Ask HN: VC are calling later today, how much should I reveal?
We have a number of competitors in our niche. The VCs are calling us out of the blue, I guess to size us up, saying they are interested in the niche and us because we have a presence in it. I wouldnt mind the investment (though I've read about the downsides of VCs here and elsewhere), but I also dont want to give too much away in case they end up funding a competitor. What should I/should I not reveal? Plans for 09, new features, new customers in the pipeline, core competencies and tech, etc. There is no NDA at this point. Thx!
13 comments
Be very careful. It sounds to me like the VC is considering investing in one of your competitors and they want to use you as 'due diligence' to verify whether there's enough of a market for them to invest in.
If I were you, I'd go into the conversation with the working assumption that everything you say is going to be passed on to your competitors.
If I were you, I'd go into the conversation with the working assumption that everything you say is going to be passed on to your competitors.
It is extremely unlikely they want to fund you. I'd ask at the outset what their motivation for the call is. Ask them to give you their own understanding of the market: how your product compares to others, what they think about the industry, etc..
What they tell you will make it clear if they have looked at your product in more than passing detail. It is more likely that someone has named your firm as a potential competitor in their business plan and they are just doing due diligence as parent-post suggests, in which case they may not even have visited your website.
If they cannot tell you anything interesting about your own product or market then what is the point in talking to them? Politely tell them you'd be pleased to talk when they have a better understanding of the industry and understand what sets you apart. Then get back to coding.
What they tell you will make it clear if they have looked at your product in more than passing detail. It is more likely that someone has named your firm as a potential competitor in their business plan and they are just doing due diligence as parent-post suggests, in which case they may not even have visited your website.
If they cannot tell you anything interesting about your own product or market then what is the point in talking to them? Politely tell them you'd be pleased to talk when they have a better understanding of the industry and understand what sets you apart. Then get back to coding.
1. go to the funded.com and do some research on them.
2. find out if you are talking to an associate or a partner. I wouldnt reveal much to an associate as they are almost definetly doing research. Either way, ask them up front what their intentions are
3. Decide ahead of time what you want to tell them. I would think about a couple of interesting tidbits that might hook them into taking a meeting with you.
Good luck!
Good luck!
I was going to type a long list of things to do, but it really boiled down to this: what can this call get you?
Who is calling? Is it someone who can put a term sheet in your hand next week? Or is it an associate out to impress the higher-ups at the firm? How good is the firm itself? World-class? Mid-level? etc.
Know who you're talking to and what they can possibly give you. If you're giving them something, get something in return.
And keep in mind you don't have to take this call if you don't want to. Ask them what the call is about and if it doesn't sound sincere just back out gracefully.
Who is calling? Is it someone who can put a term sheet in your hand next week? Or is it an associate out to impress the higher-ups at the firm? How good is the firm itself? World-class? Mid-level? etc.
Know who you're talking to and what they can possibly give you. If you're giving them something, get something in return.
And keep in mind you don't have to take this call if you don't want to. Ask them what the call is about and if it doesn't sound sincere just back out gracefully.
I would only tell them your business model plans and that you're planning to make X amount this year (or that you made X last year). Don't go too far into your plans for 2009 unless they're public knowledge. New customers can be explained by $ amounts, not names. Only discuss your technology if it's common knowledge again (or if it doesn't matter to you that your competitors know). Be frank you'd love to go down the possibilities of an investment but you're not giving them an open door into your company until after there is a signed contract for the investment.
"So, what can I help you with?"
"We're wondering how you've sized the market."
"I'm afraid that's confidential information. I can't really tell you that until we get to know you better."
"Umm, ok. How about your biggest name clients?"
"I obviously can't reveal that kind of information at this stage."
(etc)
Option 1) "Look, we really want to invest in you, that's why I'm doing this research. How can I make you more comfortable talking to me?"
Option 2) "Ok... thanks. I need to go now, do you mind if I call you back later?"
"We're wondering how you've sized the market."
"I'm afraid that's confidential information. I can't really tell you that until we get to know you better."
"Umm, ok. How about your biggest name clients?"
"I obviously can't reveal that kind of information at this stage."
(etc)
Option 1) "Look, we really want to invest in you, that's why I'm doing this research. How can I make you more comfortable talking to me?"
Option 2) "Ok... thanks. I need to go now, do you mind if I call you back later?"
Many thanks for the comments. The conversation was short and sweet, I heard them out, we didnt say too much, and they said to call them back if we want to pursue it further.
Don't reveal the fact that they are calling today and you have no idea what you are going to tell them.
Seriously, if you don't think they want to fund you, then cancel the call.
Don't reveal that you wouldn't mind the investment. Act like you have no want/need for it.
We need to research VC's before we talk to them. Try researching your VC's by talking to the people who have been funded by them.
