The Long Engagement

The Gotham Gal and I met when we were 19 and got married when we were 25. We lived together for most of those six years before we got married. By the time we tied the knot, we knew each other very well.

While venture capital investing and marriage are two different things, I think there are some things one can take from love and marriage into the world of startups and venture capital investing.

One of them is the value of long engagements.

I have never understood why founders want to run a lightning fast process to select business partners who they may have to “live with” for the next seven to ten years.

And yet we see this behavior all of the time. Often it is driven by other VCs who toss in “preemptive term sheets” thus turning a fundraising process into a sprint.

What I would prefer to see, and do see in many cases, is a founder who takes the time while they are not raising money to build a number of relationships with potential investors and then engages those investors in a process when it is time to raise capital. I like to call this process the “long engagement”.

It might sound like a lot more work than the fast and furious fundraising process that many founders are running these days.

But I don’t think it is a lot more work. Building relationships over a six to twelve month period can take the form of an occasional face to face meeting, emails back and forth, and even a few visits to the office by the investor. And none of that has to have the pressure of a pitch, an ask, and a price.

For the investor, this is a much better process. It allows them to see the founder and the business execute over time. It allows everyone to develop comfort with each other.

I would argue that it is a much better process for the founder too. It let’s them see which investors are truly interested in their business, their team, their product, and their success. It also reveals which investors are “here today, gone tomorrow.” You want the former on your cap table, not the latter.

It is easy to get caught up in the game of startups and investing in them. A fundraising process is at its heart a competition. And everyone wants to win. But you don’t get a trophy for winning this game. You get into a relationship. Often a very long one. So I think stepping back from the game theory and stepping into the relationships is the way to win long term. Which is the only form of winning that really matters.

#entrepreneurship#VC & Technology

Comments (Archived):

  1. LIAD

    I remember Mark Suster writing a great piece on this. ‘Invest in Lines, not Dots’ – https://bothsidesofthetable…. 2010! how time flies.Whilst beneficial to the investor – its also totally in the founders interests too. Reference-checks are a quasi-shortcut, but nothing can beat extended exposure to someone to establish credibility, characteristics and trust.

  2. pointsnfigures

    Nice to meet you. I have had a lot of good meetings. I am going to close in four weeks. orHow come you can’t be like David Cohen and just write us a check after a thirty minute meeting? He did it for Uber.

  3. William Mougayar

    “I have never understood why founders want to run a lightning fast process to select business partners who they may have to “live with” for the next seven to ten years.”It’s because the path of least resistance always attracts opportunistic individuals. The harder work is for real people.

    1. jason wright

      That’s right. They’re opportunists. They see only the immediate brief window of opportunity. They’re a ‘type’. I don’t like that type much. I could name a few.

  4. Matt A. Myers

    Was interesting to hear recently Toptal founder owns 100% equity – not sure if that’s 100% of non-investment equity or fully owns the company not having required funding.

  5. John Lowery

    “Often a very long one.” I’ve certainly lived through that. Great post (as usual) Fred – if ‘VC101’ was taught in universities, this should be the entire focus of lecture 1. I wish that I had followed this advice back when I was raising money, but honestly I never felt like I had six to twelve months available before we’d be out of money. Part of that was likely due to me taking on too many roles (as many founders believe they have to do). I’ve referred so many people to your post on the 3 roles of a CEO. I just wish that I would’ve read and followed that back in the day…

  6. Richard

    Marriage and business require very different relationships. In business, you only really need a relationship based on trust and dependability – and only while on the field – how you feel about the person off the field can be different. That will never work in a marriage.

  7. jason wright

    “the game of startups”.

  8. William Mougayar

    The flip side of this is that some entrepreneurs see VC money as just that. They want the thrill of receiving money without the burden of the relationship, just as the analogy would be the proverbial one night stand.

  9. awaldstein

    Yup–life is better for the depth of relationships we build over time. Though need to say that I’m running into some exceptional corner cases where the person (because of location) is off network to the world they need to be in, the projects are excellent, the founders great, and capital needs timely.An issue but everyone needs to start where they are obviously.Some of the best companies–in fact the platforms that run our world, started with someone who had a great something and found someone they didn’t know to take a chance.

