Raising money for my start-up has been one of the most challenging experiences of my entrepreneurial life. Not because there isn’t any money out there, and not even because pitching is difficult. The challenge lies in the nuances of hearing what a venture capitalist says—and then translating it to what she really means.
I call the language VCili (like Swahili, but more difficult to learn). It sounds something like this:
VC: “Love the team. Interesting product. I look forward to keeping in touch.”
Translation: “I don’t really get what you are doing, but if someone really popular invests in you, I’ll follow blindly.”
VC: “Interesting approach.”
Translation: “It’ll never work.”
VC: “How do you plan to make money?”
Translation: “If I put my money into this, it will be a never-ending sinkhole of investment, won’t it?”
VC: “I’ll bring this up at the partners meeting on Monday and let you know.”
Translation: “I may mention your start-up off the cuff when describing who I met with this week, but I’ll probably add a hand wave indicating you aren’t very interesting and we should move on to the next agenda item.”
When you first hear any of these lines, you might take them as a positive sign. But the truth is—if someone is really interested, she wont feed you lines; she’ll want to get moving forward as soon as possible. VCs are human beings, and they’re as uncomfortable with handing out rejection as most people, so they will tell you what you want to hear as long as it gets you out the door.
That’s why the best meetings I’ve had are the ones where the investor was brazenly critical of my ideas—I could address the VC’s concerns, leave knowing exactly where I stood, and learn a thing or two. (Our current lead investor is one of those, and I find it incredibly refreshing.)
But, of course, most aren’t like that. So how do you get through the minefield of VCili and get to the truth?
Just ask. When you hear a phrase that sounds hopeful but less than genuine, or the VC seems interested but doesn’t bite, you need to lean forward and ask her why.
For instance, when she utters “interesting approach,” ask, “what do you find interesting about this approach?” When she mentions bringing it up at the partners meeting, ask what’s preventing her from calling her partners in to see you right now. She’ll appreciate you candor. You won’t always get a straight answer, but I guarantee—you’ll always be remembered.
I’m still trying to learn the language, but I’m getting better at figuring out where I’d been misinterpreting it. So don’t fall for the same pitfalls as I did—if things aren’t clear, ask for some interpretation.
Photo courtesy of SCA Svenska Cellulosa Aktiebolaget.
6 Comments on "Do You Speak VC? A Beginner’s Guide to Investors"
It’s not clear what the Swahili bit of your piece here is supposed to convey. Are you saying that statements often have deeper or double meanings perhaps? Or that Swahili is hard to learn perhaps?
asante,
ben hammou
Ben,
In the article, Swahili is a metaphor for “a very difficult” language to master.
In western culture, Swahili has the image of being a very different (from English) and very difficult language to learn. It even has hints of being an “exotic” language, that again makes it seem unapproachable.
In the article, Tara uses the term “VCili” to name the arcane language/speaking style used by many VCs. Tara IS saying VCili is hard to understand, because it’s often layered with double-meanings and “politeness” — techniques used to hide words of outright rejection.
Tara is not saying Swahili uses these techniques — only that VCili and Swahili are both difficult to understand.
Tara, this was a great article. I had been toying with ideas for monetizing my blog and making it into a business, and got a variety of responses like you detailed in this post, from merchant bankers, lawyers and the like. Now, I ended up being a journalist while my life is crazy… but maybe one day will get back to that ol’ monetizing stuff. Thanks for sharing, and please be in touch, as a journalist I also cover this topic for huliq.com.
I work as a banker, and always preferred a more direct approach:- You’ve got a great business, but
1) it’s beyond our risk appetite;
2) not for us;
3) you’re in a market segment we have concerns about/are already fully exposed in
Once upon a time, I would give failed prospective customers very detailed explanations why we didn’t want to do a deal with them. And it takes quite a bit of work to put together such an explanation. I stopped basically because nobody read them; I just had a cranky alpha male (or female) on the phone demanding money and not overly interested in why I wouldn’t give it. And because logic wasn’t the barometer, but ‘selling’ a no to a cranky executive was, a much lower work and less reasonable approach becomes necessary.
So the first step in cultivating a meaningful relationship with a financier is to be professional and try to act like you want them to invest in you and your business. Even better if they feel they can have an intelligent discussion with you. But also be a bit pushy. Reasonable and pushy.
I think you can get your VC to open up, potentially some of their concerns can be allayed and you can make a deal (and possibly also impress them by acting like a professional manager). But also remember that your baby might also have completely unfixable birth defects that make it permanently unattractive to a financier.
One final thing to keep in mind is that sometimes financiers seem like Dr No. But remember they have a bias to want to do deals – nobody gets bonus by not funding. As the article says, get them to tell you what they don’t like and try to address it. It might not be a worthwhile use of their time to fix the deal up, but you can use their input to make it work.
Justin, your kind of investor is needed more often than ever in today’s market. Please don’t stop with the detailed analysis of rejection, just ask them if they want it or not. I think the ones that ask for it might also be the ones you might reconsider in the future, especially if they justify their position opposite yours, or follow your advice. Just don’t pout about people not listening.
I just started up a investment company (RE), and i know eventually i’ll need some help from a VC. So thanks for that info it was helpful.