The formulas, tricks and trade secrets of Private Equity

Both Sides of the Table

Sample Chapter

One of my favourite blogs at the moment is Mark Suster’s Both Sides of the Table (the title is a reference to him once being an entrepreneur and now being a VC). Mark put up a particularly interesting post today in which he recounts his experiences with VCs as an entrepreneur (the other side of the table).

Apart from persuading you to read Mark’s blog, I want to comment on a few points from his latest post.

  • Unprepared potential investors - I admit to being guilty of this myself; sometimes there’s a whirlwind in the office or at home or with an investee, and whomever I’m meeting with next gets the short end of the straw. But, don’t let that deter you. If anything, it makes it easier to impress me because I’m likely caught up in a shit-storm and pining for a few rays of sunshine. So, irrespective of the investor’s preparedness, entrepreneurs should stick to the points that matter. And, if I don’t know the basics of your product or technology, don’t worry, I’ll ask.
  • Arrogant potential investors – please don’t confuse unpreparedness with arrogance. Unless investors warn you at the start of the meeting that there’s an impending emergency that requires in-meeting phone use, then they absolutely shouldn’t be playing with their smartphones. Likewise, anything but full engagement is unacceptable and plain rude. The consolation to the entrepreneur in this situation is that they shouldn’t want to work with pricks anyway.
  • Unauthorized reference checks - one of Mark’s annoyances was when he specifically asked a VC not to contact a major customer, but the VC did it anyway. This is so not cool. Private equiteers (and VCs) may postulate that the avoidance of reference checks is due to something sinister, but anyone with an ounce of intelligence knows the damage they can do. You could be breeching confidentiality, you could stir competitive tension, and you could endanger current negotiations. (We all know not to drive the Bentley to negotiations, and well, the same goes for announcing an influx of millions of dollars.)

The happy ending to Mark’s recount is that the VC firm apologised and committed to changing its ways.

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