“Be Prepared” – It’s a Motto for More Than Just Boy Scouts

I am well aware that the stereotypical venture capitalist is portrayed as someone who barely pays attention to the entrepreneur’s business presentation, constantly checks his/her Blackberry/iPhone during the critical funding meeting, and appears to be more concerned about the weekend plan than the business plan being presented.

TheFunded is filled with critical commentary by entrepreneurs about venture capitalists and cite real life examples that reinforce this stereotype.

However, now that I have sat on the venture capital side of the table for 4 years, I can also attest to the fact that entrepreneurs can be culpable of equally egregious behavior.

When I accept a meeting with an entrepreneur, I realize this is highly valuable time that he/she could be spending doing something else – meeting with a customer, another vc, employees, etc. Consequently, I try to ensure I am properly prepared to engage by doing some homework on the company, the team, and the market prior to the meeting so I can ask relevant questions. At a minimum, I try to find out about the background of the CEO and if I have any connections to him/her through my network.

On the other side, you would think that an entrepreneur who is looking to me and other members of my firm to invest millions of dollars into his/her company would also invest some time in advance to know who he/she is meeting with and learn about our backgrounds. However, I have discovered this is more the exception than the rule.

To give you a real example, last week one of my business partners and I had a phone conference with the CEO and the management team of a “cloud-computing” company looking for a Series A investment. It didn’t go well.

First, the CEO called in late and his team didn’t know where he was or why he was late – turned out he was talking to a customer (which is great) but he should have at least let his team know that he was tied up and why – we could have started later. No problem.

Second, based upon the content of his presentation it was fairly clear to me he  had not reviewed my nor my partner’s backgrounds prior to the meeting and he certainly didn’t bother to inquire about our backgrounds during the meeting. He proceeded to waste valuable presentation time explaining to us how cloud computing works, how Salesforce had pre-empted Siebel with cloud computing, and then schooled us on IBM’s go to market strategy for cloud computing.

Had he done some minimal investigating prior to our phone call, he would have known my and my partner’s backgrounds (me with Siebel and his with 30 years at IBM) and he could have tailored his presentation — and would have had far more time to dicuss his specfic business.

Yes, I could have cut him off early and explained our backgrounds but I felt it was better to let him just go through his canned pitch and see where it took us. Unfortunately, it only got worse (e.g. the financial slide showed profit would eventually exceed revenues). The CEO was looking for me to invest $5M into his company and he didn’t show up on time, know something about the people he was presenting to, nor check his slides to make sure they were accurate.

At the end of the call, I sent him an email  telling him I was passing but I included a write up on the issues I saw with respect to his business plan and some things he might want to consider to make his presentation better for the next firm he presented to – so far, no reply whatsoever.

If this were just an isolated incident, I would just write it off  and wouldn’t have  bothered blogging about it. However, this type of interaction has unfortunately been more often the rule than not.

I am far from perfect but I try to at least be prepared for my meetings, engaged during them and provide a cogent response afterward – even if I elect not to invest. I have had entrepreneurs disagree with my conclusions and get angry with me when I tell them why I have chosen not to invest, but I feel it is important I continue to provide this feedback out of respect for the time the entrepreneur spends with me – even at the expense of getting skewered on TheFunded.

If you are an entrepreneur and you want a venture firm to consider investing $M’s in to your company, I would propose that you treat your meetings as enterprise sales calls – where you are trying to sell a multi-million $$ deal. You should know in advance who you are meeting with, their backgrounds, and the firm’s background so you can ask questions that will help you determine if there is a fit between your company and the partners/firm (e.g. relevant investing/operating background).

Venture capitalists, too, need to get their act together. We need to pay attention and provide relevant and timely feedback – even if we aren’t going to invest in your deal.

In the end, we are all in this “game” together – venture capitalists and entrepreneurs. In this especially difficult economic climate, both venture capitalists and entrepreneurs need to step up their collective game – be prepared – or there won’t be a game for either of us to play.