Find out how getting he got his start-up funded using his knowledge of persuasion, sales, and even hypnotherapy:

Watch Jason Nazar’s talk on persuasion.

Full Bio:

Jason Nazar CEO and Co-Founder of Docstoc

Jason is the Co-Founder and CEO of Docstoc.com, the premier online community to find and share professional documents. Before starting Docstoc, he was a partner in a venture consulting firm in Los Angeles where he worked with dozens of startups. He holds have a BA from UCSB and his JD/MBA from Pepperdine University, where he was the Student Body President of both Universities.

The banker initially thought George to be “something of a shambler*.” However, after asking him what he intended to use the money for, he became convinced that there was something special about Wingfield, “the kind of square Western gambler that even a Nevada banker could rely upon.” He loaned him a nominal amount of money; the exact amount is lost to history, but is generally agreed to be between $25 and $75. The loan was quickly repaid, and the banker agreed to provide Wingfield with a $1,000 grubstake, in exchange for fifty percent of the future wealth created by the cowboy’s efforts.

Within five years of their initial meeting, Wingfield had leveraged his modest grubstake into a mining enterprise worth in excess of $50 million, making the former cowboy and his banker two of the richest men in the Western United States.

The factors that led the banker to grant Wingfield his grubstake are the similar to those which drive modern-day, high-tech venture capital investments.

What is a grubstake and how did Wingfield convince the banker to grant one to him? Read on. 

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“Grubstake” is a very American word, combining “grub” meaning “food” with “stake” meaning “a share or interest in a commercial enterprise.” Merriam-Webster defines Grubstake as:  “Supplies or funds furnished a mining prospector on promise of a share in his discoveries; material assistance (as a loan) provided for launching an enterprise or for a person in difficult circumstances.”

As described in the excerpt from Old Grubstake Days In Joplin above, a grubstake often involved the financier or Grubstaker funding the entrepreneur’s or Grubstakee’s food, lodging and tools required to execute the adVenture.

Wingfield’s fortune was not the only one derived from a small grubstake. Old Grubstake Days In Joplin goes on to describe how Dan’s tireless labor and his keen eye for geological anomalies, combined with his uncle’s financial wherewithal, resulted in the discovery of the fourth-largest U.S. lead mine and the most productive zinc mine of its era.

The Less Things Change, The More They Stay The Same

Although it is tempting to over-intellectualize modern-day venture capital, when boiled down to its essential elements, it differs only slightly from the Grubstaking which took place in the Western United States during the latter portion of the 1800s.  Contemporary venture capitalists do not typically provide an entrepreneur room and board, but they do often establish salaries based on an entrepreneur’s nominal living expenses. In this way, the majority of a startup’s funds can be applied directly to further the adVenture’s success, rather than to make life comfortable for the entrepreneur.

Grubstakers sought Grubstakees with the traits described in Youthful Discretion – usually a young person with passion, hunger and sufficient skills to autonomously pursue the adVenture. Frontier financiers put credence in the same characteristics that are valued by contemporary venture capitalists, including:

Informal Education – Consideration of a Grubstakee’s formal education was usually irrelevant. If the Grubstakee had any “book learning,” it was seldom directly applicable to the nature of the grubstaked adVenture. A Grubstaker focused on proof of an individual’s ability to perform the skills required to succeed at the proposed enterprise, not his ability to prosper in otherwise esoteric environments, such as a classroom.

Stewardship – Judicious use of funds was of the utmost importance, because the Grubstaker was directly footing the Grubstakee’s bills. As such, the miserly spending approach described in Frugal Is As Frugal Does was a prized Grubstakee trait.

Clean Backtrail – Without email, Twitter or an iPhone, Grubstakers verified a Grubstakee’s propensity toward honesty, integrity and hard work by asking a few well-placed questions to the folks who had previously crossed paths with the Grubstakee. 

No B.S. – A firm handshake, coupled with direct eye contact, was often the only contract underlying a Grubstake deal. As such, communications had to be clear, open and direct. If a Grubstaker asked, “Where do you intend to mine for gold?”, a response of, “That is confidential information, but I will consider sharing it with you once you sign my NDA,” would not result in a Grubstakee receiving subsidized room and board.

Sticktoitness – Most men who accepted a grubstake felt honor-bound to repay them, even if the funded adVenture never generated a profit. Grubstakers funded Grubstakees who demonstrated a Humble Pride and considered failure a personal affront. 

