Angels & VCs

Yesterday I attended a panel of a couple of Pheonix venture capitalists and one angel investor. I learned a few things and made a few observations. (Disclaimer: these are my thoughts based ona panel of THREE people; take it with a grain of salt!)

• VCs and angels are arrogant people; you have to stroke them. When the panel was asked about some of the mistakes people make, one of their examples was how much they hate it when someone says, "That's a good question." You may as well tell them their office smells like rhino pee. Apparently VCs know when they've asked a good question, and they don't need you to tell them. Another example comes in the form of a story about a former CFO of Intel that is now a VC in Silicon Valley. When an idea presenter began his presentation by saying, "I don't know if you know anything about international finance..." the former CFO closed his book and walked out. That presenter overestimated the importance of his idea and underestimated the importance of stroking the investor’s arrogance. The VC may have walked out on a billion dollar idea, but at least he proved his point. Now all this doesn't mean that VCOs and angels aren't nice; in fact, they were very personably. I just think it would be hard to be an investor and NOT be arrogant. They hold a lot of power and reject a lot of people. The angel told us that his group has calculated the numbers and found that they fund about 5% of the ideas that they hear (and there are a LOT of ideas submitted that they never even hear). The VCs weren't as nice. They estimated that "for every 100 ideas we hear, we find 10 we like, and one we invest in." I guess those numbers are understandable when you consider the number of ideas that fail every day. If it were me, I wouldn't be throwing my money around either.

• I also learned a few tips to making the presentation:
• Be prepared to present without your AV (in case it doesn't work; "if you can't present it on a napkin, I don't have time to hear it")
• Don't EVER say there is no competition (if there's no competition, there's probably no profits)
• Don't tell the investor how much they will make and when (they'll answer that question for themselves)
• Don't tell them you plan on buying them out at a certain time (makes them skeptical)
• Don't be arrogant (that's their job)

• They mentioned the three ways people get into a VC position (according to them):

1. Get a low level position in a firm out of college (this is the LEAST likely to lead to success)
2. Work in an industry for several years and get industry specific experience then move into VC
3. Start a successful company or two of your own then move into VC

• And finally, what is the best way to get your idea heard? Know someone. It’s all about who you know.