.
There is no NDA at this point.
You are thinking of asking a VC to sign an NDA?
.
http://robertplattbell.blogspot.com/2007/10/to-nda-or-not-to...
Simply put, when you sign an NDA, you are signing a CONTRACT, and any contract may obligate you to perform certain acts. More importantly, for each contract you sign, you are exposing yourself to potential litigation liability for breach of contract.
Thus, as a large company, if you sign hundreds or thousands of NDA contracts, you are incrementally exposing yourself to more and more liability. In a country where you can get sued for serving hot coffee, the odds of getting sued for signing all those NDA’s is pretty high.
So there is no point in a large corporation agreeing to sign an NDA with a solo inventor, unless the NDA is one of those bogus “disclosure agreements” referred to above.
If you think about it, it makes sense. And if you were to advise a company, you’d advise them NOT to sign an NDA. For example, suppose you represent a carmaker. Most of the ideas submitted will relate to cars. If your client signs all these NDA’s with potential inventors, chances are, one of them will submit an idea similar or identical to an idea already under development in your client’s lab. You’ll end up getting sued, as the inventor will claim you “stole” the idea. Better off to advise your client NOT to sign any NDA’s.
Venture Capitalists (VC’s) historically have refused to sign an NDA, and in fact, to ask them to do so is considered an insult and a sure way to put an end to your “elevator pitch”. Again, since VC’s listen to hundreds, if not thousands of invention pitches over the years, the chance that they will hear the same idea more than once (or a similar idea) is pretty great. If they sign NDA after NDA, they slowly paint themselves into a corner, to the point where they cannot back any new idea without the chance of some previous inventor claiming a breach of an NDA.
Frankly, the proposition of an NDA is a bit absurd. Someone comes to you and says they want to tell you a secret. BUT, before they will, they want you to sign a contract agreeing to draconian consequences if you tell the secret to anyone else. Suppose the secret is not all that great? Suppose everyone already knows about it, or more to the point, someone in your company does? It really is a risk not worth taking.
So, there are various good reasons why people will refuse to sign an NDA. If you think about it, chances are, you’d refuse to sign one, too!
.
There is no NDA at this point.
You are thinking of asking a VC to sign an NDA?
.
http://robertplattbell.blogspot.com/2007/10/to-nda-or-not-to...
Simply put, when you sign an NDA, you are signing a CONTRACT, and any contract may obligate you to perform certain acts. More importantly, for each contract you sign, you are exposing yourself to potential litigation liability for breach of contract.
Thus, as a large company, if you sign hundreds or thousands of NDA contracts, you are incrementally exposing yourself to more and more liability. In a country where you can get sued for serving hot coffee, the odds of getting sued for signing all those NDA’s is pretty high.
So there is no point in a large corporation agreeing to sign an NDA with a solo inventor, unless the NDA is one of those bogus “disclosure agreements” referred to above.
If you think about it, it makes sense. And if you were to advise a company, you’d advise them NOT to sign an NDA. For example, suppose you represent a carmaker. Most of the ideas submitted will relate to cars. If your client signs all these NDA’s with potential inventors, chances are, one of them will submit an idea similar or identical to an idea already under development in your client’s lab. You’ll end up getting sued, as the inventor will claim you “stole” the idea. Better off to advise your client NOT to sign any NDA’s.
Venture Capitalists (VC’s) historically have refused to sign an NDA, and in fact, to ask them to do so is considered an insult and a sure way to put an end to your “elevator pitch”. Again, since VC’s listen to hundreds, if not thousands of invention pitches over the years, the chance that they will hear the same idea more than once (or a similar idea) is pretty great. If they sign NDA after NDA, they slowly paint themselves into a corner, to the point where they cannot back any new idea without the chance of some previous inventor claiming a breach of an NDA.
Frankly, the proposition of an NDA is a bit absurd. Someone comes to you and says they want to tell you a secret. BUT, before they will, they want you to sign a contract agreeing to draconian consequences if you tell the secret to anyone else. Suppose the secret is not all that great? Suppose everyone already knows about it, or more to the point, someone in your company does? It really is a risk not worth taking.
So, there are various good reasons why people will refuse to sign an NDA. If you think about it, chances are, you’d refuse to sign one, too!
I second the research point. They're researching you, right? Why not do the same?
Early on my company was talking to a VC. We weren't sure we wanted money, but we did want to explore the option.
We called up a few companies in the VC's portfolio to ask about their experience and the information we received was incredibly useful. It ultimately helped us make our decision.
Early on my company was talking to a VC. We weren't sure we wanted money, but we did want to explore the option.
We called up a few companies in the VC's portfolio to ask about their experience and the information we received was incredibly useful. It ultimately helped us make our decision.
enough to get investment