I finished reading Jeff Bussgang's book Mastering the VC Game last week. It’s a great, quick read that anyone starting out in tech/startups/VC should read (especially founders planning to raise money).
Lots of rookie founders subscribe to a diet of self-education through blogs/books (often about fundraising because it’s foreign as first-timers). I sometimes refer other newbies to my Entrepreneur’s Reading List including classics like Getting Real, inspirational works like The Monk and The Riddle, and prolific bloggers like Fred Wilson, Brad Feld and Mark Suster.
I’ll admit though, some of it turns into an echo chamber. "start building something, get traction, iterate on feedback, raise capital only if necessary, work hard, innovate…" etc. I’m not putting all this advice down, but Bussgang’s book touched on something new for me.
…the most essential element in the relationship between the entrepreneur and the VC boils down to one word. Chemistry.
Bussgang advocates developing a great, communicative foundation between entrepreneur and VC in order to have a successful business. By communicating early and often to develop chemistry, they can work together more harmoniously than stereotypical ‘vulture capitalists’ are known for. Furthermore, Bussgang notes that entrepreneurs cannot simply look at a VC like an ATM with a hefty fee.
I generally try to be very terse in any communication with VC’s. They’re busy guys so it’s tough to break through the noise. Likewise in any pitch I’ve had - I cut right to the chase. But in hindsight, this is too transactional. The best VC’s want to get to know the entrepreneurs and figure out how they can really help build a great business.
…and thinking back on it, the best meetings I’ve had are when I’ve ditched the deck and been the most candid about who I am and what makes me (and my team) tick. And when the VC’s open up the same way, we can really see eye to eye and start to work together.
A lot of entrepreneurs bemoan pitching investors, but I’ve learned to love it. These guys have tons of experience and I’m excited to learn from them and work more closely together to build a great business.
There’s a ton more good advice in the book. Go read it.