A Wrinkle In Time

When friends ask me what the biggest change has been in transitioning from sitting in the entrepreneur’s seat to the VC’s seat, I often think of the profound difference in the way entrepreneurs and VCs look at that all important dimension of time.

When you’re an entrepreneur, time is your enemy.  You need to solve the problem of “simultaneity” – hire the team, build the product, raise money and close deals – all in parallel.  If you have only 80% of the data surrounding a decision, you simply make the call and move on.  When I was an executive at a public company (Open Market), we used to think about every quarter like an hourglass, with the sand running out every 90 days and a mad scramble to close as many deals as possible before time ran out.  At an earlier stage company, that hourglass metaphor is similar, but the sand running out is the cash on your balance sheet!  In short, entrepreneurs learn to fight hard against the passage of time.

When you’re a VC, you have a very different relationship with time.  VCs seem to love the passage of time.  When you’re evaluating a deal, more time means more information.  When making investment decisions, VCs prefer to watch movies rather than look at snapshot pictures – in other words, they like to see a project evolve over time, not evaluate it at a discrete point in time.  They like to see teams gel together.  They like to see entrepreneurs actually achieve the milestones they claim they’ll achieve with time.  The more a VC can delay a decision, watch something progress over time, “turn another card” (a new expression for me when I joined the VC business!), the happier they are.  In short, VCs are trained to embrace the passage of time.

And so there’s the conundrum:  what’s an entrepreneur to do in the context of a fundraising process when time is their enemy, but the VC’s friend?  One piece of advice is to simply recognize this difference in this attitude towards time and try not to fight against it. One wizened general partner at a top firm once remarked to me about a particular deal:  “They told me I had to make a decision in the next few days, so I told them I’d save them a few days and simply pass.  It’s VC 101 – anytime an entrepreneur puts a gun to my head, I pass.  There’s always another deal.”  If you can create a sense of urgency in the fundraising process, you’re running an unusually charmed process.  More typically, you can expect to run a fundraising process where you simply have to give VCs the time they need to “soak in” the deal, live with it for a few months and then, at the right moment, try to call their interest to question.  Rushing the process only gets the VC alarm bells ringing.  For the entrepreneur, this start-up is their life’s work and on their mind every moment of every day.  For the VC, there’s always another deal.

8 thoughts on “A Wrinkle In Time

  1. Ooops … on my last post, I forgot to put my “take-away” or conclusion.
    Being an entrepreneur, I know I’m extremely paranoid and passionate about my startup idea … I am considering whether I should keep those feelings to myself and eventually to my team … and when dealing with VCs, give them breathing room to reach their conclusions on their own.
    No more pressuring VCs about time (or at least wondering things aloud over email).

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  2. Very interesting post.
    Whether (as an entrepreneur) I’m bothered by Jeff’s blog-post about “time” is irrelevant — for the record, I am very bothered by it, especially since it comes from an early-stage VC — but if that is the prevailing mindset of VCs, then I’ll have to learn to market to that mindset.
    I am at the beginning of my fundraising process and had 2 VCs start out with lots of interest and then fizzle out. I was very confused initially. It was almost like having a wonderful conversation with a woman in a bar, getting her phone number, and then never hearing back from her.
    The first VC ran a $500M fund but managed a small angel network in his spare time. He asked lots of great questions over email (it was obvious to me he had done his homework after our initial meeting). But after the 5th or 6th email, I asked him why we were not meeting in-person to discuss. I wondered aloud (at least over email) whether he might be stealing my business idea. As you can probably guess, I never heard back from him. And I learned to take the paraniod-edge off for future pitches.
    The 2nd VC runs a smaller fund, and started out as an angel investor. Incredible track record as an angel. But in my pitch, he kept trying to pass me off (through an introduction) to a much larger, better-known VC. I wondered aloud (again over email) whether his firm wasn’t interested and why he was passing me around. Embarassingly, I found out later from his partner that their fund was fully-invested … but he thought enough of my idea to continue to help. I felt like such a schmuck. To their credit, and luckily for me, I’m still in touch with those guys.
    Good blog posts so far. I’ll keep reading.

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  3. Jeff Bussgang wrote: “For the VC, there’s always another deal.”
    Jeff, this makes it sound as if VCs view startups as commodities, one indistinguishable from the next.
    Perhaps I am foolish to be so optimistic, but I would hope that the ability to differentiate between opportunities would be a core competency of a VC.

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  4. Hi Jeff,
    As an entrepreneur with some fundraising experience I agree on the different perspectives on time although I want to present a dilema that always arises. If a startup is very sexy (Really on the right track and not just showing off to create illusionary pressure) then someone else will make the decision faster then you.
    It is debateable whether it is a good decision or not for the deciding VC since it can be thanks to better acquaintence with the opportunity or other factors, but still it is a lost opportunity for you.
    I wondered how do reconcile between these two conflicting scenarios that can both in the same time.
    Dudu

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  5. It’s VC 101, but isn’t that a bit of a cliche ? Yes, you can always wait for the sales numbers of the next quarter to validate your investment theory, but in my modest experience, if you need yet another data point, you might as well pass.
    I have seen Tier 1 funds go through the whole investment decision cycle in just a few weeks, and pruning deals very quickly. Saves them time, and yours as well.
    That’s why, as you suggest, you want to socialize a deal before you hit the street for your fund raising, so that they have had time to get familiar with it.
    For me, the biggest change was actually to move from “I execute” to “I am going to support and monitor”. Projecting yourself as a component of the deal, as a “member” of the execution team, is 1) ludicrous – you don’t have time an it is not your job, and 2) a sure way of screwing up. Whatever you do as a VC board member, advisor, mentor, etc. is certainly useful but you have to invest in the team as though they were going to run the company solo.

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