It's About Marriages, not One-night Stands

by Paul Jozefak

Fred Destin had some good advice at theGeek'N' Rolla event yesterday in the UK and I recommend reading if you're an entrepreneur going for VC backing. I can most concur on the follow-up part of his advice. European entrepreneurs simply do not follow-up enough and forget that they are in a sales position when trying to raise capital. But that's Fred's argument. 

He made one point though which kind of stuck with me:

When I meet a company, within 3 minutes you know whether you like them, within 5 minutes you know wehther you want to fund them. In other words, I will have an urge to give you money. But because I’m a good VC, I’ll rationalise this urge asking questions that I know I’ll need when I’m selling the business to my partners.

I disagree about the 3 minute and 5 minute rule. I've been at this too long to make such quick judgements.  I wholeheartedly agree that you have to build a relationship with me when seeking money but you aren't going to get me on board in 5 minutes. I too often have the feeling that when people approach me at events or in a pitch that they are trying to get me hooked too fast. I wish I could say I've never been burned before and every investment was a pleasant experience but that is not reality. Hence, my bullshit filter is set to it's highest level in the first five minutes. There are simply too many people able to offer a slick presentation with every trick in the book to hook you initially. Then there isn't follow-up and real business to solidify the pitch. This is where I take a different approach than Fred.

I want you to get me excited about what you are doing in the first 5 minutes but I also want you to stick at it. To refer back to my title, I want to know if I'd put a ring on your finger and I would never decide something like that purely on gut feel. I am building a relationship with you to initially get myself excited about the deal (dating), then get my partners on board (call em' "the folks") and finally to close the deal (marriage). This takes time and trust me, there isn't a baby on the way, so don't pressure me with a time incentive. Plus, I've had many bad deals (divorces) so you bet there will be a prenuptial agreement (shareholders' agreement). Yes, it will hurt to negotiate this but it'll keep us honest thereafter!