Why vcs lie

VCs should seek feedback from entrepreneurs too. If you pitch me or know me, please give me feedback! Check egos. It's easy to get defensive If your presentation doesn't include measures to address that assumed, pre-programmed credibility gap, which often means just talking about things in a way that demonstrates you know what you are talking about and actually can navigate around Android, then you likely don't yet have the realism or the drive necessary to make something go.

Perhaps not the most well-considered illustration, but I think we can get the OP's point without throwing a politically correct hissy-fit. What a load of crap. A 50 year old today could easily have been a 20 year old AI programmer in , and he probably knows more about technology than the rest of us put together. Computers aren't actually that new, ya know, and are not the exclusive domain of the GenY kids.

There are folks around who have been programming longer than most HN readers have been alive. In fact, I work with some of them, and I respect them greatly. I believe this belief is rather common. However, an older person who may be founding a "social, local, mobile" startup because he's looking for a career change is going to have a credibility gap because of the general impression that older people are not technically minded.

If the pitcher doesn't have a strong compsci background or history to counteract that notion, he'll have to make up for it in the presentation. We are all free to pontificate on whether this is a fair generalization or not, but I think it is clearly that it is commonly held and something an older founder will have to face and address if he wants to succeed. Now if you had J. Would it matter if J. Random 25 year old tobacco company accountant showed up and said "I'm founding The Next Instagram?

Probably, but I wouldn't want to be in the business of helping perpetuate this kind of ageism. Ageism is just as inappropriate as sexism or racism. The tech industry seems to be going through growing pains with respect to sexism, but ageism is apparently still widely acceptable. At some point in life it becomes hard to do something you have not done before. You can get better at what you are already doing e. Going from 20bn to 40bn like Warren Buffett after 60 , but it's harder to go from 0 to 1m, since this involves new stuff, a qualitative change.

As I said, I read that line as an illustration of an obvious incongruity between the company the founder is trying to pitch and the perception of the background and qualifications of the founder. As such, the founder will need to recognize that he needs to establish credibility with the audience before he can successfully sell them on his ultra-hip location-aware social tweeter app.

Generalizations and stereotypes are a reality that founders must shape to their advantage. I think this is ultimately true. Whether the bias is justified or not, the best founders will be aware of it and work to make up for it. The same could be said for bias against women in technology, for example. That being said, I still believe this bias is wrong, and am concerned that this VC so publicly shared it, because to me, his publicly sharing it indicates that he's not even aware there's anything wrong with it.

I do not believe a 50 year-old should have to work any harder than a 24 year-old in proving that they have what it takes to run a social startup. What does it tell you? I am trying to understand what you mean. Do you believe every person the author met over the age of 50 is in fact capable of building compelling social products, and that the author has misjudged them? To the author: I'd definitely want the blunt, unvarnished and harsh truth. No joke! The only way to get better is to get the truthful opinion of people that matter.

The problem with the standard "the truthful opinion of people that matter" is that if you don't like what you hear, you might just reclassify the speaker into the "people that don't matter" group. Even the statement of your enthusiasm for the unvarnished truth is a veiled threat For this comment, all down-votes will be considered up-votes I've done that before - and it is one of the things I most regret.

I ended a friendship because of that kind of mistake and swore to myself I'd never do that again. After all, if I do that I'm exactly the kind of person I despise. How can I seek to improve myself if I won't listen when I might get butt-hurt from the words I hear? I'm not sure how you figure that. It is actual enthusiasm, don't confuse it. Markets are not efficient which is another way of saying that information asymmetry exists. Successful financiers would prefer to keep it that way.

What would be a rational reason for divulging why you turned down a potential opportunity? You can't really formulate one. Also, this doesn't have anything to do with VC's per se. Why VCs judge people: 1. My company made it to the final round for a program and the end feedback was they didn't think we could deliver on what we were building. At first, I took it as le insult. An insult against my mad pr0grammer skills. In hindsight, I look at it as: my technology may have been OK, but it wasn't astounding enough to qualify as a revolution in the area and lead a big stampede to my door.

It was a harder problem area NLP. Something simpler with the same amount of persistence and execution may have led to much greater results. In hindsight I appreciate the honesty. They saw it before I did. The challenge is, people aren't ready to hear certain things until they're ready to hear it. So are you saying you would rather have not heard the honest, but negative feedback at all? It sounds like in hindsight you are grateful for the honesty.

