NEVER TELL A VC. . .
July 6, 2008
Wow, Rick Segal (the Steve Segal of venture capital) is on a roll. His latest post offers entrepreneurs advice on which questions they should NEVER answer:
- Who else are you speaking to? [Answer: The usual suspects.]
- What pre-money value did you have in mind? [We are looking for a deal that provides great returns for all of us.]
- Can we speak to a few of your customers so we can better understand the value proposition? [No. Customer calls are post term sheet due diligence]
Good stuff. Ironically, I have answered all three (to ill effect). First, I shared our potential investor list with a potential investor who called each of the other potential investors and held a meeting without us. It was a nightmare. I turned my powerful position (i.e. more than one offer) and turned it into a losing position (they all ended up passing). Second, I scared more than a few potential investors away (prior to diligence) by suggesting a pre-money valuation that they felt was too high. Was it too high? Maybe, but I thought we were negotiating (they were saving time by ending discussions). Finally, I let three potential investors call ALL of our clients. First, it was disruptive to our clients (i.e. they were worried we were running out of money) and second those same investors ended up investing in our competitors…
