We have been in the venture capital business for over 15 years and one of the issues that continues to be a topic of debate is the expectations of VCs during their interactions with entrepreneurs. We have heard first-hand feedback from entrepreneurs over the years about what they loved and despised in their interactions with VCs. Out of that has evolved a set of values and principles that guide our daily interactions with entrepreneurs.
On one hand there is significant pressure on our time from both existing portfolio companies and the new companies we meet, which exceeds by several orders of magnitude the number of companies we ultimately invest in. On the other hand, the passion and effort put forth by entrepreneurs into their company demand immense respect and focus from us both during and after the interaction in the form of a constructive response with feedback. We believe that managing these demands on time and intensity are critical for us and for the continued thriving of the venture business.
Ironically, the partners at LiveOak felt this pain directly when we were on the road raising our first fund. Most entrepreneurs don’t see this side of our business, but it took more than 18 months with thousands of cold calls to LPs, and hundreds of meetings with prospective investors all over the country. You can read about what it takes to raise a VC fund here. As we debriefed on these meetings and trips, we recalled interactions with certain investors very fondly even when they didn’t invest in our fund. There are other occasions that we do not recall quite as fondly. After successfully raising the fund, we reflected deeply on what we learned from these experiences and the implications on how we would practice our trade as venture investors differently, now on the other side of the table.
The resulting philosophy is what we call the LiveOak Entrepreneur’s Bill of Rights – a set of aspirational goals intended to guide us during our interactions with entrepreneurs.
I. Invest real time: If it is worthwhile for you to invest a big part of your life, it is worthwhile for us to invest 90 minutes to understand it. It takes that much time and often more to appreciate the nuances of an idea and how an entrepreneur’s life journey enables him or her to see the problem and the market opportunity differently when aspiring to disrupt the status quo. Any entrepreneur visiting us with a full pitch deck should expect us to allocate 90 minutes to that discussion – the minimal amount of time we believe that is required to have a rich discussion and develop conviction to want to dig deeper in a next step.
II. No distractions: Those that have pitched to us might find it ironic that a technology venture capitalist is taking notes the old-fashioned way – with pen and paper. You come into our office with the fire, dedication, and grit to pitch your passion. We come in with the intent to provide you with undivided attention. In an electronically-tethered world, we want to remove distractions that would interfere with that interaction – no computers and no cell phones. However, there are always unavoidable situations whether personal or professional that need immediate attention. Those should be extreme exceptions to the rule and in such cases, we tell the entrepreneur to expect this in advance.
III. Timely response: This is the most important and sometimes the hardest thing to do. Most companies fall into three categories by the end of the meeting:
No
The No’s are taken care of quickly because we often inform the entrepreneur unambiguously at the end of the meeting if the opportunity does not fit our investment interest or what additional metrics and data are needed before we would consider revisiting the company. Other times we reaffirm our initial assessment with the other Partners and respond back to the entrepreneur within a week through a call or email explaining there is no possibility we will invest.
Yes
The second category is also relatively straightforward since it involves additional due- diligence and introductions to the rest of the partnership.
Not sure yet
It is the last and hardest category. Sometimes it means waiting for the story to develop; other times we need to identify an expert in our network that knows the market better. In these situations, it is our goal to keep the entrepreneur informed of the process and move the company to a clear yes or no as soon as possible.
There are certainly times when, in our minds, we respond with a decision and pointed feedback on what it would take for a company to be investment worthy, but may not come across as a definitive answer in the entrepreneur’s eyes. If you ever encounter the feeling of not knowing which of the three categories you fall under, we urge you to reach out and ask for clarification. While we recognize we will not bat a thousand in every entrepreneur’s eyes, this is one that we actively continue to improve both as individual investors and as a firm.
IV. Be helpful even if we are unable to invest: Any company we meet not only has the potential to impact the Texas ecosystem, but the world as well. Regardless of whether or not this impact is made inside of the LiveOak portfolio; we strive to be helpful in any and all ways that we see fit. Sometimes this means a tough critique on what areas to prioritize and develop further. For others it means making a connection within our network. We realize our long-term success is defined by the success of the Texas ecosystem and we are fully committed to help accomplish that.
We will be the first to admit that we aren’t perfect and that adhering to the LiveOak Entrepreneur’s Bill of Rights requires constant and conscious effort. However, having been in this business for 15+ years and recently sitting on your side of the table, what should not be in doubt is our sincere desire to use it as the North Star that guides our behavior. Our legacy as a firm will be measured not only by the returns our investments deliver to our investors, but also by the impression we leave and influence we have on every entrepreneur we meet.
This is the ethos that will steer LiveOak in the years (and funds) to come.