    1. sigmaalgebra

      found someone they didn’t know to take a chance. Likely not; at least not much of a “chance”.The roulette table in a casino, even an honest one, is not taking much chance; with a low limit on the size of the maximum bet, there is even less chance. The law of large numbers (either the strong or the weak version) says so about expected returns, and the central limit theorem (even an easy version, without the tricky Lindeberg-Feller version) says that the variance is small.Or, as at…I’m shocked, SHOCKED, to find that gambling going on in here.Here are your winnings, Sir.Oh, thank you very much. Well, from Rick’s side, there wasn’t much risk!Similarly for the people who write insurance — life, auto, home, business, medical: They have good enough means of rating that the law of large numbers saves them. The expectation is good, and I can believe that for a big insurance company with millions of small policies the variance can be astoundingly small.Similarly for the credit or loans issued by a commercial bank.Well, it appears that for VCs, the old story that they could have lunch with an entrepreneur who outlined his plan on the back of a paper napkin and agree to funding right there has long been gone with the wind even if it ever existed.Instead, it really does appear that (i) the limited partners are nearly all, and with nearly all the investing, at large pension funds, university endowments, family offices, and sovereign funds are essentially just employees and not some have a hunch, fast draw, pull the hair trigger, shoot from the hip romantic figure of the canyons of Wall Street, hills of Hollywood, glamor of Monte Carlo, or Sand Hill Road in Silicon Valley. And, as such employees, they have rules, criteria, to follow and, then, pass versions of those rules on to their VCs. Like the rating in insurance, commercial banking, private equity, etc., the rules and criteria are seen to work fairly well in the sense of the law of large numbers (expectation) and the central limit theorem (variance).So, with few exceptions, the VCs follow da rules, dem rules, stay with da rules.So, for a VC with lots of investments, there isn’t much of a “chance”.

  10. Mario Cantin

    Great metaphor. My wife and I were engaged for 8 years before we tied the knot. People would ask why we took so long. I would reply that by the time we took our vows we knew the pros and cons of each other and it made for a fully informed decision. Going into a business relationship with unknown parties simply incurs additional risk that could be mitigated by being a little savvy about the human aspect.

  11. Andrew Cashion

    There is only the long game.My wife and I bought a house together before we were married.

    1. sigmaalgebra

      > There is only the long game.Yes, but too many people have given up on any long term goals and just live for whatever pleasure they can get day by day.And for people who are pursuing a long game, far too many of them don’t believe that “game” is marriage, don’t respect marriage, even when they have one, and, instead, have other long games in mind. To them, their marriage is a mule to be manipulated, exploited, exhausted, and then discarded.

  12. Angel L.

    I am a firm believer in establishing relationships first before making a decision to bring someone into my personal, professional, or entrepreneurial life. The counter to that from my experience is that urgency sometimes gets in the way of building the relationship first especially with my start-up FinTech Connector. Figuring that balance is critically important. Still working on it.

    1. JLM

      .The longest relationships begin with some kind of blind contact.As a people, America has embraced the Internet — the faceless, anonymous Internet — as the means to meet one’s life mate. It is an enormous industry.Networking in the financial world is no different. Hell, there are financial networking cruises these days.JLMwww.themusingsofthebigredca…

  13. Lyel Resner

    I really like this analogy. This has certainly been my approach as an entrepreneur, but I recognize that being able to build relationships with potential investors is largely a reflection of the fact that I am lucky enough to have access to communities and people who can write checks.I know this is not the case for most people, including a number of my students and aspiring and talented entrepreneur friends. I try to bridge these spaces when I can, but its difficult. I think the consequence is the world misses out on a lot of great talent and enterprises that tackle important problems.Fred, knowing that long-term relationships can yield better for everyone, have you seen folks in the venture world make a concerted effort to build relationships with folks outside of traditional communities and spaces in tech? Underserved or historically marginalized folks that might not have access to these spaces? Really interested if you’ve seen approaches, mechanisms, or folks who do this well.

    1. sigmaalgebra

      The VCs have some patterns that have long track records. They don’t really know why on average the patterns work, and they also don’t have any way to judge the value of things outside the patterns.

  14. sigmaalgebra

    Lived together for six years and THEN, STILL, got married and STAYED married?WOW! Great congrats!!First, too often the situation is (i) quickly get all goo-goo in love (big dose of that love chemical), (ii) get married, and (iii) after about three years get a divorce.Or, second, the situation is still (i) quickly get all goo-goo in love (big dose of that love chemical), (ii) get married, then (iii) have a kid (maybe (iii) comes before (ii)), (iv) have a total of 1-3 kids, and (v) by the time the youngest kid is in first grade, be totally torqued at each other and get a divorce.So, the second case lasts a little longer due to the young kids.So, apparently too often, the rule is, three years without a new kid, and the marriage is over. Basically the initial chemical love wears off quickly, and otherwise the two people don’t much care for each other. So, there was little or no conception of being “bonded” together for life.It’s as if Darwin was saying that three years without a new kid means that, for having more kids, Darwin’s main interest, with a divorce there is everything to gain and nothing to lose.Or, surprisingly, Darwin doesn’t much care about bonded together for life, about strong, lasting family formation.More broadly, the current situation in the US and apparently nearly all the more developed countries is that, for whatever reason, the birth rate is so low the population is going extinct, quickly, literally. If there is no other solution, then Darwin will have one! Hint: Darwin is interested in something about “fittest”, and that has to apply also to family formation.

