10 Reasons Not to Listen to Venture Capitalists

This article was originally published in BostInno here.

Recently, while mentoring at Harvard Business School (HBS) in their Startup Bootcamp series, we heard a number of students praising investors’ quick pattern recognition and counsel, quoting those of us who were there as though we had the answers. The truth is, we don’t. We aren’t the marketplace, try as we might to represent the market, we aren’t your customer. It can be easy to forget, especially when we bring capital. But any funding we give you is a mirage. It’s only the fuel to contribute to the bigger picture: finding your customers and providing a solution for them.

Even when we give you operating input, it’s just that, input, not gospel. At most, we can glean best practice from the great entrepreneurs we invest in and share it. But even then every situation is unique.

That being said, here are 10 reasons not to listen to us and continue on innovating:

1. Venture capitalists are not your customer.
2. VC money is not success – the only money that really matters is the customer’s who are paying for your products and services.
3. The more money VCs invest, the greater the potential distraction from what really matters – creating and realizing value in your market.
4. Even if VCs were once successful operators, we are no longer current. We have become investors. Ask our LPs if you don’t know why that’s very different.
5. Observing is very different from doing – VCs can empathize at best – and must always respect a founder’s commitment, execution, and vision.
6. VCs who take control of your business are not investors in you. They are ____ (you decide)
7. We are “Doctors in the no.” We say no 99.9 percent of the time. If we’re not careful, it makes us unconsciously biased to look for the downside instead of imagining the upside. “Shoot for the moon and even if you miss you’ll end up in the stars”.
8. VCs tend to look for patterns that reinforce their conviction but the best investments are often the opposite – they are breakouts that change the game and look nothing like anything seen before.
9. VCs are wrong about 75 percent of the time. Boston VCs missed Facebook. More recently, hundreds of VCs turned down Peloton; and there are countless other stories like this over the years, from Cisco to eBay.
10. When you start a company, you bet your one and only life. We invest in a portfolio for diversity.

What have we missed? Please tell us in the comments below.

Many of these points are nuanced when you dig in and build a business from inception to IPO. For example, so much of it comes down to the quality of people on your team executing. And that’s the point. VCs don’t live the business, executing the way you do. We have a role to play in recruiting, supporting the team, and removing roadblocks or highlighting new potential paths. But don’t listen to us if we’re getting in the way of you running the plays.

It’s your business and anything we offer is just input.

That’s our first and foremost principle at Underscore VC. We are very aware of all the points above and specifically listening and learning to work to do things differently to set entrepreneurs up for success. It’s the key reason we grew our Core Community of now hundreds of customers, partners, experts and current best practitioners organized by domain, function, and stage to help entrepreneurs get exposure to the personalized and current counsel for their particular challenge at each stage of growing their business.

We never forget that when we invest money, we can get it back. When you invest your life, you can’t. So don’t listen to us because we bring money. It’s a commodity, a mirage at best. Listen to your customers, your partners, your market.

Founders, you are our customers. Without you, we have no job. Share what you need with us on Twitter at @UnderscoreVC, and thank you for the opportunity to listen to you.

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At Underscore VC, Michael and his team partner with bold, brave entrepreneurs to build iconic companies from inception to market leaders. As a former entrepreneur turned VC, Michael has backed and built teams that have created billions of dollars of value focusing on large, market-changing technologies such as Blockchain, IoT and AI/ML as well as disruptive business models such as Open Source and SaaS. Representative investments include Acquia, Demandware, Mautic, Salsify and Zaius.

Follow Michael on LinkedIn, Twitter @mjskok, and in his Harvard Innovation Lab class, Startup Secrets. Follow Underscore VC on the web and Twitter @underscore.vc.