VCs use a lot of methods to make investment decisions, one being looking for how entrepreneurs respond to questions and whether they have thought of everything about the challenges their company will face. The entrepreneurs know their companies much more than I, and my job is to determine if they are masters of the topic and have thought of everything. If they fish for answers to my questions, then I worry they may not have thought of everything. This is the basis for the questions, not for my desire to sound intelligent.

I like to have co-investment partners work in presentations together, and a big benefit is it allows us to be more “tame” and let someone else ask the questions so that I can observe the interaction. I don’t ask questions because I want to sound intelligent, because I am not. I am just an ordinary guy. Your assessment is correct, without the opportunity to allow a great VC like Andreas to ask the questions while I review the interaction, it is more likely I would pass. These are techniques I use to make investment decisions and I am fine if you disagree with them. In the end I have to make a decision if I want to invest and the entrepreneur has to make a decision if he wants my money. Your observations are spot on, but I think you may not have realized all the reasons for how I run an investment decision process.

Thanks for your comments. I will try to explain my techniques to entrepreneurs in the future if they find them unsettling.

http://www.thefunded.com/submission/welcome

TheFunded should be a place for the entrepreneurs and the venture capitalists to meet. To be clear, we are a staunch advocate of venture financing and venture capital, and we believe that it is important for the venture industry to have a voice in this fast growing community. We are processing over 1 Membership application from CEO’s every minute, on average.

My impression was that Howard was asking these “tough” questions just to sound intelligent. He really did not have much of a clue. Without Andreas’ interest he would have just passed on us.

I’m sorry to post this anonymously, but I cannot take a chance to offend a DFJ Board Member. Too much riding on it.

I’ll jump in directly on the Howard Hartenbaum “hatchet job”. Howard rejected us too, but I’d say I appreciated his blunt style. While I could see how his style might be perceived as arrogant or rude, I thought his candid and straight forward style was a very welcome breath of fresh air. He let us know what his concerns/questions were, was explicit about how he was going to make a decision and was clear he didn’t have to wait for another firm to validate us with an offer. I agree with Mister X that Howard’s “here is what I think” and “have you thought of this?” approach is quite remarkable in an overall environment where it’s easier to keep stringing things along with opaque issues, more questions, and hazy timing.

I won’t hesitate to take my next venture to Howard (if he’ll take the meeting

TheFunded completely breaks the trust models that make Silicon Valley work. It presumes that there is only an antagonistic relationship between entrepreneurs and VCs, and only a friendly relationship between entrepreneurs.

Neither, of course, is true. Microsoft and Intel had their tensions, but worked together well; and Intel and AMD like each other not so much, but substantively cooperate in various technical and industry forums. VCs and entrepreneurs are a different value chain, with the same complex tensions.

The “trust model” of the Valley is figuring out which VCs *and* entrepreneurs are good guys, and which ones aren’t. It’s figuring out, on a completely separate axis, which ones know what they’re talking about and can get things done, and which ones don’t and can’t.

I am willing to have a very open conversation with a VC I trust about other entrepreneurs, and a very open conversations with entrepreneurs I know about VCs. With people I don’t know and trust, I am highly skeptical of telling them much of anything.

TheFunded doesn’t play into the reality of getting things done here any more than gossip sites play a meaningful role in getting Hollywood movies made. At its best (and it is far from ‘best’) it would be idle entertainment only.

The site lets people rate these consulting companies. I’ve always had a problem of validating the feedback of people who put opinions on goolti.com. However since so many people need it, such sites should definitely exist cos’ they weed the bad ones out for sure. In run, unfortunately they take in a couple of good ones down too. Howard, I guess, is this unfortunate one. But well, there is no better way out either.

I met Howard for the first time early 2006. I was raising my seed round for our tech startup. I had my laptop ready with my nice deck of PPT slides – Internet connection, overhead projector ready, coffee mug on the side, etc etc. Howard was about 10 mins late for the meeting, and when he arrived, the first question he asked was basically “who are you and what’s important to you in life”. Clearly, I was a little surprised. We talked for about an hour – never got to the PPT. It was a heated, fun, open, not the kinds of conversations you typically have when pitching. I liked it. Liked the form (no BS, get to the point), like the content (he gave me lots of feedback), and liked the guy (as a human being).

He eventually passed on the investment and we went with other VCs. Yet, he introduced me to some key press people and partners – without me asking for anything.

So yes, Howard shows up late at meetings. Yes, he asks pointed question that are sometimes destabilizing. Yes, he might appear arrogant at times. But of all the people the VCs that I’ve met he’s one of the few people who dares to challenge but also makes a genuine effort to suggest other ways. And that to me is pretty remarkable.