Dave McClure put out a post a week ago calling for more consumer startup VCs to be versed in building products, user interface/experience, and engineering. I’ve been thinking about this a lot as Venture Capital is starting to evolve and most first rounds are done by firms with smaller overall fund size such as First Round Capital, Union Square Ventures, Jeff Clavier’s SoftTechVC, Founder’s Fund, and Dave’s supposed new fund. I think there’s a missing role in Venture Capital, especially at the early stage funds, where having nothing more than a demo/product can be enough to get funding. First, let’s take a look at the general list of roles in a firm (correct me in the comments where I may be wrong. this is a general overview and each firm is different):
- Partners- Different levels of partners (managing, general,etc.) depending on the firm. These are the senior guys who write the checks and sit on your board.
- Associates- Probably the first person you will talk to upon an introduction to the firm. If the firm contacts you, it is usually an associate (or analyst). They might one day be partners at the firm.
- Analyst- They handle the dirty work (I don’t mean that in a bad context). Financial analysis, analyzing the opportunity, the market, due diligence research,etc.
- EIR- Successful entrepreneurs/early employees from really successful startups who aren’t ready to start their next company and need a place to evaluate opportunities. They sit in on pitch meetings and analyze opportunities. Usually the fund they are working at will be the first ones to put money into their next startup. They might even join in as co-founder or CEO at a startup that successfully pitches the fund.
So where’s the missing role? The first person an entrepreneur interacts with at the firm for that “first chat” needs to be someone different. I think it should be someone who is:
- Product/ui/ux focused– They understand what a great product looks like and know why it works. They have a sense of style and can see what’s really polished. Spotting a team that can put together a great product+user experience with almost no money is like finding a unicorn. Unless you have done it yourself, you don’t exactly know what to look for. For that first meeting, you’re not looking at financials. You’re looking at product.
- Less MBA, more of an engineering background- They need to understand the nuts and bolts of the product. They’re probably not as well versed in the particular area of engineering you’re pitching, but they certainly understand the high level details.
- Publicly Visible- They spend time on Hacker News, they blog a lot or a little, and people know who they are. Whether you agree with their views or not, they have some valid insights.
- The equivalent of a “community manger/leader” for a firm- Partners can’t meet with everyone, but this person certainly should have open office hours. They should be openly accessible to entrepreneurs. Most importantly, they are the face of the firm to the entrepreneurs in the local community. Have a new product or thinking of doing a startup? You should talk to this guy or gal (that could be a whole other post).
As an entrepreneur, I want to talk to people who understand product, design, engineering, and have been through what I have. Kevin from Wufoo even hit upon this after getting a ton of calls from VCs who have never used their product, don’t know how to build a product,etc.
“I’ve yet to wait for a VC to come and talk to me and have an idea, at the table and say, ‘Look. I’ve looked at your business. I’ve looked at what you guys’ve done. Have you thought about these?’ Right? I don’t hear that at all. I don’t understand. That’s not how I would approach having someone be excited about wanting to be a partner in business.” – Kevin Hale from Wufoo.
Money is a common denominator. Understanding product, design, engineering, and what an early stage startup is going through isn’t. Give me someone who wants to talk product, design, and engineering. After that we can talk to the associates/analysts/partners about the other things.