The value-added investor lie

Scott Maxwell has a nice post on how companies should go about selecting their VC firm.  He makes some excellent points on what to do when you have luxury of selecting the VC firm that is right for you.  To read and listen to the VC firms, the money you get from them is secondary to the VALUE-ADD they provide.  The reality is, most founders just want their money.

I am not a founder who can pick the phone up to the Top Tier firms and have them bang down my door with their term sheets.  If you are one of those people, or you are a founder and can attach your star to one of them, count your lucky stars.  Every round of money I have raised I have been focused on raising the money so I could build my business.  The decision was not about who could provide the most value-add, it was who was willing to write the check first.  I have ended up stumbling into situations where multiple options became available, but even then it became about the amounts and terms attached to the money that ultimately drove the decision-making process.  The fact is, I've gotten really lucky finding investors in some cases who really did add a bunch of value after the fact, and ended up with pure money and no value from other investors, but not once has that been how they were chosen.

I have a bunch of friends who are founders of other companies, and it seems like this is the norm, not the exception. 

So pay attention to what Scott said, because that is exactly what you need to do to convince a VC that you are interested in the value-add they can provide.  You need to carefully cultivate the perception that you are a hot commodity and that you can afford to take your time and be choosy, because that is the story that investors want to hear.  I didn't ask for this to be the game, I'm just learning this is how it is played.

So don't think there is something wrong with you if the reality of your existence is you just want their money and it is very important to you that you get their money.  Ultimately, investors are smart folks and they know that is true even when it is best left unsaid.

Comments

[MD]

I would like to know your advice on this.

How much value an angel or VC would pay to the 'Board of advisors' in start up? Now,
We have couple of potential investors (angel)talking to us. And many of them suggest us to take them as Advisors who would have a very fractional stake and an annual compensation. In return , they bring expertise, network and will help us closing the funding sooner. They themselves may or may not invest.

I precisely, want to know, does this help? Is this a norm in Silicon valley. Or my model is valued purely on it's merit. (We are an Indian start up)

And yes, I am keen to get the money faster to build my business.

[Mohit dubey]

Hi,
Where r u? No posts!

[Mjugotbj]

It's serious l a county fair tickets %OOO