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.