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Dial-for-dollar calls from some VC associates

This will likely get classified as a rant. So be it.

I love VC associates. I love VC Principals. I was myself one until not too long ago. I don’t believe VC firms need to be just partners. Associates do play an important role at VC firms, and for companies VCs end up investing in. Associates are not only good eyes and ears into the community (esp among younger founders & entrepreneurs) but they also provide a helpful outside-in perspective to VC firms. They also provide valuable day to day help to portfolio companies (e.g. in recruiting). In my experience VC associates who do well typically have a few characteristics:

- they are startup enthusiasts. In another life, another time, and perhaps in the future, they aspire to be entrepreneurs
- they work hard, not just long hours, but really spend their mental energies understanding core businesses, themes, spaces, business models
- they do their research in spaces they are looking into to sound genuinely ‘knowledgable’ and ‘thoughtful’ when they reach out to companies
- they know their limitations and are upfront about the intentions. i.e. ‘I want to learn enough so I can put this in front of a partner and see if there is interest at our end’

Recently as more VC firms have gone towards late-stage VC and growth equity investing, I have seen a rapid increase in the number of dial-for-dollar VC associates. These are not the same as the associates I describe above. I am ranting below to possibly help them get their dirty job done better, without wasting precious time of entrepreneurs they reach out to.

Such associates are typically hired fresh out of college with no real interest in startups per se. Don’t get me wrong, they are smart, driven, and work long hours. But they are the ‘finance-types’ who see VC and private equity through the same lens. Its all about ‘deals’ and working in VC is a job. They are managed not by partners but by other Principals etc, and are often on a budget to make x number of lead-generating calls per week (number x often reaches 20-30!). They are usually given a script that explains in a few minutes what their investment firm is known for, and are let loose with all kinds of databases, access to tech-rags/blogs, and a Salesforce account. They reach out to CEOs of all kinds of companies with similarly scripted emails. I have seen a bunch of them show up at my portfolio companies in recent weeks:

“I am from firm X. We were investors in x, y, z and have backed prominent founders like a, b c in the past. Love your space and what you are doing, and would love to hop on a call with you for 15 minutes to learn more and share our insights in the space”.

Anyways…problem is not that these associates are doing their job, and going gangbusters at it. Problem is that such a cold-call to CEOs may end up fulfilling their quota needs, but ends up wasting a CEO’s time. CEOs who receive these emails often don’t realize that they are one among 5-8 others who got such an email the same day from the same person. They look at the investment firm name and think it is a firm they should not ignore and hence end up taking the call, only realizing after spending 30+ minutes on the phone that (a) the person they spoke to barely knows what their business even does, (b) their ‘insights’ amount to nothing more than names of a few companies listed in an article alongside CEO’s own company’s name, (c) now their company is in some investment firm’s database, and seen to be potentially ‘fundraising’ by a prominent fund when that is not true.

I generally advise CEOs to look up the name of the person reaching out to them on the investment firm’s website to gauge how senior they are so they understand where such a conversation will rank in the investment process. CEOs realizing that this is a dial-for-dollars call don’t have to be rude in their replies, but they may return the email with something like:

“Thanks for reaching out. We are not fundraising right now, but if you have a strong interest in the space, have one of your partners either reach out to me or one of my Board members he/she would likely know.”

I understand that there may be amazing, profitable, growing companies in off-the-beaten-path sectors based in Kansas or Dakotas that no VC has ever heard of….and who would make for great growth equity investments for investment firms…and associates should try to find who they might be…but that should not be the case for previously VC-backed companies in already well understood areas of technology. If you are going to reach out to a CEO, esp if it has already been invested in by other investors, do the industry and your firm’s image a favor and learn a bit more about the space first so you can genuinely say you have an interest in the space; know what the company does, makes, sells, or holds dear; learn who the competitors might be in the space; and help the CEO understand in the email itself that this is a call to learn more and your goal would be to inform a partner if it is worth taking up any more of the company’s time. Depending on the situation, a CEO may actually find that appealing and get on the phone, or a proverbial coffee, with you. Or at least the email text I described earlier.

Again, it is a rant…but not against all associates. And in fact not against dial-for-dollar associates either. This is a practice that simply hasn’t adopted & changed much from its small/mid-cap private equity days to now being deployed for access to ‘hot’ companies in the tech sector. It can be improved much, and I hope it will.

Proud of Helen Greiner, Presidential Ambassador for Global Entrepreneurship

I could not be more proud today that Helen Greiner, my friend and founder/CEO of Lux Capital portfolio company CyPhy Works, has been named a Presidential Ambassador for Global Entrepreneurship (PAGE) by the President of the United States, Barack Obama, and U.S. Secretary of Commerce, Penny Pritzker. The U.S. Department of State and the U.S. Agency for International Development (USAID) are also partners in this effort. She is in Washington D.C. today to meet the group at the White House.

