Grumpy old men
Article Date: Apr 01 2004Seen it all before, understand all the problems, watched manifold disasters unravel in the past… does this remind you of anyone? Veteran venture capitalists.
I always remember going to the Holy Grail of the US venture capital industry Sandhill Road, Palo Alto in California – in early 1999.
I had travelled 6,000 miles for one key meeting with a US venture capitalist who had said he wanted to invest in our new fund.
The meeting was a complete disaster, although I did manage to salvage some pride on the tennis court later! Firstly, I really hadn't qualified them enough; in my enthusiasm I confused their good manners for real intent. In reality they had never invested in companies more than 30 miles from their office and probably never will. Secondly, but probably more importantly, it was a Friday afternoon and everyone wanted to go home – they were fed up with the meeting. But it brought home to me what it is like to be on the receiving end of what I now call ‘the grumpy old man’ syndrome.
By this I mean those venture capitalists that have seen too many companies. As hardened veterans they need careful handling… after all, they have the money and, despite your better instincts, if you need it, you have got to get their attention.
So this set me thinking about the things that really annoy me as a VC. Being inherently a nice chap, you will understand my list is so short that I had to engage some help; in this case a Yorkshire contemporary of mine, Barry Anysz of Capital for Companies. So here is our list of pet hates:
Business plans that come directly from the companies
By this I mean the plans arrive from companies that have had no third party advice from external advisers. At first sight it may appear rather strange that this could be a problem, but unless you are particularly skilled there is a real art in providing ‘just enough information but no more’ to keep your reader interested. And in case you do not think this is important, remember that 90 per cent of all business plans do not even get to the first meeting stage.
Having an adviser costs money (for both the company and, for that matter, the VC) but in the end it is invariably worth it. Let’s face it, we all save ourselves a lot of time if you, the company, know from the start what you are in for with us greedy VCs. Equally, a good adviser will help target the correct VC for you to go to. For example, there is no sense talking to a late-stage investor when you are an early-stage company and vice versa. Then there are also people that specialise in certain sectors and once again you need to know who they are.
Spreadsheets that one can’t read because they are so small
Just how good one’s eyesight is depends quite a lot on age, so don’t make matters worse by giving us tiny numbers on spreadsheets. It’s one sure way of making us fed up from the word go.
Assuming that we understand your business!
Now this is quite an admission from a VC! The reality is that in many cases we do understand your business but too many acronyms and particularly abbreviated terms in a business plan make it very difficult to read and can lead to venture capitalists switching off.
Product demonstrations
I must admit that this is somewhat contentious but it is a real pet hate of mine. Yet the number of times this mortally offends people still astounds me. At a first meeting I am just not interested in product demonstrations because they take up too much time and are only really relevant when one knows a lot more about the market. If the management team wants to spend too much time demonstrating the company’s products it also makes me concerned that the team is too product-orientated rather than market-driven. And that’s another of my pet hates!
Long boring presentations
How can I say this? I understand (I truly do) how important your business is to you. At the same time, a good salesman should be able to judge his audience and long presentations really are a no-no. Firstly, make sure you have a good ‘elevator test’, that is, if you cannot describe what your business does in the time it takes to go two floors in an elevator, you have failed! Secondly, make sure that you are prepared to change your pitch depending on your audience.
For example, some people will really understand your business model, so dwelling on its strengths in great length is not only irritating, it’s insulting to boot. Last but not least, make sure you leave enough time for questions. After all, this is the time you get to know what the VC really thinks of you and your business.
Don’t go off half-cocked
By this I mean don’t come with only half the team. This probably means that the rest of the team are presenting to someone else – red rag to a bull to most VCs. Although this was probably a reasonable tactic at the height of the internet boom, it’s not so sensible today. And more importantly, it is a massive waste of time as it almost always leads to an unnecessary second meeting.
So there you have it
Oh, and I nearly forgot; there is one last thing which also drives me mad and that is plain bad manners. Leaving my meeting room a complete mess, bad eating habits, briefcases scratching my best boardroom table…now I am really becoming a grumpy old man!
Michael Jackson is chairman of Elderstreet Investments, the leading technology venture capitalist which he founded in 1990. He is also chairman of Sage, the FTSE-100 accounting software group which he has been closely involved with for the last 20 years, since its unquoted days. Michael is an entrepreneur and legendary investor in his own right.
