Sep 10 2007 by Jason

Why Are Venture Capitalists So Hard To Deal With?

One of the questions that we get most often is “why are VCs such jerks?” or some sort of derivation thereof. Specifically, people complain about:

– VCs not returning calls / being unresponsive

– VCs not understanding how good of an investment my company is

– VCs stringing along entrepreneurs when they know they aren’t going to fund a deal

– VCs being “know it all board members”

– VCs being unapproachable in general

I won’t try to defend all VCs. In fact, I’ve seen all of this behavior from other VCs and I don’t condone it in any way. How does one avoid these behaviors? The key is picking good VCs to work with, but also to be self aware of your particular situation. I’ll try to address the particular complaints above by illustrating some situations that I’ve seen and also try to give you some insight into what might be rattling around in your VC’s head.

Issue 1: VCs not returning calls / being unresponsive.

Why is this happening to me? It could be that your VC is just too busy. They may have a prior investment that is suddenly requiring a lot of time, they may be looking at a ton of new deals, they may be fundraising themselves, etc. It’s not uncommon for one deal to take 100% of a VCs time if it is going through a merger situation or complicated financing. In this case, don’t take it personally.

I’ve seen some cases where the entrepreneur’s actions have led to perceived unresponsiveness. If an entrepreneur cold-calls a VC looking for funding, I wouldn’t expect a call back normally. I answer all of the emails that I get, regardless if I know the person sending it, but 5 minute phone calls that go on forever from someone that I’ve never heard of usually don’t get returned.

I’ve seen other cases where the entrepreneur sends an email every day to the VC wanting an update. This can get annoying and doesn’t lead to someone wanting to respond quickly.

Also, I hate to say it, but maybe the VC just “isn’t into your deal” and it’s at the bottom of his or her list. Sometimes unresponsiveness is indicative of interest. We try very hard to let people know quickly whether or not we are interested, so that folks don’t end up in this “bucket” but many VCs don’t operate this way.

Finally, maybe your VC is just an unresponsive person and you don’t want to work with them.

Knowing which one of these fact patterns that you fall into is easier if you are self aware and also have a transparent line of communication with your VC.

Issue 2: VCs not understanding how good of an investment my company is

Why is this happening to me? “I have the greatest idea in the world and no VCs see this – are they all idiots?” This is a reoccurring theme. I think the biggest disconnect here between VCs and entrepreneurs are *why* VCs may decline to pursue a deal. It might not have anything to do with your idea at all.

You *may* have the greatest idea in the world. A VC may still decline if the deal is outside of his / her investment thesis, is located somewhere that they don’t want to invest, or if they think the management team is not the correct team for the company.

You also may NOT have the best idea in the world. Perhaps the VC has seen similar ideas fail, or has some knowledge of a better prepared competitor in your space. Maybe your idea is just not that compelling.

Or perhaps, all the VCs you’ve met are idiots. It’s happened before where good ideas have been turned down by numerous VCs, only to find one later that funds it to great success.

Issue 3: VCs stringing along entrepreneurs when they know they aren’t going to fund a deal

Why is this happening to me? It shouldn’t. This is one behavior that I’ve seen that I personally have no tolerance for. Yes, it isn’t fun to tell someone that you aren’t going to fund their deal, but the only honorable thing to do is tell an entrepreneur this as soon as you’ve made up your mind.

Issue 4: VCs being “know it all board members”

Why is this happening to me? This situation is rarely one-sided – it’s usually the fault of both VC and entrepreneur, but it’s usually between the following polar extremes:

1. The VC is a complete idiot, doesn’t pay attention to the company at all, only shows up for the board meetings and then sits there and espouses “wisdom for all to hear.”

2. The Entrepreneur always thinks he/she is correct and that “no one could possibly know more about my company than me” and completely ignores the VC who has experience across many different companies.

In reality, most times I see this dynamic of “my VC is a jerk on my board” the truth is that it lies somewhere between these two extremes. I’ve seen situations that were very clearly biased towards each sides of the spectrum, however.

Issue 5: VCs being unapproachable in general

Why is this happening to me? This one is strange to me, because it would seem the whole VC community has become much more open and transparent over the years. From blogs, to speaking panels, VCs are more “out there” than they’ve ever been. Hopefully from this blog, folks at least think a few VCs out in Boulder, CO are completely approachable.

In summary, I think it’s hard to brand all VCs as “jerks.” I think some of the “poor” behavior is simply poor behavior, but some of it is perceived through rose-colored glasses of some entrepreneurs. You should also check our Bill Burnham’s post on “Why your VC is Acting Crazy.”