Would n-years of lying have helped you any more? Would you have the insight you have now if you were simply lied to and told "great team - show me more traction", when they really think "gosh, what a sucky team"? Monotoko on June 13, prev next [—]. The people who don't have what it takes will either give up and go onto something else, or cause them to plug the leaks and turn the startup into a successful venture. I saw that some comments pick-up on VCs being adamant on founder's nervousness and such.

Probably, OP should have mentioned different pointers, but still I think that such comments are missing an important point of this post by Josh - honest feedback almost never works. So what do you do when you know that honest feedback will not work? Are you going to hit a brick wall with your head? You can like such people, value them, but if you feel that they can not accept your honest feedback, you don't give it.

While I totally understand the human nature behind it, I find it a shame that more investors don't offer personal criticism with their rejections.

It's a great way for startup founders to grow their skills, at least when it comes to pitching to investors. In order to believe that "we need to see more traction" is a lie, you have to believe that you are able to identify "good teams" with certainty.

That is what ticks people off about VC's. Most people should not be told just to give up completely. I'm not sure why the OP wants to focus on "you just don't have what it takes to run a company" instead of "your presentation skills were lacking, rehearse more", or something like that.

For many entrepreneurs, the offense is not in "x needs improvement", but "We believe you are too stupid to improve on x". Even if you believe that, why not just say "x needs improvement" and then wait to see if they really are too stupid to improve on x or not?

Why does everything the VC thinks, including have to be shared? There is nothing productive about "you're incapable, just give up" or "you're incapable, go deal with someone who gives people less money first and see if that gives you some capability".

These are all deflections of the real problem. Why not try "We were concerned that you appeared nervous when asked how your site would handle potential copyright issues" instead of "you just can't do it"? For some people, hard as it is to take, this is exactly the right advice. Some people simply aren't cut out for what they're trying to do, and changing tack sooner rather than later is the optimal course of action. Any advice which precipitates that decision is therefore good advice, no matter how hurtful it might be to receive.

Some people may need to put in a lot of work at something to become competent, but I don't believe that wholesale just some people can never succeed at something as generic as entrepreneurship unless there is a physical or mental disability or some really exceptional background involved.

Most normal people really can become successful entrepreneurs if they try hard enough. As the OP said, just saying, "You'll never make it, just give up" is very unlikely to yield positive results.

So even if you think the founder really will never make it, why is that an important criticism to share? They may surprise you if you actually provide helpful criticism on action points where real progress can occur. If you actually are capable, and someone says otherwise, you will ignore them. Good Subscriber Account active since Shortcuts. Account icon An icon in the shape of a person's head and shoulders.

It often indicates a user profile. Log out. US Markets Loading H M S In the news. Tech Contributors. William Hsu , MuckerLab. Like with company stage, VCs have round sizes in which they prefer to participate.

Many VCs are conscious of ownership and seek to buy a certain percentage of a company when they invest. But as with stage too early or too late , VCs will sometimes make exceptions to their model to have a small ownership percentage of a company that they think has huge potential. One of the benefits of a partnership is absorbing the fall for each other in situations like these.

If you want a tech VC to back you, the tech should exist or come from you in the future. If you get too specific with the similarities, though, you risk the VC telling you that your company is competitive with one of their existing investments. But a mobile gaming company in general may be a good fit. VCs will ask to see your cap table, especially as they get more serious about the investment. Ask someone you trust to be straightforward with you about your pitch deck. The same goes for spelling, grammar, and legibility: be precise and clear.

Communication matters. Usually this means that the VCs think your valuation is too high. Depending on how much higher your desired valuation is than what the VC thinks is reasonable, you may also risk appearing overconfident and out of touch with reality. Some of the most contentious areas include classes of stock, pro rata rights, liquidation preferences, founder vesting, the board makeup, employee stock options, drag along rights, information rights, and voting rights.

Strategic investors, those associated with corporations, can be especially problematic because they have more complicated incentives beyond just making a return on their investment. They might invest to get a view into a product that they want to build themselves, or to get more information about your company to see if they want to buy it later.

The way that founders run their fundraising process reflects a lot about them. Some firms do not lead investment rounds or only do in rare cases. You want the VC to invest in you, so you should invest the time in personalizing your email to them.

If you must do a cold pitch over email, at least make it rise above the crowd. Cold email pitches should:. Some VCs, usually pre-seed or micro VCs, will back startups that are nothing more than an idea. But having bad product to show is also, well…bad. If you have a tech demo, make sure it works. Prepare for demoing on different devices and in different settings, from coffee shops to conference rooms. Exaggerating your product capabilities can come off as disingenuous or naive.

Many founders, especially those who are highly technical or academic, seem to think that securing patents is important to VCs.