Helen joins an elite group of entrepreneurs in promoting President Obama’s vision of global entrepreneurship. Others members of PAGE are:

  • Rich Barton, Co-Founder and Executive Chairman, Zillow
  • Tory Burch, Chief Executive Officer, Tory Burch; Founder, Tory Burch Foundation
  • Steve Case, Chairman and Chief Executive Officer, Revolution
  • Reid Hoffman, Co-Founder and Executive Chairman, LinkedIn
  • Quincy Jones, Chief Executive Officer, Quincy Jones Productions
  • Salman Khan, Founder and Executive Director, Khan Academy
  • Daphne Koller, Co-Founder and President, Coursera
  • Hamdi Ulukaya, Founder and Chief Executive Officer, Chobani
  • Nina Vaca, Chief Executive Officer, Pinnacle Technical Resources
  • Alexa von Tobel, Founder and Chief Executive Officer, LearnVest

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A short note from a VC to executive search firms.

I tend to be a non-passive investor that works very closely with my portfolio companies to support them in any which way I can. Check out my blog post on “Friends Don’t Let Friends Have a Lazy VC/CEO Relationship“.

Lately several of my portfolio companies have had a reason to hire executive search firms for key management positions. If they try, VCs can be very helpful in identify top talent for key management positions. Often the extended network of partners at Lux Capital (and our co-investors) is enough to find the right candidates. But not always…sometimes we simply want to broaden the pool of candidates to choose from,  some times a process helps even define what we really need in the company, and sometimes we just need someone to run a tight/formal process especially if the management team is already too stretched and busy.

In that context I have had the pleasure of talking to several search firms over the last few weeks to help my CEOs select the search firm to go with. These were all for senior level positions in the companies, e.g. CEO or VP/SVP roles. I have obviously worked with several firms over the last 10 years, but I can’t say I have locked in yet on 1-2 firms that I would use over and over again. I volunteered to help CEOs select search firms and now I understand better why CEOs were happy to let me do the initial screening.

This screening process takes up quite a bit of time, conversations often feel repetitive, and frankly don’t often inspire a lot of confidence in whatever choice we may end up making. After several calls I realized that it was hard for me to really differentiate between the various firms, and I couldn’t tell if they were really helping me make a good choice (even though they tried). As I talked about my experience with a few CEOs, I realized this was a common problem they had also faced many times. One CEO even went as far as to remark “Why are you wasting your time with these calls? Just pick one randomly and they will likely be just as good as all others.” I am sure each of the firms I spoke with would disagree and call themselves out as unique, differentiated, and perfect for our needs.  Read more

A new kind of cleantech. A new wave of hardware innovation enabling sustainability.

I spoke with two different people on phone yesterday that asked what ‘new’ cleantech innovations I was most excited about. One of them runs a very large national advocacy group for clean energy, and the other works to support energy policy matters inside the White House. They were expecting me to respond with some thoughts on the latest/greatest achievements in solar efficiencies, biofuel titrations, or wind turbine designs. Or maybe they expected me to rave about a new generation of home energy monitoring devices. But I had something else on my mind.

At Lux Capital, we are witnessing amazing things happening in what we call “core technology” sectors that we believe will also have stunning impact on many sectors that were previously classified as cleantech. But they don’t come labeled as such. And that is not a bad thing. Let me briefly mention three of them below:

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Some thoughts on energy/cleantech VC

I had a chance to join an interesting round table conversation at Stanford University on financing strategies for energy/cleantech. There were a lot of interesting ideas shared, from PACE financing efforts in California to bond structures, tax credits, REITs, MLPs and green bank concepts.

It was interesting, however, to note that pretty much every one sitting around the table was rather down on cleantech venture capital as a sector, essentially counting VCs out of the equation all together. While I don’t blame them given the lack of VC interest in the field in the recent past, there were some thoughts I shared there that maybe worth sharing here as well. In summary I believe VCs have brought, and will continue to bring, value to clean energy sectors, and there is much that can be done to create a better environment for them to participate.

1. Energy innovation would benefit by having VCs around the table. While deployment side companies are in vogue, we can’t just do incremental innovation from this point on. We need a mix of both. We need to continue funding crazier, out of the box ideas in the sector so we have innovation ready for the next stage of deployment as well. VCs generally are able to take a slightly longer term, riskier tech view. It sounds a matter of fact now but the first VCs to take risks on building electric cars, putting solar on rooftops and taking us to Mars and beyond in search of resources were very brave, and thankfully so.

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