Shared View Of Success – The Grubstaker won when the Grubstakee won. Such alignment minimized the risk that Founderitis would arise and derail the adVenture. A Grubstakee who attempted to withhold profits rightfully earned by a Grubstaker usually met his demise face-down on a barroom floor, as opposed to in a courtroom.

Fear Of Failure – A grubstake was intended to facilitate the Grubstakee’s basic survival while he pursued his adVenture, not satiate his hunger for success. If the grubstake was too large and the Grubstakee was not properly motivated, the adVenture would fail. Effective Grubstakees were sufficiently dissatisfied with the lifestyle afforded by the grubstake and did not consider free room and board “success,” just as veteran, modern-day entrepreneurs do not consider a funding event a “victory.”

Fill The Scarcity Void

“I don’t ask for much, I only want your trust.
But you know, it don’t come easy.”
Ringo Starr and George Harrison, It Don’t Come Easy

As noted in Spilling The Beans, ideas are innumerable, and in the absence of competent execution, they are worthless. Conversely, money in pursuit of outsized returns is plentiful. Thus, if both ideas and money are abundant, what is the scarce constraint in the entrepreneur/venture capital fundraising equation?

The scarce commodity is trust. Trust brings ideas and money together. As such, an entrepreneur’s task is to create a bridge of trust between his ideas and the venture capitalist’s cash.

Trust is what brought together George Wingfield’s energy, drive, ambition and ideas with his banker’s grubstake funds. Wingfield went on to become known as “King George,” due to his political influence, which was so pervasive that he turned down an appointment to the U.S. Senate because he feared that relocation to Washington, DC, would dilute his power.

King George was also known for his generosity and willingness to grubstake miners and ranchers whose earnest work ethic and Creed were sufficient to earn his trust. This approach allowed King George to reap the rewards of numerous entrepreneurs’ hard work, without getting his hands dirty – just like a modern-day venture capitalist.

______________________
John Greathouse has held a number of senior executive positions with successful startups during the past fifteen years, spearheading transactions which generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.
John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses. He is also the author of an award-winning entrepreneurial blog infoChachkie.com. You can learn more about his experiences at johngreathouse.com
______________________

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Copyright © 2007-9 by J. Meredith Publishing. All rights reserved.

—–
George Wingfield: Owner and Operator of Nevada  <Return to Article>

As Pascal points out, it usually takes people (even a mathematical genius) longer to gather and organize their thoughts than it does to simply communicate them in a Joycian, stream-of-consciousness manner. Such lack of preparedness requires less effort, but it seldom results in effective communication.

High-tech marketing guru Richard St. John clearly understood this principle as well. However, unlike Pascal, Mr. St. John invested the necessary time to ensure that his 2006 talk at the TED Conference was succinct and highly impactful. Over a seven-year period, he interviewed over 500 very successful people in order to answer this question posed to him by a high school student: “What leads to success?”

Rather than investing the majority of his time creating a legion of dazzling PowerPoint slides, Richard first focused his efforts on distilling his thoughts. In doing so, he was able to answer the high school student’s very broad question via a handful of simple, graphically rich slides that he could comfortably present in approximately three minutes. As recommended in Presentation Tips From The World Of Comedy, Mr. St. John effectively integrated humor into his discussion, while not distracting from the ultimate punch line of his talk.

Mr. St. John’s pithy presentation is particularly compelling because he leaves the audience wanting to hear more, rather than anxiously shifting in their chairs, wondering when his presentation will end. Clearly a seasoned presenter, he avoids all of the mistakes outlined in How To Give A Horrendous Investor Pitch, including subjecting his audience to “death by PowerPoint.”

Mr. St. John’s eight things that lead to success are described below:

He later expounded upon his brief talk in the book, 8 To Be Great.

• Passion
• Work – it is not really work if you “work” to make it fun
• Good – practice your art so that you are very, very good
• Focus
• Push – work through challenges, including self-doubt
• Serve – identify what you can “serve” that others will value
• Ideas
• Persist – especially when faced with failure or CRAP (Criticism, Rejection, Assholes and Pressure)

It is not the presence of one, two or even a few of these traits which will lead to success. Rather, it is the combination of all these factors, consistently executed in concert over an extended period, which leads to personal and professional success.

