October 16, 2022

Competing To Win Deals

A summary of one of our favourite blog posts from Fred Wilson

Angel Resources

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Summaries From the Masters

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Fred Wilson is an American businessman, venture capitalist and blogger. He is the co-founder of Union Square Ventures, a New York City-based venture capital firm with a number of successful investments, such as Twitter, Tumblr, Foursquare, Zynga, Kickstarter, Etsy and MongoDB.

Delve into the most salient points from the article below

Connect with the Entrepreneur

  1. Establish a personal connection with the entrepreneur. A great personal chemistry with the founder/CEO is crucial in winning the deal.

Involve Your Full Partnership

  1. Showcase your entire team early and consistently. Entrepreneurs want to know they're working with a firm, not just an individual.

Encourage Feedback

  1. Offer a list of past entrepreneurs you've worked with, so they can gather feedback on you and your firm.

Avoid Pressuring Decisions

  1. Don't pressure entrepreneurs with exploding term sheets or no-shops. Trust that the right deal will come together without force.

Make Your Offer in Person

  1. Discuss high-level deal terms in person instead of sending a term sheet. This approach focuses on personal fit and high-level deal terms.

Add Value Early On

  1. Discuss strategic issues and hiring challenges even before becoming an investor. Show your value from the start.

Use the Product or Service

  1. Demonstrate genuine interest in the entrepreneur's offering by using their product or service.

Offer a Fair Price

  1. Offering a crazy high price might scare smart entrepreneurs away. Instead, present a fair price and communicate your flexibility.

Don't Team Up with Another Firm

  1. Avoid pairing up with another firm to win a deal, as entrepreneurs want to choose their syndicate partners themselves.

Be Prepared to Lose Gracefully

  1. Maintain a positive relationship with the entrepreneur even if you lose the deal. They might return to you in the future.

By following these counterintuitive yet effective rules, venture capitalists can increase their chances of winning deals and establishing long-lasting partnerships with entrepreneurs.

You can read the full article here: https://avc.com/2005/11/the_vcs_custome/