Sitting on the Other Side of the Table

The guys at Softbank have been great giving me full access to all of their internal discussions.  For years and after giving north of a 100 VC pitches as an entrepreneur, I have been fantasizing about what it would be like to be on the other side of the table.  This week I got to see first hand what it’s like to be in the shoes of a VC evaluating pitches and deals from the "buy-side" and like all good fantasies, the reality is a lot less satisfying than I imagined.

First off, I have to say that I’ve gained respect for venture investors (words I confess I never expected to pass my lips…er fingers). 

So hear’s what it’s like being on the buy-side.  Management comes in and gives a well rehearsed pitch about everything that is good in their business:  huge market, talented team, bullet-proof technology, crappy or non-existent competition, massive sales pipeline…basically free money…are you interested?  And then it starts a game of 21 questions trying to figure out how big is the real opportunity and how big (and where) is the risk.  After sitting through a handful of pitches, I’m surprised at how little time the CEOs spend framing the risk/reward profile (instead choosing to focus 99% of the time on the opportunity).

I think making an investment is the same with a VC as with a CEO.  I don’t mind making a bet as long as I have a good idea of the bet I’m making.  Entrepreneurs have to be optimists (who would survive if we weren’t!), but one lesson I’ve learned this week for when I get back to pitching is to spend more time outlining where and how big are the risks rather than leave it up to the VC’s imaginations.