I strongly encourage you to watch Mr. St. John’s presentation. Not only is it inspirational in its own right, it is also phenomenal proof that you really can say more when you take the time to say less. Mr. Pascal, take note.

— Get hands-on advice from your Uncle Saul, Subscribe Today. —

Copyright © 2007-9 by J. Meredith Publishing.
All rights reserved.

Hint: It is not a mouse.

The fact that you likely cannot name this creature confirms the reality that ideas are cheap.

All too often, inexperienced entrepreneurs struggle with sharing their ideas with potential investors, Donors and others who might be in a position to help them. The next time you wonder if it is safe to share your ideas, recall the fate of this long-eared, anonymous cartoon character.

Oswald The Unlucky Rabbit

After struggling for over five years, Walt Disney and his brother Roy scored their first hit with Oswald the Lucky Rabbit. Unfortunately for Oswald and Walt, Universal Studios, which owned Oswald’s intellectual property rights, assumed that Oswald’s initial success was formulaic and could be readily replicated.

Universal severed its relationship with Walt Disney, hired the majority of Disney’s creative team and began creating Oswald cartoons. Although an additional 140 Oswald episodes were produced over the next 14 years, none of them was nearly as successful as the first 26 installments, which were developed under Walt Disney’s tutelage.

Meanwhile, Walt tweaked Oswald, morphed him into Mickey Mouse, and parlayed the highly derivative mouse’s success into the $50 Billion Walt Disney Company.

Ideas Are Worthless

What was the inherent value of Walt Disney’s idea to draw an anthropomorphic rabbit?

Zero.

What was the inherent value of Walt Disney’s idea to draw an anthropomorphic mouse?

Zero squared.

Outside of adVentures based on hard science, most entrepreneurial ideas have a similar inherent value – zero.

The value of Walt’s ideas laid in their execution: the storylines’ humor, which appealed to both children and adults, the quality and believability of the animation and the intangible degree to which audiences could relate to and empathize with the on-screen characters.

Conversational Foundation

Some entrepreneurs confuse the identification of a market to be served or a customer pain to be assuaged with valuable ideas. Institutional investors are seldom presented with unique inspirations. Most businesses are based on variations of established themes, such as new ways of solving old problems and old ways of solving new problems. A potential or even partially implemented solution generally does not warrant rabid protection.

As noted in Your Personal Pitch, entrepreneurs must take chances and judiciously discuss their ideas, plans and dreams in order to bring their adVentures to life. If an entrepreneur does not share her thoughts, it will be impossible to marshal the necessary resources, recruit investors and inspire employees to join her adVenture.

Simply talking about your idea is seldom risky. As long no propriety information is disclosed, such discussions will almost never result in adverse consequences. However, as noted in the discussion of Big Bad VC, below, you must consider the capability of your audience (and their surrogates) to take advantage of your idea when deciding with whom to speak and how much detail to include in each discussion.

Parlay, Protect, Promote

Although it is true that businesses are built upon a foundation of conversations, there are a number of judicious things you should do to protect your idea while you are sharing it.

One inexpensive way to protect your idea is a provisional patent. The U.S. Patent Office allows one year from the date of a provisional filing before a formal patent application must be filed. A provisional filing allows you to publicly discuss your idea with potential Donors and Stakeholders. Such feedback will help you craft your definitive patent application.

Another simple means of protection is a Non-Disclosure Agreement (NDA). This agreement precludes the party that receives the confidential information from sharing it with others and, in some cases, from using the information for his or her own gain.

If you attempt to protect an idea too early, you risk expending energy and resources protecting an unworthy, ill-formed idea. Thus, it is important to exclusively discuss your ideas with trusted parties before you spend the time, money and effort to protect them.

Walt Disney learned the importance of owning his ideas the hard way. Despite the urban myth that Oswald was stolen from Walt Disney, the reality is that Walt never owned Oswald. This lack of ownership was a mistake that Walt Disney did not repeat. He never again allowed another party to control the destiny of his cartoon characters or his adVenture. As noted in (Non)Sense Of Entitlement, successful entrepreneurs uncompromisingly control their own destiny. To this end, properly protect your intellectual property before you promote it.

Who’s Afraid Of The Big Bad VC?