  15. sigmaalgebra

    For that suggested on-going dialog with a VC, a dialog takes two, and commonly VCs respond only when there is a good chance of a good investment quickly.

    1. awaldstein

      not true in my experience.

      1. sigmaalgebra

        Yes, obviously that WOULD be the case for anyone who never contacted a VC! 🙂

        1. awaldstein

          sorry don’t get this.been raising private and public funds my entire career and from day one so your point?

  16. JLM

    .Lots of conflicting info here.On one hand, the average VC decries how busy they are that they can’t even respond to emails, don’t take meetings without a secret handshake double opt-in intro, and like things a certain way. Certainly Freddie has sent that message on numerous occasions.Email bankruptcy? If it’s important, they’ll email back again? <<< This is what VCs say about direct contact. Relationship or marriage bait, y’all?Recently, Freddie opined that it was important to CLOSE and close quick.I would also inject just a bit of earthiness to note that most VCs are known by the marketplace. If you’re wearing your best skinny jeans to impress the entrepreneurs, don’t bother. They know you. Every shitty story about you has been told and re-told. Some of them are true.In addition, VCs talk shit about each other. I cannot tell you how many times this has happened that I have personally witnessed. Just today somebody sent me a link to an blog post from 2016 that was a classic dustup between Fred and Scott Galloway over Tumblr from 2016.Totally unsolicited, sent because I had written something about the WeWork IPO and Scopt Galloway had also written about WeWork. I had never seen it — the blog post about Tumblr — when it happened in 2016.It is a legitimate strategy of the VC wars to make a quick, competition-killing, pre-emptive move. This is true when new funds try to go toe-to-toe with established players like USV. Makes sense, no?That tactic in itself says something about the VC. The two best answers in business have always been a quick YES, and a quick NO.On the other hand, we are told to believe a picture of your friendly VC stopping by for a chat, a cup of coffee (more likely to be a triple shot, blonde, rainbow art latte with a half pump of caramel infused nutella), and a tour of the place with maybe getting a couples massage thereafter or sharing a hot dog in a box at a Yankees game.The truth of the thing is that every effort at raising money is a crap shoot, a grind in which more than 90% of the targets are going to tell you “NO” in a variety of languages. I once spent 18 months raising money and was told NO in seven different languages. Still, I got the YES I needed in English though it was British English.There is a whole slice of the country where Moms will tell you that nothing good ever comes from a long engagement. In the South, engagements are determined by the availability of the wedding venue.The only thing in greater supply than political observations is bad business advice.Know which side of the table you are to be seated upon. The world is divided between users of capital and suppliers of capital. Stay loyal to your tribe.Get some cranberry scones from Whole Foods for when the VCs drive out to see you. They go stale after 3 days, but you can spritz them with water and microwave them. Nobody will ever know.JLMwww.themusingsofthebigredca…

    1. Richard

      The idea of forecasting how a team of people who are early in their career without much under their belts will get long when the company is 10 years old and successful is futile. Hasn’t Fred learned this from almost every company USV has backed ?

      1. JLM

        .Forecasting how a team of men trained for a year will act ten minutes after they have been shot at for the first time, is a real crapshoot.JLMwww.themusingsofthebigredca…

      2. sigmaalgebra

        You are reminding me, are there any sole-solo founders? My guess is that they have relatively few “co-founder disputes”?

    2. Matt A. Myers

      It’s interesting to see the illogical contrast of beliefs that Fred has – but that don’t check against the logic of the other to confirm validity in the logical algorithm.

  17. kidmercury

    i mainly just want to note that literally billions of people think long engagements are an incredibly bad idea for marriage. in india arranged marriages are very common, and i know many, many people with arranged marriages that are very happy and have great families by any standard. to their worldview the idea of searching for some magical romantic love and living with a potential mate you are in love with and frolicking merrily in your youth together is a comically absurd way to approach things. in the arranged marriage worldview it’s all about connections, if your family makes a good intro for you then you should take it and move on with your life, since according to that worldview life really does not begin until you are married, and since an intro from trusted family is the ultimate in terms of a warm referral — a super qualified lead.i got happily married the western way, but the old school indian (and wherever else they may do arranged marriages) makes a ton of sense to me, and presumably to the billions it has worked very well for.i don’t know how far this extends to entrepreneur/investor relations. but i mainly didn’t want y’all to sleep on old school arrangements. 🙂

  18. Sudha Lakshmi

    “You get into a relationship. Often a very long one. So I think stepping back from the game theory and stepping into the relationships is the way to win long term.”But I don’t think game theory and Fred’s advice are all that far apart! As my co-founder once put it: as a startup founder, you’re playing a long, iterated game, and the player whose interests are closest to yours are your early-stage investors, so why WOULDN’T you optimize for fit and alignment? Which of course means taking the time to find that fit!

