@Dr. Smith…

Glad to know that an example that came to my mind is one given by stalwart like you …

you are right about the baby example as well…..

and I must thank you for the statistics on marriage and investment…. I thought the equation was heavily tilted to the investment side

@ walter ..

thanks for the insight .. you are right … these days even guys are going around dating 15 women at a time and if resources and law allowed they would marry 15 girls at a time …

you are right that the VC’s have to work with 100 proposals at a time but I would still say they should short-list and have a dating period… i think its good for both sides…

for VC firm of google one marriage was good enough…..

Praveen, I agree with your example quickly.

This is why I never accept the traditional VC model that gives you 15 minutes on the phone to pitch your investment. This analogy is not the best way to find a wife, nor is it the best way to find an investor. In my view the traditional courtship process is preferred where time and quality are take precedence.

However, I understand the VC is going to enter multiple relationships, and speed is the key. When you see 100 proposals a month to marry, you want to get through them as quick as possible since you know 90% of those marriages will fail, and the top 10% is what you know will make you money in the end.

Your example will not go over well with many who have a different view of how they “choose their mate” but I think yours is correct in my observation over the past 20 years. The only difference now is that they want 3-4 of their friends to join in the relationship so they don’t take all the risk when the marriage falls apart in the end…and the 15 minutes has been reduced to 10.

@ Walter

Of what I have read so far in the discussion I would subscribe to your point of view completely… the way i see it is … Investor and enterpreneur relationship is like a girl meeting a boy and falling in love at first sight, dating and getting married.

When an investor is looking around with both hands full of money he has an some set guidelines and criterion accordingly to which he would want to invest. However, in the subconscious he is fond of certain aspects of enterpreneurship (promoters attitude, product or service portfolio etc.) that he has not included in his guidelines or criterion. A first generation enterpreneur is someone who believes in his idea or product and risks not only his little money but more importantly his career and family’s well being. He absolutely loves it when someone listens to his arguments on why the business is going to be successful and endorses it.

So when a investor finds an enterpreneur who does’nt fit in his guideline but appeals to his subconscious he expresses his excitement which in turn excites the enterpreneur. It’s like love at first site .. sparks fly.. heart races and gets filled with emotions.

Then after initial exchange of emotions and liking each other they start dating and finding out more each other in detail. After a while you know if your first impression was right or wrong and whether the things are as rosy in details as they appeared on the first sight. If thats not the case you part your ways. However if it clicks you go ahead and make your pitch and pop the ring.

The whole city comes to your wedding, eats and drinks and goes back to home. You spend some quality time on honeymoon(where you fund based on emotions). However, the dating thing was just an assessment the reality starts off now. You politely tell each other about things you don’t like and see if they can be moderated or changed completely. Again some marriages hold and others don’t. Some hold for few months the others for some years and some last for decades or lifetime.

So the risk is always there and your have to assess it in percentage and see if it is still less that the appeal of the business plan or the operational plan later. You have to have deep understanding of each others perspective and respect for each other’s view and you make small corrections/adjustments here and there when you see your marriage is more important that these small things. However, one sided understanding and adjustments also don’t last long. It has to be both ways.

Doc.

Bingo. Hit the nail right at the forehead. Not much comments on the points – Your experience speaks in those. My couple of cents.

You briefly touched an nice aspect “don’t call us, we’ll call you”…

In my last 18 years, I have seen lots of entrepreneurs who do NOT understand this statement or fail to recognize this. I won’t blame them because if they don’t believe in being ‘investment grade’ then nobody will.

What I feel is, there are no mentoring sessions or discussions on how to understand these signals before loosing entire steam.

One more point which I feel does impact is the ability to verbalize the concept. I have seen people having really nice ideas which had a lot potential to be in ‘investment grade’ but were not able to express / communicate / verbalize the same in front of prospective clients / investors / media, causing delayed realization of value.

Thanks for a wonderful series.

An investor who objects to pay for experienced management – including a founder – in the Use of Proceeds is displaying more interest in a loan to own deal than investing in a team. I have found that most successful VC’s would rather back the A guy with a B idea, rather than the opposite. Entrepreneurs should be hungry, not starving, and their interests should be both transparent and mutually aligned to their investors.

Every situation is different…BUT…some founders (and most investors also) want their cake and to eat it too. In other words, they try to get equity for their “sweat” plus a good pay package on top of that. In general the investor will think these two are see-saw factors that the more of one the less of the other.

This is just a general comment to the initial post. Investors understand that founders need to make a living wage, now this doesn’t mean go out an buy a new Jaguar or pay off the mortgage, which some greedy individuals do. There is a tremendous amount of stress on new entrepreneurs, this doesn’t need to be multiplied several times over by bill collectors calling to get the past due mortgage or car payment. Prudent investors know that initial growth and development of the venture is built by a very focused founder; so a living wage is entirely within reason. If the idea is real and the potential is there, the big payday will come, and the founder(s) and investors know this.

For all, if you have money in the game and work 15hr days to make it work, you should get paid something. Ridiculous salaries are one thing but we all have bills, kids, and obligations. Entreprenuership is hard enough without being paid, we are working too and longer days than most.

An investor will appreciate all efforts by all, incuding founders.

Chris