When attempting to raise money, reticence to share your idea will be perceived as amateurish and will cause most sophisticated investors to assume you lack the maturity and judgment required to lead a successful adVenture.

However, a bit of trepidation when dealing with Venture Capitalists (VCs) is wise. De facto protection in such discussions is difficult to secure, as most VCs will not sign an NDA during the initial stages of your discussions. There are pragmatic reasons for their reluctance, so do not argue the point.

If your dialog progresses to the point that it is necessary for you to communicate sensitive, proprietary information in order for the VC to fully evaluate your opportunity, entering into an NDA might be appropriate. However, during the early stages of your discussions, you will sound naive if you ask a VC to sign an NDA.

No reputable VC will steal your ideas. Note the operative word: reputable. As with any professional interaction, do your homework and know with whom you are speaking. You must have an adequate depth of knowledge of your target market(s) and where your idea or technology fits into the respective market ecosystems in order to determine how much information you can safely disclose.

Reputable VCs militantly protect their reputations. The cost of compromising their ethical standing is far greater than any gains they might achieve by co-opting your ideas. However, if you seek funding from a VC that has a potentially competitive company in its portfolio, you are placing your adVenture at risk. With no malicious intent, it is quite possible that a VC might communicate your business plan to a portfolio company which has the necessary knowledge, resources and inclination to transform your ideas into a business.

This unfortunate sequence of events occurred at a Voice-over IP company that I (many years later) tangentially helped go public. During the company’s initial stages, management made the mistake of communicating its plans (to create an Internet fax service) to a VC that had a telecom startup in its portfolio.

The portfolio company was struggling with its initial go-to-market strategy when the VC suggested that they consider the viability of the Internet fax market. The portfolio company subsequently refocused its product development efforts and entered the electronic fax market before the unfunded startup.

In this instance, did the VC steal the idea of delivering faxes over the Internet?

No. I would not characterize their actions as “theft.” The idea of Internet faxes was not unique; PC-initiated, phone-based faxes had been introduced nearly a decade previously. However, the fact that the technological infrastructure had evolved adequately to enable an Internet-based product was not readily apparent to the struggling portfolio company. Once the VC alerted them to the opportunity, the portfolio company applied significant resources, at great risk, to exploit the idea. As such, simply alerting the portfolio company to the Internet fax opportunity was worth little – the value was derived from the hard work that was required to turn the idea into a profitable venture.

Lesson learned? Before disclosing the basic premise of your idea, determine whether or not your audience is in a position to leverage your idea, either directly or via their affiliations.

Oswald Comes Home

Nearly 80 years after its creation, the Walt Disney Company purchased the rights to Oswald the Lucky Rabbit. Now Oswald stands side-by-side his heralded cousin Mickey, as an infamous example of an idea’s relative lack of value in the absence of unyielding execution.

With each passing decade, the pendulum swings back and forth among the intelligentsia as to which factor has the greatest impact, but for an entrepreneur on The Fringe, the answer is clearly: Yes.

Location, Location, Location

Obviously, both Nature and Nurture matter to an entrepreneur’s success. Given that you cannot do much about your gene pool, the pragmatic entrepreneur will do everything they can to stack the cards in their favor with respect to their environment. If you are attempting to start a biomedical venture, you have a much higher probability of success if you start your venture in an environment which has a track record of sustaining such ventures. Why attempt to swim upstream, when you can expend far less energy, go further, and move more quickly by going with the flow.

You would not plant corn in Antarctica, and you should not start an Internet services company in Alabama. This is not to suggest that Alabama cannot support an Internet company. I am sure the Alabama Chamber of Commerce could proudly point to the handful of such ventures that have ‘made it’ (relatively speaking). However, if you toss enough corn seed onto the tundra, a few stalks might come up during the Arctic’s short summer season. Yet a few sickly seedlings would not be justification for starting a large farming enterprise at the South Pole.

At first glance, an emphasis on the location of your adVenture may seem at odds with the trend toward virtual, decentralized organizations. Take another glance. It is true that you can and should leverage tools that allow your organization to draw upon employee talent across a broad geographic area (like the globe…). However, unless your organization is comprised of a relatively small number of employees, you will likely be forced at some point to hire a concentration of employees from within a comfortable commuting distance.

