The other day I was chatting to a friend of mine (another VC of course). I said, 'I am really worried, how can it be that VCs are so much better at describing their narrative on 20VC than founders?' A trend I have observed over the last few months where the charisma and salesmanship of the VCs have sky rocketed and founders have remained the same.
Confused at this paradox, where one would expect the VC to be the introvert and the founder to be the charismatic salesman of their product. I asked my friend for his thoughts. He stated Harry you do not understand, 'we (VCs) are nothing more than salesmen!' This reminded me of a comment cited to me by one of my wisest mentors in the industry. He said, 'Harry if you want to be a great VC you need to do one of 2 things really well. You either need to bring in the best deals. Or you need to bring in the best LPs'. So how does this make VCs like salesman? 3 ways in particular.
Selling To LPs
A fund is nothing without it's LPs. VCs need to be able to provide a cohesive and strong narrative outlining the competitive differentiation of their thesis or stage. Just like founders, VC fundraisings can endure from anywhere between 1 week (Sequoia) to 36 months!
Selling To Partners (The Internal Sell)
Probably one of my biggest surprises on entering the world of VC was the need for 'the internal sell'. Coming from a world of angel investing where you can decide and offer a cheque within minutes. VCs have to go through a process of internally selling the company to their partners. Even if they have a conviction-driven approach to the investment decision-making process, they will still need to present the opportunity to their partners. This is one reason I disagree with people who say that 'if a VC wants you they will be in touch and fast'. This is not always true as one individual partner might be in love with you but has to narrate that vision and opportunity to his partners. A process that can take significant time to get consensus.
Selling To Founders (The External Sell)
The final piece of the puzzle, after LP commitments and your partnership in alignment, is the 'external sell', the sell to founders. Why should they take your money over all the other sources of capital? A question that has led to the rise of many differentiated models; operational value add, shared carry structures with founders etc. It is at this moment in the call or meeting when founders know the VC is interested. For founders reading mark this transition point in the conversation. When the VC stops asking you questions and starts telling you about their value add, competitive advantage etc. That is when you know they want you to pick them.
Ultimately for a venture fund to be successful, your partnership will need to consist of all three sales methods above. However, individuals do not need to have all of the above. Going back to my mentor earlier about the 2 things you need to do well, 'if you can bring in LP money', tick that box. If you can sell a company to your partnership and convince the best founders your money is greener than anyone else. Then you have the right combination. So to conclude, in isolation you can have 1 on its own or 2+3 together. At the end of the day it all goes back to what Brad Feld tells me, 'VC is simple, LPs give us a box of money, we need to make sure we give them a much bigger box than they gave us originally.'