Should you talk to VC’s if you don’t need money?

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There has been some outstanding debate over the past few weeks based on a blog post (and then a clarification) by Allen Morgan of Mayfield Fund, who argues that entrepreneurs should not meet with VCs unless they’re formally pitching a start-up.
There has been mostly reaction arguing against this point of view, particularly from VC’s such as Brad Feld, Mark Suster and Fred Wilson (as mentioned in this WSJ follow up article).  In fact, while I was writing this, Mark Suster blogged about this concept, and of course wrote much better than I will about this exact topic. However, since I had already started with this post, I’m gonna see it through and try to come up with something Mark hasn’t already said ;-) .  I am going to make the analogy of a sales person and her relationship with customers.

 

(1) You only call me when you need something – You know the joke about a sales person being “coin operated”.  If you are the customer and you are getting LOTS of love during the cycle that you are looking to buy (or in many cases when the sales person is looking to sell), but practically no love any other time, you realize you are in a one way relationship.  Pitching to VC’s is no different – if you are not speaking to any of them and wait until you need the money, I claim the VC’s will see this and realize you are not a relationship builder, and that you are only looking out for yourself.

(2) We’re not partners – How many times do you hear a customer say “My Account Manager has my best interest at heart?”  When you do, you know you have a winning relationship.  Too often, this is not the case.  In fact, there is typically a conflict between what the customer needs (great product/service at a good price) and what the salesman wants (a big check).  This is short term thinking, on both sides.  The sales person should want to create lasting value so their customer will come back to them time and time again – the big check will come (maybe over time vs. all at once, but many times over).  The customer should treat their sales person as a valued member of the team – making sure they understand all the needs/requirements so they can craft the best possible solution, not just the lowest price.  The customer/salesperson relationship is not necessarily long lasting – companies change sales reps frequently, people change jobs, etc.  On the other hand, you will be working with whichever VC you choose for a very long time.  So, if creating a solid partnership with your customer is important even if it may be short term, what do you think of a relationship that is almost guaranteed to go 5+ years?

(3) How big is your pipeline – I wrote about creating repeatability while prospecting earlier this year.  The same concept applies here.  If you think you’re going to need VC money in 12 months, you need to start there and work backwards – how long will it take to get a term sheet?  To meet the right VC that shares your philosophy?  To recruit the rest of your management team that they will want to see before they give you money?  To finalize the financials?

(4) I already made my quota, so I don’t need to prospect – I love this one.  Related to #3.  I’ve seen so many sales folks who “mail it in” once they’ve made their quarterly or annual quota.  Like they’ve reached the finish line.  Except they haven’t.  They start the race again next quarter/year.  We entrepreneurs need to watch marathon runners or performance bicyclists – they know how to pace themselves for long durations.  They realize winning a Stage or getting past that large hill was a great accomplishment, but not nearly enough.  If they don’t have all the resources to get all the way to the end of the race, they lose.  And I bet they aren’t looking for those resources halfway through the race, they know what they need before they even start.

I don’t think the froth around investing right now is the new normal.  There are a few high flying companies that are raising capital without much sweat – but brand new or less visible startups still need the fundamentals and it still takes time.  Or, maybe not.  Maybe these high flying startups already have strong relationships with the VC’s they want to work with?  Maybe they have been building these relationships for years and are simply leveraging those relationships now?

There is so much you need to know in order to truly partner with a VC – and not all VC’s are the same.  I don’t know HOW you think you’re going to do that if you aren’t talking with them regularly – asking them questions, learning what works and what doesn’t.  Waiting until you need the money is the same analogy as a sales rep calling all his accounts in the last month of his fiscal year trying to close a deal to make his quota.  It “might” work, but it certainly isn’t a repeatable way to find success.

I’m a huge believer of long-term, long lasting relationships.  Because of that, I’m always talking to lots of people – accountants, lawyers, developers, marketers and yes, VC’s.  My concept is very simple.  If a VC is not interested in speaking with me or building a relationship unless/until I need them (a la Mr. Morgan) then I thank them for their insight and leave them alone.  But I will never assume that this is the case.  I don’t do it with customers, partners, employees.  I want to be out there meeting you, and if you want to meet me, then great things will happen, I’m sure.  And if you don’t, at least I tried.

Bottom line, Be prepared, build relationships, be able/ready to accept “no”, and as Mark Suster says, drink LOTS of coffee.

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