Transplanting is Not Painless

Entrepreneurs who are not on The Fringe start their venture wherever they happen to be at the time they conceive of their startup. These folks allow the location of their friends and family to dictate the location of their startup. However, just because your great-grandfather decided to settle in the middle of nowhere 100-years ago does not mean that your adVenture must suffer.

Be proactive and launch your startup in the most ideal location. Jeff Bezos, Founder and CEO of Amazon, was a Wall Street banker in New York when he conceived of an online bookstore. He realized that the initial location of his startup was of vital importance to its ultimate success. As such, he selected Seattle, primarily because: (i) it was near Ingram Micro, one of the largest book distributors in the country and (ii) there was an abundance of software developers and high tech managers close by who had been educated on Microsoft’s dime, and had been instilled with Microsoft’s ubercompetitive corporate culture.

Do not fool yourself by thinking that you will eventually relocate your startup “at the appropriate time”. Once your adVenture is launched, there is tremendous inertia that is difficult and expensive to overcome.

With the addition of each new employee, supplier relationship, establishment of office space, etc. it becomes more difficult and more expensive to transition the company to a new location. In addition, in any such transition, you risk losing some of your employees, which translates into the potential loss of valuable institutional knowledge.

Come West Young Man

In the United States, as with most developed nations, certain geographic regions have robust Entrepreneurial ecosystems. These communities all share a number of commonalities which you should look for when deciding where to launch your adVenture. Silicon Valley is the most well known of these entrepreneurial enclaves. However, it has become such a Mecca for startups that the landscape is crowded and the soil has become less fruitful than it was in the past.

In addition to terrible traffic, exorbitant commercial rents, rampant smog, and horrible weather, Silicon Valley also boasts a job-jumping workforce that tends to work on a two-year cycle. For many Valley workers, the mentality has become: join a venture, vest half of your options during the first two years and then head on to the next venture as a means of ‘diversifying’ your options portfolio. This is great when your company is growing and you are hiring new talent, but it can be devastating if your startup’s growth slows. This lack of loyalty can also be an issue as your employees move closer to full vesting of their initial option grant, which may prompt them to look for greener pastures.

You may be better off launching your adVenture in an emerging entrepreneurial ecosystem that offers more reasonable commercial rents, and more loyal workforce. Fortunately, there are a number of communities in the US which embody the factors that are conducive to allowing a venture to prosper.

Entrepreneurial Ecosystems

When you are selecting the location to launch your startup, assess the degree to which the following factors are present.

Inexpensive High-tech Workforce – Most entrepreneurial enclaves are situated near a University that has a strong technical curriculum. These workers are everything you are looking for: young, cheap, hungry, and technologically proficient.

Equity Driven Workforce – Unfortunately, much of the US suffers from a post-unionization mentality that dictates that you should get paid for every hour that you work and that “overtime” is at the employee’s discretion. You do not have the time, and you cannot afford to expend the required energy to fight this ‘old world’ mindset. I am not being a ‘fly over’ snob here. I lived in St. Louis for years, and it is a great city to launch a family. However, it is not a great city to launch a venture. Just the thought of trying to convince a middle-America workforce that ‘options are good’, and that they should work late into the night (night after night) exhausts me. Thus, launch your adVenture where you can draw upon a workforce with a work ethic that appropriately values equity compensation.

Start-up Centric Service Firms – As discussed in “Roping In The Legal Eagles”, you will need a special breed of accountants and lawyers who understand the common issues faced by new ventures; in addition, many of these firms will be willing to exchange some of their services for equity.

Venture Investment Community – Follow the money. Certain areas of the US have an extraordinarily high concentration of startups which are funded by institutional private equity. For instance, according to the Q3 2006 PricewaterhouseCoopers / National Venture Capital Association MoneyTree™ Report, Southern California venture investments totaled over $853M. This is more than the total raised in all of the New England states combined, more than was generated in the NY Metropolitan area, and more than the aggregate VC funds raised in all of the 33-states at the bottom of the list combined.

Even if your adVenture will not require venture capital funding, the lack of a robust institutional private equity infrastructure in your community is likely indicative of an environment that is less than ideal for a startup.

Affordable Housing – One of the biggest challenges in a number of regions that are conducive to startups is the stark lack of affordable housing. Younger workers can generally be accommodated, as they are usually flexible and are willing to live with multiple roommates.

