The best VC pitch tip that I stole

It’s been really fun keeping a blog again. I haven’t been writing since I sold my company to Salesforce.com. One of the things I’ve enjoyed the most is the conversation that it has created for me. More people have left comments on the blog, sent me Facebook notes or dropped me emails with either question, ideas for a post or challenging something that I’ve written.

The best comment that I’ve received was from my friend Jason Spievak, co-founder and CEO of RingRevenue whose company I invested in early this year. His comment was so obvious when I read it that I wish I had thought of it myself.

He said, “Given that most capital meetings don’t lead to a next step, I’ve found one great rule to be: never leave a meeting without getting a reference to another capital source. VCs will usually be willing to give you a name of someone else who might know your space better or otherwise be a better potential investor fit rather than just send you out the door with a “no thanks.””

So true. Most VCs want to help even if they don’t think the deal is a good fit for them. And we really don’t enjoy having to tell people “no” all the time (which is maybe why so many VC’s say, “we love your business — just come back and see us when you get some traction.” I call it the “soft” no.)

By the sheer law of numbers we have to say no to most of you. Consider this: I see in person or take web conferences for about 10 business minimum per week. Sometimes it is 15, sometimes it’s less. But that’s about 400–500 deals / year in one stage or another. (That excludes the many plans I receive that I deem not appropriate for a call or meeting). We’re 4 partners and we also have 2 associates and an analyst. As an office we see upwards of 1,000 deals / year. My math might be off a little because it’s late and I had a killer Tanqueray 10 martini tonight but we see a lot of deals.

So assuming that in a good year we fund 10 deals. That’s a 1% hit rate at best. So I like to tell people that by definition we have to turn down 99% of business that we see (a prominent entrepreneur who sold 2 businesses and then worked in VC for 8 years before quitting and going back to entrepreneurship said that he wanted to get out of VC because he got tired of turning people down all the time). So maybe that’s why there’s so many memes about how to best turn down entrepreneurs (see Fred Wilson and Brad Feld). It’s also why my philosophy is, “if most of the people that I see I’m going to need to turn down I might as well be nice to them. If I can’t fund them, at least I don’t want them to think I’m a dick also.”

So for many of the people that I see I try my best to give referrals where I can. If it’s not a good business I really do try hard to protect my friends and colleagues from having to sit through a time-wasting business. In that case the buck has to stop with me to tell the person that I’m not convinced about the company. But for many businesses it might be a matter of: stage too early, stage too late, wrong sector, wrong geography, too competitive to an existing investment, we have past “road kill” in a company that is similar in nature or frankly maybe I’m just working hard on 2 other deals and I don’t have the time or capacity to evaluate the deal. In any those cases I’m happy to give an intro and I usually try my best to offer (as I did with an interesting company I saw today called Ride Amigos that came in knowing they were too early stage for us but I feel confident will raise money from somebody else).

But as with most of life, most people don’t ask. You don’t ask, you don’t get. I always tell people who are in the job market that when you do an informational interview your goal isn’t to ask the person you’re meeting for a job, your goal is to ask for 3 more intros. In a way I think VC pitches are the same. Take Jason’s advice. In a VC meeting if you get the sense that the firm isn’t ready to move don’t be afraid to say, “if you don’t see us as a perfect fit for your firm do you have anybody else in town you think we’d be a better fit for?” And if your rapport is good (and it won’t always be) ask if they’d mind intro’ing you.

Thanks for the tip, Jason.