Advice And Money

I was chatting with my friend Maurya yesterday. She runs a non-profit called ScriptEd and has been figuring out the raising money thing over the past few years. She said to me “I have found that a good way to get funding is to go in and just ask for advice.”

I chuckled and told her that there is a saying about VCs, “Ask a VC for money and you will get advice, Ask a VC for advice and you will get money.”

And I am guilty of this as much as any other VC. When it’s clear the founder only wants your money and has no interest in your advice, it is hard to get excited about the investment. When it seems that all the founder wants is your advice and isn’t worried about getting money, it makes you want to work with that founder.

Of course, the secret sauce of the investor:founder relationship is “advice AND money”. The way investors get paid for our advice is that we get to buy a piece of the founder’s company and go along for the ride. We pay for the right to give advice!

The easier part of this duality is the money part. There is a well understood system of how money is exchanged for equity upside. Founders and investors don’t have to figure that out.

The harder part is the advice part. Founders need to figure out the best way to get advice in a way that it is useful and actionable for them. Investors need to figure out how to provide advice that is useful to the founder. Because we are talking about two people communicating and building a relationship together, this means that each investor:founder relationship is going to be different and what works for one relationship is not likely to work for another.

It is also true that a founder might have dozens of investors in their company and getting advice from dozens of people all the time is overwhelming. So founders need to figure out which investors to focus on and that doesn’t always mean the ones who wrote the biggest checks.

What I have learned over the years from working with hundreds of founders is that you need to earn the right to be listened to and writing the check is not enough. You earn the right to be listened to by giving good advice. You also do that by not forcing the founders to act on your advice. You have to be OK with a founder deciding to ignore you or delay acting on your advice. You can’t take it personally. You have to keep being positive, supportive, constructive, and encouraging. Over time, if you turn out to be a good source of advice, you will see things you suggest being acted on. And you will see the founder reaching out for advice more frequently. You will become a trusted advisor.

Getting to that point is the holy grail of the investor:founder relationship. It can take years to achieve. Or it can never happen. When it does, it’s a special thing and it is the thing that keeps me in this game after thirty years of doing it.

#VC & Technology