The primary housing challenge tends to be with respect to middle managers who are in the midst of starting a family, and thus, desire a home with a yard, garage, etc. Fortunately, in a number of entrepreneurial enclaves (such as Southern California), the temperate climate allows workers to spend a lot of quality time outdoors, which reduces the claustrophobia they would otherwise feel in their $1 million 1950’s track home – or “Quaint California Cottage”, as it is known in real estate parlance.

Proven Entrepreneurs – A vibrant pool of skilled and willing entrepreneurs who have ‘made it’, and thus have discretionary time to help you avoid common startup mistakes, is a key component of an entrepreneurial enclave. Such Donors (see “Personal Pitch”) make excellent Advisors and Board Members.

Smell of Money in the Air – As described in “Make Stone Soup”, the smell of money is a powerful thing. If you are trying to launch an adVenture in a community that has fostered few startup successes, you will have to ‘sell’ the idea of working ungodly hours in the hopes of a large payday to a group of folks who have no first-hand experience with such success. However, within an entrepreneurial ecosystem, the chances are greater that your workforce will have some association with someone in the community who has reaped the rewards of a successful entrepreneurial venture. Knowing that entrepreneurial success is ‘real’ and that it can happen to otherwise ‘ordinary’ people is a great motivator that you should not underestimate.

In the world of startups, it is clearly nature over nurture. Given this reality, why try to grow corn in the Artic, when you can live in a sunny, pleasant locale in which other entrepreneurs have created a well trod path to entrepreneurial success.

Gestalt – an organized whole in experience which explains psychological phenomena by their relationships to total forms rather than their parts.

What?

A Venture Capitalist friend of mine once told me that, “Venture Capital is really a game of pattern matching.” He noted that whenever he met an entrepreneur in search of funding, he did his best to match the person (and his team, as appropriate) to a ‘pattern’ he had seen before.

Typical patterns which Venture Capitalist look for include:

• Technical Guy with a great idea, but no management experience
• Sales Guy who can package the opportunity, but who has minimal technological skills
• Visionary Founder who cannot properly delegate or appropriately accept input from other members of the Core Team (see “Founderitis“)
• Young Entrepreneur who is inexperienced, but has an interesting idea and is willing to learn from the Board and the Core Team (see “The Tribe”)
• Corporate Executive who lacks entrepreneurial experience, but has proven his leadership capabilities at a Big Dumb Company

Each of these patterns entails positive and negative traits that both excite and alarm Venture Capitalists. In the instance of the Tech Guy, the Venture Capitalist would be concerned that he might focus too much on technology and potentially mishandle business issues. With the Sales Guy, the Venture Capitalist might extrapolate that he may over-promise the product’s technical capabilities and ultimately deliver a sub-standard product to market.

By anticipating such pattern matching, you can proactively address concerns that your ‘pattern’ might raise. Thus, the tech guy would be well served to emphasize his willingness to delegate business issues to more experienced team members, whereas the sales guy should be careful to not overly promote himself or the opportunity and to acknowledge his technological shortcomings.

Such Gestalt pattern matching is a defense mechanism. Given the thousands of business plans they review, and the hundreds of people they evaluate, Venture Capitalists have to adopt effective methods of quickly assessing if a person / opportunity is worth greater diligence. As such, the initial pattern matching filter that they apply may be somewhat capricious, but it is a pragmatic way to deal with the otherwise overwhelming data onslaught which they must process.

Armed with insight into this aspect of a Venture Capitalist’s evaluation process, you can increase your odds of making it through their pattern matching filter by keeping in mind that the initial evaluation is less about ‘you’ and more about ensuring that you properly position yourself such that they will associate you with a positive ‘pattern’.

Who I Be?

In order to properly manage the pattern matching phenomenon, you need a heavy dose of self-awareness. Unfortunately, this is often difficult for young entrepreneurs, as they do not have enough experiences to fully comprehend their place in the world.

The key to self-awareness is the ability to see yourself through the eyes of others, as described in the following exercise.

Ask a group of people that you trust to give you their ‘objective’ feedback regarding the people in their past that remind them of you. Select some people who know you well, and others who do not. For instance, a good sampling of people to include in this exercise would be a family member, a senior co-worker, and a teacher. In essence, you are asking them to perform the same sort of ‘pattern matching’ that a Venture Capitalist will perform. Although your friends and family will likely match you against different patterns, their responses are of value, as they will allow you to see yourself through the eyes of others, and thus enhance your level of self-awareness.

