There’s a lot of stuff that’s accidental about Fog Creek and Stack Exchange, but lunch is not one of them. Ten years ago Michael and I set out with the rather ambitious goal of making a great place to work. Eating together is a critical part of what it means to be human and what it means to have a humane workplace, and that’s been a part of our values from day one.
Yesterday, I spent some time talking to a founder in NYC. We’ve become friends over the last year or two. We decided not to invest in his company for reasons that I won’t get into on this post. But I’ve tried to be helpful because I like him.
He is in the process of raising a seed round. We were talking about possible investors that he should talk to and I shared with him my thoughts on who I thought were great and not so great.
I suggested a name of an investor that I really like and this founder said something like “he’s great. but, he knows who I am and what we are doing. if he was interested, he would call me, right?”
I understand this logic. It’s not a lot of fun to fund raise whether you are a hot company or one that is grinding it out. It takes time and getting a rejection ain’t easy. Also it’s more desirable to be wanted than to try to convince someone of something.
But if you like the investor, I would recommend staying close to them and give them the update on your progress, your plans and your vision. We have a few startups in our portfolio that we passed on (a few times) before we made our initial investment. Sometimes it’s the progress and sometimes it’s the sheer will and determination that gets us over our concern.
Don’t be shy. Make the call and get the meeting. The worst that can happen is they turn you down. That’s not awful either. Remember, you get to show them how wrong they were :)
Both parties need to recognize that no matter what happens, the utility functions of the VC and the entrepreneur simply do not match in an early-stage exit scenario. They just don’t. And this has to be ok. Because if it’s not, the chance for establishing healthy long-term relationships between VCs and entrepreneurs goes way, way down. Investing in an early-stage company isn’t merely investing in a product, technology or service, it is investing in a person (or people) and a relationship. Building companies is necessarily a people business. And approaching these relationships from the perspective that “life is a marathon; not a sprint” is, in my opinion, essential to building a healthy venture firm for the long haul, and will ultimately optimize long-term returns as well.
Excellent post & I couldn’t agree more. This happened recently to us at 5min. The investors thought the price was too low but ultimately the founders wanted to sell. So we sold and I’m thrilled for the founders. They treated us great and built an sweet company along the way. What else can you ask for.
So, when the press grabs onto to the meme of “founders are assholes” or ex-founders who didn’t stay with the companies over time whine about their co-founders or when people who didn’t really have any involvement with the creation of a company sue for material ownership in the company because of absurd legal claims, it annoys me. It cheapens the incredibly hard and lonely work of a founder, creates tons of noise and distraction, but more importantly becomes a distraction for first time entrepreneurs who end up getting tangled up in the noise rather than focusing on their hard problems of starting and building their own company.
Brad wrote a great post about a topic that has been stuck in my head for the last few weeks. And here’s what I wroteabout @Ev in the comments.