    1. sigmaalgebra

      First, the main part of “game theory” is the von Neumann- Morgenstern saddle point result with a nice proof via linear programming duality theory. That math has next to nothing to do with marriage! There is a generalization by Nash, but it doesn’t have significantly more to do with marriage! Both results have two big problems: (i) The math needs context and assumptions nearly never realistic in practice. (ii) The data needed is essentially never available with meaningful accuracy.Second,> so why WOULDN’T you optimize for fit and alignment?Because later or even right from the start, one or both may have strong, secret (“hidden agenda”) interests, didn’t or don’t really respect the marriage or their spouse, and were using the marriage only as a “rented mule”, one-time use, disposable, short term situation to manipulate and exploit for these other interests.

      1. Sudha Lakshmi

        You are of course aware of the Gale-Shapley algorithm for stable matching, which was originally formulated with marriage as an example. :)So, to put my co-founder’s point in terms of matching theory: he’s essentially saying that early-stage VC is much more a matching market (like marriage) than a purely price-driven one,More here on the Gale-Shapley algorithm and its importance to all kinds of markets:

        1. sigmaalgebra

          Never needed or used Gale-Shapley.There is some matching I did use: For NASA, how to assign some signals to some satellites to minimize the angle in the sky where signal interference would occur. There NASA did have the needed basic data. There is a cute matching algorithm, but it’s also a problem in min-cost network flows, and that is linear programming with a special feature: If the arc capacities are integers and the initial basic feasible solution is integer, then the simplex algorithm, or its network flow version, will maintain an integer solution and find an optimal solution that is integer — get integer programming for no extra cost! For the NASA problem, had to do some iterations for the maximization of the one angle, and that is called the bottleneck assignment problem and just needs some very fast linear programming post optimality. So, that afternoon I reinvented a solution to the bottleneck assignment problem.The Nobel prizes for economics are sometimes given for goofy things! E.g., the famous Arrow, Hurwicz, Uzawa paper stated a problem in constraint qualifications for the Kuhn-Tucker conditions (only from smoking funny stuff can conclude that that math has anything to do with a real economy), didn’t solve it (it’s tricky), but a paper I published did. So, I get a Nobel prize in economics? They haven’t called yet! :-)Let me guess: The math you mentioned needs lots of data no one has any chance of having,Somehow I doubt that Fred had that theory in mind, Besides, it’s likely not really “game theory” — not everything is!Sometimes Fred posts content that is easy to correct or improve on, and sometimes people post here to do that.Sure, some math may do some things for romantic matchmaking and may do some, simple, first-cut matching of VCs and entrepreneurs. But I don’t see math as doing anything significant in solving problems in existing marriages.Basically in the US, the large fraction of children born outside a marriage and the small fraction of marriages that are happy and doing well at family formation show that marriage is not highly respected.

  19. Dan T

    I figured out the exact age and length of engagement to maximize the likelihood of an ever-lasting happy marriage. The exact length of time and exact age when you have complete faith that you have the right partner. Mine was 6 1/2 years and 29 years old. Working out great for the last 26 years or 32 years, depending on how you look at it.

  20. lunarmobiscuit

    Fred, this goes back to the discussion of finance vs. entrepreneur VCs. Founders want you to write the check after the first meeting as they are not thinking of bringing in a partner, they are thinking only about raising capital and getting back to business.What you also seem to miss is that you, Feld, Suster, Andreessen, and a few other VCs seem to consistently add value. I’ve worked with many top CA VCs, all of home spent 15 minutes of our first hour meeting pitching their “value add” but most of whom were of net-negative value in the long run.In your many years as VC, you must have a long list of syndicate partners who you and your USV partners don’t look forward to working with, or who you wont follow into a deal because of their past behavior or reputation.Is still around? Back when it started there were not many VC firms or partners there with high ratings. That’s not a scientific survey, but it demonstrates that the VC industry as a whole had issues, and I’ve not heard of much change on that front.So yes, from your side of the table the correct answer is a long engagegement. From my corner advising entrepreneurs, I tell them to be patient if it’s the right investor. But 99% of the time the best advise for entrepreneurs is to move on to the next investor as what’s most important is to get thr funding closed and get the focus back on operating and growing. In the end, hitting milestones makes investors happier than yet-another conversation kicking more tires.

    1. redwoodmafia

      This is absolutely the situation.I’m not going to spend a bunch of time to build a relationship with 40 VCs in the hope that a couple invest. I’m going to build product, grow the business, and when it’s time for the next round, talk to fellow founders and pitch the crappy VCs as warm up and try to close only the most highly recommended ones.