Working with VCs, part 1

I promised I’d look at the fundamental problem between hackers and VCs, and propose a solution.

Let’s take it one step at a time, starting with seed funding.

It’s interesting seeing what VCs look for:

First, the founding team must be smart, passionate and capable. Ideas are a dime a dozen, it’s execution that builds a successful company.

Everyday, businesses Powerpoint decks are being shopped around to VCs. Lots of business types are pretty slick, so it’s not easy for the investors to tell if you’re worth the risk.

The way they manage it is by spending time with you. They want to get to know you. I heard one VC talk about how he’ll “be your best friend” in the lead up to signing a term sheet. So if you like bowling and golf, there are plenty of VCs to hang out with.

Since it is faster to create a prototype and prove the existence of a market, all this hanging out is just unnecessary yak shaving. It slows you down and distracts you from the task at hand: building a great company.

The good news is that if you prove the existence of a market, angels and VCs will probably be much easier to find. Since the business is less risky, the terms will also be more favorable and you risk signing faster.