Revenue and Talent: The Cure for Itchy VC Trigger Fingers

Founders aren’t the only ones under funding pressure. I know because it’s half of what I talk about with my VC coaching clients.

A VC is only as good as their track record. They need to get good deals over the finish line to have a shot at fame and fortune. They also need to get deals out the door for other reasons:

• If you’ve started a new fund, you want to announce a first deal so people know you’re legitimately putting money to work.

• If you’re near the end of a fund’s life, you might want to finish that fund out so you can get the management fees layering in on the next (hopefully bigger) fund.

• If you’re competing with others in your firm, especially for a partner spot, there could be a sense of “What have you done for me lately?”

So while founders are always wondering how they can get checks in the door, it’s not always straightforward how a VC gets one out the door while still maintaining a high bar.

Lowering the bar doesn't make sense in the long term, because pushing a dud through only delays the inevitable black mark later. Bad deals are also a time sink. You need something fast and good, and that won't happen if you passively wait for deals to come to you—especially if you don't work for Benchmark or Sequoia.

Even if you do, it won't happen if you're junior. You need to go out and get something, and you need a carrot to entice the right deal to reveal itself.

Most investors pitch themselves wrong. They think the carrot is money. It isn't. Money is the most commoditized thing in venture. Everyone has it, everyone's offering it, and the best founders know money follows everything else. Announce to the world that you're actively deploying and you'll get an adverse selection problem—a wave of companies who need capital right now, which is not the same as companies worth backing. The good ones aren't sitting around waiting for your term sheet. They're heads-down building, and won't interrupt that to talk to a check.

"Why would someone talk to you if they don't need money?" is probably the most important question a venture professional can ask.

What the best founders actually want is revenue and talent. They know that if they have revenue, driven by top talent, the money takes care of itself. So if you want their attention, don't lead with the thing they already assume they can get. Lead with the thing that's genuinely hard to find.

I was talking with an investor recently about this exact problem: how to shake something loose before a deadline. My suggestion had nothing to do with announcing capital. Go find a top-tier, first non-founder sales hire—someone who's built sales teams before, someone specifically looking for high-growth companies in a particular space. Take that person and signal to a curated group of high-quality pre-seed and seed investors that you know someone exceptional who's out exploring top companies, with strong $1mm+ revenue growth that is mostly founder-led. 

That's going to shake loose more high signal companies than just asking, "Who's raising?"

The last your upstream deal sources want to do is unintentionally hand a one-off firm a head start on a fundraising process that hasn't even started yet. 

Offering top talent changes the ask into an offer, even if a lot of things might need to line up to actually close that hire.

Revenue and sales leads don’t need as many stars to align, because the right customer can always be closed.

This is how I've run an event series called Always Be Closing. Instead of gathering founders to pitch investors, we partner with top-tier companies that could actually buy startup products, everyone from Datadog to ConEd to KPMG, and we ask a very different question: “Who wants to sell into these companies?” It doesn't matter where a founder is in their fundraising. If they've got a product that solves a problem one of these buyers is looking to solve, of course they say yes. We've curated a buyer with real intent, so the founder knows it's a good use of their time. 

That's a carrot. "Come meet capital" is not.

The best part is for the investor who isn't in the most competitive position, whether that's because they're junior or because their fund just isn't a door-opening name. Access to a Fortune 1000 buyer, or to someone who's been there and done that at the early stages of a company that eventually IPO'd, is all the cred you need. Companies at the highest level of competitiveness will take your meeting if you're the one holding those things, even if your fund isn't high on the ladder. The letterhead stops mattering. What you can open the door to starts mattering.

Money doesn't shake deals loose. Specificity does. Go find the buyer, the operator, the talent a great founder actually wants, and become the person who has access to it. The right deals will reveal themselves once you're offering something they can't get everywhere else.