Begging and Choosing

Fred Wilson talked the other day about the importance of choosing a group of venture capitalists who like working together. It reminded me of how much I like our investors: Paul Goodrich from Madrona Capital, Marc Singer from BEV, Emily Melton from DFJ and Steve Hall from Vulcan.

When I first got involved in raising money for my last employer, Plumtree, I looked at a venture capitalist the way Wiley E. Coyote looked at the Roadrunner, as a mirage of drumsticks and chicken wings, garnished with a sprig of parsley. Assessing an investor for his advisory ability seemed like asking about a heart surgeon’s personality before getting a triple bypass; it was hard to think beyond the cash we needed for our survival.

Ten years later, raising money for Redfin has often still been a gambit — our last effort was in 2007, and it wasn’t as easy as we thought it would be — but what made it easier was that we had convinced ourselves we really were evaluating each investor too.

Of course, it isn’t always possible to choose your investors. Beggars can’t be choosers, and all of us unprofitable companies are beggars. But my point is that approaching money-raising as a choice actually makes you a better beggar. Nobody likes being sold to, but everybody likes being chosen.choice

I still read tweets and blogs about how to make a VC moan with pleasure or lose his mind or do whatever he is supposed to do, but a VC relationship is more of a marriage than a one-night stand. Yes, you need a mission statement that fits on the back of a business card, a snapshot of your financials and the blue-bottle magic of an insanely great demo — which I have to admit should have the intensity, the lack of antecedent, the awkardness and brevity of teenage sex.

But after that it seems obvious that you just want to have a conversation about the business. PowerPoint, an evil system of command and control that turns one person into an unstoppable bore and the rest of us into zombies, is responsible for billions of dollars in lost valuations.

And if you aren’t asking as many questions as the investors are, you can fall into becoming a performing monkey, skimpering down Sand Hill Road from one meeting to the next with the same song and dance. Ideally, raising money is more like traveling to alien planets in a densely clustered solar system, where you encounter very smart creatures who have no idea what your world is like, but ask you questions that make you wish it were better.

It has been so long since Redfin has raised money that I worry we’ve lost touch with an important source of ideas and information. I still remember the questions from last time: why doesn’t Redfin charge users for premium access? Have you looked at how Yelp encourages users to compliment one another’s reviews? Why aren’t you offering mortgages? I try to answer every question with “yes,” “no,” a number, or “I don’t know.” For the best questions, the answer is usually “I don’t know.”

But you also need to have questions of your own. Here are some of my faves:

  1. How do you see our market changing over the next few years? Your investor has to develop her own ideas about your business sooner or later. At this early stage, this question is mostly an IQ test.
  2. When times have gotten tough for your portfolio companies, how have you helped them out? Anybody can get lucky with an investment that takes off like a rocket; all you have to do is hang on for dear life. A VC’s true measure is how she gets all her other companies pointed in the right direction.
  3. Who are your favorite entrepreneurs? Some people genuinely like entrepreneurs, notwithstanding their volatility and constant intellectual jousting. Most people fake it. If the investors’ fave five is composed of people she hasn’t worked with, she’s faking it.

It’s a fun process. Yes, when really smart people get to know everything about you in a very workmanlike way and then pass by the dozen, it becomes a self-esteem destruction machine. But mostly, it’s fun. Every entrepreneur I know secretly loves the WSoP-stakes game of raising money: the marbled lobbies and green courtyards, the bountiful assistants bearing glasses of ice-water are so much nicer than our grubby little offices.

What I don’t understand is why entrepreneurs only love venture capitalists until they give us money. As someone who always hated rich people and people in authority, I remember as a younger co-founder being shocked at how the grown-ups at Plumtree spoke respectfully of our board. I kept waiting for them to take off the rubber masks of their own faces and say, “just kidding, we hate them too.” So maybe now you’re waiting for me take off my rubber mask.

But back then, I just wanted to build good software and market it straight down the world’s throat. Now that I feel responsibility for other parts of the business, I need more help. This fall, despondent about our layoff, I really needed help.

Sooner or later, you will too. You’ll feel all alone in whatever you’re trying to do, and you’ll need advice. If you’re really in a jam, you won’t even be able to ask normal people for advice, because the situation is so bad you don’t want anyone to know about it. Your friends will listen to your better-than-it-really-is situation assessment while browsing the web or yelling at their kids, and then tell you what you want to hear: that the situation is better than it really is, that your board is wrong and you are right. If you already know what to do and just haven’t done it yet, this feels great. If not, it makes you feel more alone.

This is why it’s a good idea to at least try to choose your VCs, instead of just begging to be chosen by them. I almost didn’t write anything about recruiting and choosing VCs because I am so bad at talking to them — at a climactic meeting with an entire firm a few years ago, I opened the presentation by asking if the firm had ever made any Seattle investments, whereupon a senior partner gently reminded me that he was the first venture capitalist to invest in Microsoft — but the one real lesson I’ve been able to glean from the whole experience is that being a better chooser makes you a better beggar.

(photo credit: D.James | Darren J. Ryan)


  • Dave Schappell

    Glenn — your posts are fantastic, and this one is incredibly well presented (and timely). As the leader of a company that’s currently in fundraising mode, I was reminded that this is a two-way street, and that I need to be asking the important questions of our potential investors. I know what our current investors have brought to the table, and that’s been invaluable. But if we’re to bring someone else into this adventure, I need to be sure that they help make us better. We’ve tried to do that, by being selective with the investors who we’re meeting with, but at times, I admit that it’s felt rather erratic. I’ll be meeting with one of your referrals tomorrow, and will keep this in mind.

    I look forward to your future posts,


  • Glenn Kelman

    Hey! Thanks for the kind words Dave, and best of luck tomorrow. Lots of us here at Redfin are big TeachStreet fans…

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  • Kurt Schimmel

    Glenn, I came to this post through Twitter, posted by Mike Hirshland [@vcmike]. Thank you, a wonderful article that applies to so much more than just VC’s and entrepreneurs.

    I too look forward to future posts.


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  • Brent P. Newhall

    Just found this through @guykawasaki’s tweet. Excellent post, and making me think a lot more about how to go find money. Thanks very much!

  • Tom

    Thanks Glenn for this post (link from Twitter @guykawasaki). We are preparing to be “choosers” on our first seed round. Then the rubber masks go on… :)


  • Glenn Kelman

    Ha ha Tom, congratulations on RAISING YOUR FIRST ROUND. That is huge!!!

  • fred wilson

    good post Glenn

    beggars can be choosers but they have to be good beggars!

  • Glenn Kelman

    Well, well, well! That means the world coming from you Fred. Thanks for stopping by! I’m only sorry we hadn’t implemented Disqus before you did; we’re about to…

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  • Talha Jamshaid

    This is a very informative article..I have made my effort in explaing the how Beggers Go

    High Tech..The link is given below..…/

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