But I think it's hard to think well about the role VCs play. I know I've fucked it up before!
So here are my war stories and takeaways.
The first story is the longer one. There was a VC; call them G. We were in talks with G for a while about investing into Alameda.
In many ways the talks were good!
So the talks went on for a few months, and finally got to terms.
They did not react well to us saying no, and we were surprised. Like, of course we said no! They only bid 1/3 of our offer.
So we thought the deal was dead, and they didn't for some reason.
That line of reasoning did not seem to move them.
But anyway they maintained it would happen.
When dinner time arrived, it became clear they weren't going to the dinner--they had just booked us a table. Also we were paying. Also 2/3 of us were veggie.
Hyping up the restaurant was a really weird flex!
And so much seemed like that--a thin veneer of first-class living surrounding a business proposition that didn't really make sense.
A few months later they came back, ready to buy their seed allocation of FTT after it was 10x higher. We said no.
So, there are two very different types of Bad VC Experiences.
Well, why do they exist anyway? Let's start there.
I've been on both sides of this now a few times, and have started to get a sense of it.
As far as I can tell there are basically 6 reasons VCs exist.
The Second, and maybe most common, is that they can buy low and sell high. Ideally, Very Low and then Very High, separated by Very Little Time.
They're not floating capital for a while, they're not promoting it--they're just making money the project could have made instead.
So far this doesn't look like a great advertisement for VCs. So far they either look like leaches, or really incompetent leaches.
Often people will have a great company but that company won't make money for 2 years--instead it'll spend money. So it needs money to survive until it makes money.
The only word of caution here--do you really need it?
They tell all their friends about your project, and all their portfolio companies, and give you connections and networks.
But Virtuous versions take projects they believe in, and teams they believe in. And when they go to their friends and companies and networks and promote the company, they're just telling their truth.
The Fifth VC is nearly indistinguishable from 1-4, sometimes. Everyone _says_ they're #5. But there are things you can do to tell.
Or grill them, and make them sell you on yourself.
Or watch what they say publicly, and see what they push. Do they push random crap? Or do you agree with what they promote?
If the Fifth VC really believes in you, though, they’ll give the _most_ money, because they think it’ll be worth it.
And networks are great _if_ they’re really utilized.
We’ve gotten surprising amounts of value from team #5. It pops up where you least expect it.
A Fifth VC can get you a foot in the door. It’s up to you to maximize that.
Finally there’s the Sixth VC, a variant on the Fifth. They’re similar except instead of giving their influence they give their advice.
And so is noticing when you’re about to make a large error in strategic direction and telling you.
Telling apart a Sixth VC from a Third VC can be hard, but it’s really important.
Ask whether it really is very positive sum.
And I’ve sometimes been really impressed, and felt great. Lean into that.
But you can tell when someone really genuinely believes in you: their thoughts and arguments flow freely and powerfully.
Find the partners you want.
1) if you need funding, raise
2) if you don't like a VC, don't raise from them
3) if you really click with a VC, they migth fight for you, and that's awesome
And to those unnamed who have worked behind the scenes to help get us to where we are.