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.