’s a terrible medium for a thousand reasons.
I was in a board meeting several weeks ago and we were discussing the company’s top priorities. The CEO pointed out that the top priorities were on the company wiki, which is fantastic. But unfortunately, not one of the board members had read the company wiki before attending the meeting. Another truth about VCs is that they are attention constrained for the most part. And they will most likely read information that is pushed out to them, and they are less likely to go find it on their own. That’s why email is best.
Getting attention from your VC means giving them attention. It’s like any relationship. There are no one way streets. And it takes work. But if your VC can help you and you want the help, you have to rope them in.
Comments (Archived):
You asked earlier “should VCs blog?” and this post is an excellent example why a lot us out there hope that you continue to do so. This was insightful, direct and helpful.
agreed
Brilliant post from a VC blogger, entrepreneurs should read and why VC should blog
Great post, and very informative. Entrepreneurs who want their VCs to be engaged (and I would argue that if you don’t then you should go elsewhere for capital) should start that process early on in the relationship so it gets off on the right foot. Have the first board meeting within a couple of weeks of the closing of the financing. And don’t be afraid to ask questions that you may not know the answers to, particularly if you’re a first-time entrepreneur. Good VCs won’t expect you to have all the answers yourself (and they may not have them either).
I was once asked if I was looking for a passive or active investor in a VC… well I don’t think entrepreneurs should ever take VC money if it’s because they just need the cash. There are passive angels for that. If I were going to put time into working with a fund, I want them to actively build value in the company.
yes, this is exactly why VCs should blog. thank you.
With so many opportunities for online and offline communication, there’s really no excuse for keeping your venture capital partner in the loop. I imagine a decent number of entrepreneurs just want to do things themselves once they receive financing and don’t want to bother the VC, until he or she has a crisis and then its the different dynamic of putting out a fire.
……The CEO pointed out that the top priorities were on the company wiki, which is fantastic. But unfortunately, not one of the board members had read the company wiki before attending the meeting. Another truth about VCs is that they are attention constrained for the most part…..My experience working with a number of VC’s.1) They are always busy. Why? VC”s should not have more than 5 portfolio companies otherwise they are spreading themselves thin like “peanut butter” (borrowed this one from Brad @ Yahoo, manifesto). 2) From a management perspective to much time is sucked up “managing” the VC’sAs far as the wiki described above. Let me translate what the ceo of your portfolio company is saying.. “Hey VC guy. I’m very busy trying to grow a company here. If you want to know what is going on at the company please check out our corporate wiki for minute to minute updates. Otherwise, I’ll see you at the monthly board meeting in a couple of weeks. Speaking of which, I’ve got to run now so I can start to put together the board presentation, so you can really understand what has materially changed here at the company in the past couple of weeks. AND Yes, I realize this will such up another couple of days of internal resources…….”
Would looking like your VC help? I am referring to this advice: http://smartstartup.typepad…Is this hot on the east coast too?
I think the answer also depends on the partner as well. As a first time CEO, I had an experience with two different VCs on the board — one (remote) didn’t want to know much until I raised an issue, and then he (sometimes) jumped into the problem in very unhelpful ways. The other (local) was even tempered and wanted to be well informed, helpful, steady-hand.My mistake was treating them both the same — which was to keep them unawares of the issues that I could have used help on because of the disruption caused by the somewhat and sometimes unhelpful partner. Not good for the relationships with either.In hindsight, I would have kept more engaged with the local partner — obvious now, not so to a first timer.
Hello, I have been reading your blog for about a month now and find it very interesting, I have two questions, what does VC stand for and what does a VC do?
VC is Venture Capitalist. They deal with private equity and invest in new, frequently risky, growth companies.Ideally. Today I think they just blog about facebook all day…
Fred, since you don’t mention *how* to get attention from your VC, just that it’s important to do so, I wrote up some tips on that at http://www.sacstarts.com/20…
It’s easier for fast-growthing/ heathy companies to get attention from VCs, rather than companies in trouble, in China. It’s because people are always the most important issue VCs are considering, duo to the lack of technoledge innovation in China, which is quite different from USA I think. So VCs always ready to say, let’s be friends but not working together if you are not strong enough to get your company out of trouble by yourself. Sure, money is another thing…