The Importance Of Choosing The Right VC


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Michael Litt


Editor’s note: Michael Litt is CEO and co-founder of Vidyard, a video marketing and analytics platform.

Like so many young startup founders, I find myself alternating between laughing out loud and cringing as I watch the Pied Piper crew navigate the business world on HBO’s “Silicon Valley.” Having spent a good chunk of last year raising my own company’s latest round, the conversations about investment and valuation really hit home.

Looking back, I’m thankful the only body parts on the table in my VC meetings were elbows.

The show gets so much right about struggling to get your product to market, dealing with eccentric personalities and navigating the Sand Hill Road dog and pony show. But I was cringing as Richard and Erlich obsessed over dollar amounts at the expense of where the money was coming from. It’s an easy trap to be dazzled by dollars, and Pied Piper isn’t the first startup to fall into it. The show glossed over the importance of finding the right VC. Founders need great venture partners not only to sign the check but to provide good advice, make business connections and provide benchmarks against companies with similar business models in their portfolio.

After all, they’re not just taking free money. They’re giving up part of your company and opening up board seats to these people. They can’t afford to take on the wrong person.

Pied Piper is paying for it in newer episodes. Against a wall, Richard agreed to take money from uberdouche Russ Hanneman, a man whose claim to fame and riches was putting radio on the Internet and whose only interest in Pied Piper seems to be getting them to overpay on crap from other companies he owns.

In the fictional land of Hooli, taking money from Russ Hanneman is a hilarious disaster. In the real world, it’s just a disaster. Real startups need more than money from their VCs. They need their connections and their advising services. Sure, you don’t necessarily want an overly assertive new board member who steals autonomy from the founders, but you do need someone with good judgment and a real interest in making sure you succeed.

When I was meeting with VCs while raising money for Vidyard, I took a lot of meetings. I dutifully explained our video marketing and analytics platform, showed off the impressive growth we’d achieved and told them about the immense scale of our opportunity. Of course, we talked about the money: how much we wanted and at what valuation.

After dozens upon dozens of meetings, there was one firm I wanted investing in Vidyard. Okay maybe two or three, but Bessemer Venture Partners was the only one that I really loved. I didn’t love them for the term sheet they ended up giving us or how fancy their offices were. I loved them because they loved our business, and they shared our vision for where we could go. And I knew they had helped others like Shopify and Box go from fledgling startups to big success stories.

I spent long hours on the phone with Bessemer partner Byron Deeter talking about our business, but we spent just as much time talking about unrelated technologies and shared interests away from the office. It was clear that there was a match to be made. It took a while, more than six months, for us to prove Vidyard’s potential and make the numbers work to get an actual deal done, but the result is a partnership in which we know we can trust our investor to do more than sign checks.

I’ll keep watching and hoping Richard and his crew can overcome the obstacles they’ve created for themselves. Real world startup founders would be wise to learn from Pied Piper’s mistakes and seek investors that provide more than just money. But that doesn’t make nearly as entertaining TV.

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