I’m doing a lot more work with London startups, and a common question is "How to spot a good VC?"
The answer is that a good VC knows how to says “No”.
Let me explain…
The European tech scene is hotting up, with London very much at the epicentre. Super exciting times. US king pin @pmarca proposes “the historian will detect in the decade of 2010-2020 a period of tremendous significance”.
The number of VC’s is also growing, but quality is variable. With very few exit-hardened tech entrepreneurs, their ranks largely comprise former execs from the corporate, M&A and finance worlds.
The problem here is that at first glance the new school of Euro VC’s appear tooled-up because, for a finance guy, raising a a large fund is easy. But mostly they have no clue. No mental model of what success looks like. No idea about partnership based on capability, respect and good times. No idea of what it takes to craft and nurture a new idea to a successful exit. No decent invest themes beyond “mobile, social and data”. No model of what authentic rock star founders look like because they’ve inhabited worlds of drones.
Instead of being able to respond to a pitch with a clear “Yes” or “No” they fumble forwards. Going through the motions of burdensome requests for plans and projections. All the time burning the start-ups precious runway and frantically trying to understand what the hell they’re looking at, and what they should do.
A good VC knows how to says “No” because they have the experience, have done their background research, they know the themes they want to invest in, and because they want to build a high-quality low-volume portfolio.
So, in short:
- A good VC meets 300 prospects a year and backs 3
- A good VC is fresh because they are calm, polite and in control
- A good VC comes back with an answer quickly, and why
- A good VC keeps a manageable sized portfolio
Good luck out there.
Image - The loved Australian statesman Alfred Deakin famously said “No” to a knighthood in 1887 because he knew Australia would be a republic