Thursday, July 14, 2005

Commandment #10: Control the Meeting (But Be Smart About It)

Commandment #10: Control the Meeting (But Be Smart About It)

In a VC meeting, first thing to remember: Your goal is to get the next meeting (See: Commandment #3).

Second thing to remember: That’s not your audience’s goal.

The goal of the audience is to decide whether it’s “worth it” (see below) to schedule a second meeting (their opportunity cost, and, to a limited degree, yours). For this, they will inevitably ask a bunch of questions (see Commandment #8: Know what you don’t know, and admit it). Questions can be good, bad or distracting (a form of “bad”). The wrong approach to answering questions can be fatal to the second meeting. This Commandment offers advice on ways to handle this situation.

Caveat: As I’ve written previously, the dance between entrepreneurs and VC’s is not “fair” – at least not in the “cosmic” sense of disappointed entrepreneurs. Several commentators on this blog have, as expected, taken me to task for openly stating this (“arrogance” being one of the kinder epithets). In general, when offering advice about a system is not “fair”, you can take two approaches: (1) how to change the system, or (2) how to navigate the system, “as-is”, to your immediate, practical benefit. Unapologetically, my approach is the second. Not that the first approach is not worthwhile; it likely is. It’s just not the approach of this blog.

So, you’re going to get questions (as previously mentioned, you’re usually in trouble if you don’t). Questions usually come from a variety of motivations, “Good” and “Other”.

“Good” motivations include the following: (1) questions designed to see if you know your market, technology, competitive dynamics, risks well enough for the VC to invest money in you (i.e., the kinds of questions you would pose to anyone asking you for money), (2) questions designed to see how you handle “tough” questions (a form of “stress” interview – startups are hard; you want to back people who – at the very least -- can handle tough questions) and (3) questions to elicit one or more facts that will enable the VC to decide whether to marshal the resources for (more charitable way of saying “incur the opportunity costs” of) additional meetings.

“Other” motivations vary, but here’s one example. Like all human beings (including entrepreneurs), VC’s have egos. The human ego is not, shall we say, always at it’s best in a “competitive” situation like a VC meeting where there is a premium on being (or appearing) “smart” in front of a bunch of other smart people (including the entrepreneur). (For more on this, see Commandment #3: Know Your Audience.) You will, on occasion, run into someone in a VC meeting, who seems dead-set on pursuing a line of questioning that shows how much the questioner knows, but is a side-show to the main event: your business presentation. There are others, as well. For your purposes, however, questions derived from all “other” motivation are similar – they are a distraction and you need to deal with them, and move on, so you get through your presentation (See all prior Commandments).

How do you do this? Because situations differ so widely, I don’t have “one-size-fits-all” advice. But, here are some tips.

Make sure you understand the question!

There are at least two important reasons for this.

First, VC’s are highly (and negatively) sensitized to entrepreneurs who don’t (or by their behavior appear not to) listen. Indeed, a proven way for entrepreneurs to avoid all the fuss and bother of actually getting money from a VC is to give this impression.

[N.B.: Because I can hear the flame-throwers being fired up, let me be clear: this is NOT to say that VC’s have all the answers, NOT to say VC’s are always right, NOT to say VC’s are good listeners, NOT to say VC’s aren’t often arrogant, NOT to say that entrepreneurs should merely agree with whatever the VC says, or otherwise be subservient in the meeting with the all-knowing VC. This IS to say, however, that openly and honestly engaging in a conversation, and really listening to the person with whom you’re conversing is a good thing to do. As I’ve noted in numerous prior posts, VC’s are no better than this than anyone else (maybe worse), but they’ve got the money.]

Second, often entrepreneurs and questioners go at it, wasting precious meeting time, only to conclude that they don’t actually disagree on some fundamental matter.

Usually disagreements are either “factual” (I don’t believe some fact you assert) or “judgmental” (even if I agree with your factual assertions, I don’t agree with your conclusion). Over the course of several meetings, these ultimately require different handling. But for the first meeting (where you’re trying to get the second meeting), I would suggest that “discretion is the better part of valor” -- no matter which type of disagreement.

When someone asks you a question in a VC meeting, you (or someone on your team) should start a little timer going in your head. If you’re starting to spend a wildly disproportionate amount of your allotted hour on a particular point or line of questioning, you (or your team-mate) should make the decision to move on. There are probably numerous ways of politely doing this, and – as with all other advice in these Commandments – you need to find your own “voice”, but something along the following lines may be a helpful place to start.

“I think I understand your concern on this point, but let me make sure whether or not I do (and explain the nature of the concern or disagreement). While it is an important point that we think we can explain to your satisfaction, why don’t we take it off-line? We absolutely want to make sure we give you a complete and thoughtful answer, but we do want to make sure that we have time to present our entire idea to you before the meeting’s over.”

Assuming the questioner is not a complete jerk, this (or something like it) will usually work, and the presentation can proceed. If it doesn’t work (i.e., the questioner is just a jerk), then move on to a different VC firm.

Now, in “moving on”, your work’s just started. Go back and read Commandment #8. The advice there also applies in many ways to this situation. That is, (1) note the disagreement, (2) after the meeting go gather your facts and your (logical) arguments and (3) quickly and succinctly follow up with the questioner and your proponent within the VC firm (if they’re different). This shows a number of characteristics that VC’s like: diligence, thoughtfulness, “eye-on-the-prize” thinking, etc.

In any particular situation, you’ll need to make your own micro-judgment about which way to go. If you’ve followed the previous Commandments (e.g., knowledgeable VC partner, background on the attendees, etc.), however, you’ve at least got a start. And you’re ahead of the game just because you know that some questions are distractions -- and need special handling.

Keep in mind, that you can easily have a pyrrhic victory in your first meeting. You do NOT want to thoroughly and conclusively rebut a time-consuming challenge from someone, but run out of time to get through the presentation and win the prize: the next meeting. If you are spending too much time on an issue (unless it is THE absolute key issue – which is rare) then figure out a strategy to move on.

Good luck getting that next meeting (and your funding). Entrepreneurs make the world go ‘round and, without them, VC’s would have to go get honest jobs!