My early stage startup has shown a lot of promise in a niche space, and it's attracted a partnership with a leading F500 company. I wonder if the VCs in this space I plan to approach for my Series A in one year would consider an endorsement today that I can use to expedite a seed round. Thoughts?
Disclaimer: Having spent over 18 years in Private Equity + having started/exited from 3 successful startups... I am 99% against current definition of VC.
Let me give you my experience with VCs and have you make your own decision.
One of the biggest VC events in the country, panel of 11 top VC firms...
Question asked "How do you select the companies you invest into? " Answer: "98% of our pipeline comes from people we've done significant/repeat business with, 1% comes from C-Level execs from our portfolio companies, 1% is thru pipeline generated by associates/and others - aka REGULAR Entrepreneurs"
Question: "If you have a venture in SF/Bay Area verses elsewhere, would you pay attention to economics/venture in your selection process?" Answer: "We have enough deals in SF area, we dont need to look anywhere else"
Question: "If you could invest into disruptive Tech vs proven model, what would you select? " Answer: "Proven model. We dont have time to be pioneers. Once someone else proves that model, there will be plenty of companies replicating, and there will be enough time for everyone to come in".
I dont know about you, but i am completely disgusted by it.
Not to mention, if you are "lucky" to attract VC they strip you blind.
Would you want to be monitored by VC for future investment?
PS... VC is for people that either very well connected or desperate. There is nothing in between. You have many more options to raise funding.
It's isn't about verbal commitment like it is said in football bet, they need put their 💰 where their mouth is.... If they really believably score you A, then they should have invested.....
Alex, this is the original poster. What you say sounds both disheartening but true. Would you be open to hearing more about my situation? If so, it'd be great if you can share your email. Thanks!
Odds are on that if they're giving you the A-pass they're not willing to endorse you at this point. Otherwise they'd invest themselves.
I hope someone answers... or perhaps more accurately, someone says this occasionally occurs.
MSB Equity Fund will endorse and finance Early Stage Start Ups
Endorsements don't work the way you think that they do.
There are basically three kinds of endorsements.
The first one, the "my credibility is on the line" endorsement, comes with money. The amount of work to get such an endorsement is a significant fraction of the work required for investment. This is a fairly high bar. Few, if any, VCs are going to go to the trouble and not make or arrange for an investment IF you pass muster. (Almost all large-fund VCs can make small or very-early investments, they just choose not to. Also, many have some mechanism for doing so, such as "scouts". In the very unlikely case that there's some real impediment to investing, they'll arrange for funding by another investor with whom they swap favors. Never take money from investors who don't have such relationships.) Moreover, few will even make the attempt if they think that it's unlikely that you'll pass muster.
The second one is "No" from the first. That's a huge negative with earlier stage investors.
The third is "throw the kid a bone". The VC didn't spend any time. That ranges from a large negative (the VC looked enough to decide that it wasn't worth looking at) to the VC just blew you off, which is a moderate negative.
FWIW, the second and third kind of endorsement are virtually indistinguishable to whomever hears the endorsement.
In other words, there are two possible outcomes. One, you get a useful endorsement AND enough money so you don't need the endorsement. Two, you get an "endorsement" that other investors view as a negative.