This link has been bookmarked by 52 people . It was first bookmarked on 02 Mar 2006, by Christopher Hyams Hart.
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Do you think corporate finance attorneys are paid $400/hour to push out vanilla term sheets?
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venture capitalists want to invest in proven teams (eg., the founders of Cisco) with proven technology (eg., the basis of a Nobel Prize) in a proven market (eg., ecommerce).
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Marc CarlucciThis is an example of the kind of breakdown of communication between venture capitalists and entrepreneurs that causes much pain and frustration for entrepreneurs.
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The Top Ten Lies of Venture Capitalists
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“I liked your company, but my partners didn't.” In other words, “no.”
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“We like early-stage investing.”
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“We can open up doors for you at our client companies.” This is a double whammy of lie. First, a venture capitalist can't always open up doors at client companies. Frankly, he might be hated by the client company. The worst thing in the world may be a referral from him.
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If entrepreneurs insist on using a flavor of ice cream to describe term sheets, the only flavor that works is Rocky Road. This is why they need their own $400/hour attorney too--as opposed to Uncle Joe the divorce lawyer.
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“I have lots of bandwidth to dedicate to your company.” Maybe the venture capitalist is talking about the T3 line into his office, but he's not talking about his personal calendar because he's already on ten boards
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“If you get a lead, we will follow.” In other words, “no.” As the old Japanese say, “If your aunt had balls, she'd be your uncle.”
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Greed in this business translates to “If this is a good deal, I want it all.” What entrepreneurs want to hear is, “We want the whole round. We don't want any other investors.” Then it's the entrepreneur's job to convince them why other investors can make the pie bigger as opposed to re-configuring the slices.
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“Show us some traction, and we'll invest.” In other words, “no.” This lie translates to “I don't believe your story, but if you can prove it by achieving significant revenue, then you might convince me.
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“We're investing in your team.” This is an incomplete statement. While it's true that they are investing in the team, entrepreneurs are hearing, “We won't fire you--why would we fire you if we invested because of you?”
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BB BarrenAlas, entrepreneurs are also simple people: If they don't hear a conclusive “no,” they assume the answer is yes. This is an example of the kind of breakdown of communication between venture capitalists and entrepreneurs that causes much pain and frust
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06 Jan 06
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