Always know more than the VC
Entrepreneurs need to know more about their industry than the VC they are meeting. I’m sure this sounds pretty obvious, but you might be surprised at the number of times I’m in a meeting and I somehow know more about the companies that have failed in a space than the entrepreneur who is pitching me an idea. It’s really bad when the idea is exactly the same business plan as a company that crashed a year or two before – and the CEO hasn’t heard of the company and can’t imagine how or why they might have failed. Or that I happen to know that a major player has recently launched a competitive product and the CEO doesn’t…
I’m not sure how this happens, since like most young VCs I don’t really know that much and I don’t consider myself particularly knowledgeable in most areas. Even if I spend 1/3 of my time in particular industry (the amount of time I can reasonably focus at any given time on an industry given my other responsibilities) an entrepreneur, spending 100% of their time on a space should know much, much more than me.
I guess there are two potential issues that could cause a venture capitalist to know more than an entrepreneur:
- The entrepreneur hasn’t done enough research or doesn’t know the space well enough. This leads to some pretty disappointing conversations.
- The venture capitalist doesn’t know as much as they think they do. This means you are dealing with a blow-hard VC… and if you think they know it all in a pitch, wait until they are on your board!
There is the possibility that the venture capitalist knows more than the entrepreneur because the VC used to be a good entrepreneur in that space. In this case, the entrepreneur should be very aware of the venture capitalist’s background before walking into the meeting. The entrepreneur really really needs to be able to articulate the market need, product value proposition and have good information on the market’s ability to pay.
If you find yourself in this situation, the only other advice that I could give if you are in this situation is to not seem defensive but to use the meeting as a learning exercise. If you seem like you are going to be a fast learner, and you hit the 3 points in the above paragraph, then you may still have a chance to convince that VC to take a serious look at your business.