There has been much talk lately about the demise of the venture capital industry. Big funds are imploding after a decade of poor industry returns. The causes are many: wacky capital markets, Sarbanes-Oxley regulation, ballooning fund sizes, misaligned incentives, generational turnover, etc. Reviving the industry was such a big topic at this year’s National Venture Capital Association meeting that NVCA leaders issued a bold set of proposals to jumpstart the industry.
I haven't spent much time trying to dissect the causes of our industry’s current malaise. But one thing I know for sure is that we are doing a lousy job of basic customer service. How bad? If you google “venture capitalists suck” you will get more results than “United Airlines sucks”. A totally inaccurate measure to be sure, but to be anywhere near United Airlines on the suckage scale is not something that our profession should be proud of. I think we can do better.
So let me make a more modest proposal.
We venture investors could do a lot for the reputation and health of our profession by getting back to the basics of good customer service.
Many of us have forgotten that our business, after all, is to serve investors who entrust us with their capital and entrepreneurs who entrust us with their dreams. Having raised money at three start-ups before starting in venture, I have more than a few opinions on how venture professionals could act more, well, professional. Let me start with a few simple ones:
1. Return calls (and emails)
One of the classiest and most successful venture investors I’ve ever met is Brook Byers of Kleiner Perkins. Early in my career, I asked him at a panel discussion to share the secret to his success. He explained that one of his basic rules of doing business was to call people back by the following day. It sounds so simple, yet every week I talk to entrepreneurs who drive themselves insane wondering when the VC they met is going to call them back. I’m not talking about unsolicited inquiries (only the appropriate ones of which deserve a response); I’m talking about getting back to people with whom we’ve already met. Email overload is no excuse. Not when we’re checking our Blackberries every five minutes.
2. Pay attention
Which brings me to my next suggestion. I vividly recall pitching my third startup to a famous Sand Hill venture capitalist back in 1999. We had studied his portfolio, prepared a customized presentation and shown up early for the meeting, only to have him spend the hour distractedly munching a bag of peanuts and tossing the shells on the table in front of us. Now that a decade has passed and peanuts have given way to Blackberries, it is a rarity that I sit through a meeting where a VC is not checking email, surfing the Web or popping out to make a phone call. What’s the point of making all the physical effort to get face-to-face only to be mentally absent? I’m as guilty as any, so let me resolve immediately and publicly to put my Blackberry away when meeting with entrepreneurs, or at least use it as a drink coaster.
3. Just say NO
Given that we need to turn down 99% of the ideas that come our way, you would think that VCs would be pretty good at saying “no” to entrepreneurs. The best salespeople and entrepreneurs know that a quick “no” is better than a long “maybe”. Some of my VC colleagues don’t like to say “no” to keep their options open for a potential investment, but the vast majority just don’t like using the two-letter word because they are nice people. They hem and haw and say something about having to “talk to the partnership”, then worry for weeks about how to make up a reason for declining the opportunity. I’ve resolved to either tell entrepreneurs in the meeting or get back to them within a week. It sure has made my life a lot easier and I hope it’s helped them waste less of their precious time.
4. Be accountable
All this is easy to say, but aside from some community rating sites like thefunded.com, venture capitalists are simply not accountable to entrepreneurs. At Altos, we’ve begun measuring the time it takes us to get initial and follow-up responses to entrepreneurs, but we are by no means perfect. For a profession that generates all of its returns from the hard work of entrepreneurs, we sure do a lousy job of customer service. So hold me to what I say. Call me on it. If I (or my partners) don’t follow my own advice in this blog, just email email@example.com and you’ll get a response from me. If I still don’t get back to you, then you should probably give up on us and try United Airlines instead.