Once your trusted source of feedback has identified one or more people you remind them of, explore the specific aspects of your experiences, education, work style, passions, goals, etc. which are similar to the person(s) with whom they are ‘matching’ you to.

If you are at the early stage of your career on The Fringe, this exercise is best performed with someone who is older, and thus has a deeper base of current and prior relationships to draw upon.

Suggest a Pattern

It is also possible to proactively address the pattern matching phenomenon. In advance of speaking with a particular Venture Capitalist, research the deals they have funded, and identify one or more portfolio entrepreneurs who ‘fit your pattern’.

You can find patterns that the Venture Capitalist have already invested in by looking at the portfolio on their website, and then drilling down into the history of the Founding Team of each venture. You may not fit the pattern of the “MIT Professor with 50-patents”, but you might find that the Venture Capital firm has funded someone whose pattern is akin to yours.

When you speak with the Venture Capitalist, you will be in a position to guide them toward a pattern in which they have already invested. Make it clear that you share the positive aspects of the bankable pattern and detail how you will overcome any negative traits that might be associated with this pattern (e.g., additional training, finding a mentor, adding specific skills to your team, etc.).

Simply recognizing that Venture Capitalists will attempt to lump you into a known pattern is helpful. Venture Capitalists are always looking for a reason to say ‘no’, so be sure to avoid comments that will allow them to associate you with a negative pattern. Your goal is for the Venture Capitalist to say, “I have seen this movie before and I want to see it again, because the ending is great!”

The result was a listless audition and the ultimate rejection of the world’s most successful recording act by the otherwise astute Decca Records.

When you complete this reading, you will be able to answer the following question:

• a. Sports writers are to athletes
  b. Theatre critics are to actors
  c. Band managers are to musicians
  d. All of the above

VC are to Entrepreneurs as ________ are to _________:

That was the last time Brian attempted to control the Beatles’ musical direction. As their career progressed, Brian focused on what he did well: dealing with the financial aspects of the Beatles’ money machine.

Several years later, after apparently forgetting his role in the Decca audition debacle, Brian made the mistake of offering his unsolicited advice to John Lennon during a Sgt. Pepper recording session by telling him “I don’t think that sounded quite right”. John did not miss a beat, saying, “Slag off Brian. You stick to your percentages and we’ll look after the music.” Brian quietly sulked out of the studio and never returned.

In this instance, John Lennon did what many entrepreneurs fail to do with respect to managing their VC. John made it clear to Brian that the Beatles’ role was to ‘make the product and tend to operations’, while Brian’s role was to ‘count the money’. If your VC offers you gratuitous advice regarding your operations, you must communicate a similar (albeit a bit less pointed) role delineation.

Kick your VC ‘out of the studio’, just like you would a skanky groupie. You are in the band, your VC is not. At first, they might be able to help you book a few gigs, and maybe even pull together your first tour, but they are not qualified to tell you what notes to play, or what lyrics to sing. If they do, and you listen to them, you are almost guaranteeing that you will never have a ‘hit’.

Seeing is not Doing
Observing successful execution is not the same as performing successful execution. Operational advice from a VC is akin to Brian Epstein giving Paul McCartney voice lessons. It would not make sense for Paul to follow such guidance, just as it does not make sense for you to take operational advice from a VC who has never ‘done it’.

At the height of their fame, the Beatles were asked, “What excites people so much about your music?” to which John Lennon replied, “If we knew that, we’d start another group and become managers.”

The same could be said of most entrepreneurs. If operating a startup were that easy, entrepreneurs would just invest a few dollars, sit on the sidelines, and let others do the heavy lifting – oh wait a minute, that’s what VCs do, isn’t it…?

Let’s review:

• a. Sports writers are to athletes
  b. Theatre critics are to actors
  c. Band managers are to musicians
  d. All of the above

VC are to Entrepreneurs as ________ are to _________:

The answer, of course, is “d”. The reality is that VCs play on the periphery of the entrepreneurial world, and sometimes they confuse their peripheral ‘involvement’ in a venture’s success with something more than mere observation.

Treat your VC like a VIP. Give them front-row passes to your shows, early releases of your CDs and let them schmooze in the greenroom. However, do not let them think that they are part of the band and never, ever let them get away with telling you, “I don’t think that sounded quite right”.