Three of our worst VC stories

As with all things, the horror stories just get the most attention. People love to rage. There are plenty of boring (good, even!) VCs out there. They just work more quietly, professionally.

I'll share a story, but its about a close friend and not me so I won't name any explicit actors and I'm going to round out the numbers. You either trust me or you don't, but this is a very direct relationship I have to both the founder and VC.

The story is this: the founder started their company outside of SV, so the lawyers weren't super familiar with startups and messed up the initial incorporation and stock plan stuff (actually super common: use Stripe Atlas or pay a startup-aware lawyer!). Went under the radar through years. This company ended up being bought for nearly $1B (with a B) after many rounds and a large board.

During the legal work to close the acquisition, they found out this messed up stock plan. Without going into the details, the effect was that instead of taking home $200M, the founder would take home ~$75M. The mistake the lawyer made almost a decade earlier was about to cost him $125M.

Most of the board basically said "too bad so sad, law is law." But one VC (the one I know, the one I'm talking about) basically strong armed and politicked the whole thing and eventually convinced everyone around the table to give up an equal share of their own holdings to make the founder whole.

Letter to the law: they didn't have to.

Spirit of being founder friendly: this VC went to bat hard and got everyone to yield to make things "right."

Also, look, you might argue $75M vs $200M is just "rich vs rich." Who cares? Sure. That's not the point.

You don't hear about stuff like this because honestly its not a big enough deal and feel good stories get way less clicks than pitchfork stories.

My prospective co-founders and I were pitching to a VC firm that was, on paper, a really good fit for what we were trying to do. The partner we were pitching to was, 15 years ago, briefly my manager's manager -- some work relationship there, she remembered me and I her, but we didn't work super closely together and it had been a very long time. She had moved on at that company to more big-shot things and ultimately become a partner at a respectable VC firm.

About 10 minutes into the pitch, she cut us off, and basically said -- as absolutely kindly as something like this can be directly said -- "I am not going to invest in this, and furthermore I don't think what you're trying to do is investible at all". Then she took a bunch of her time to run us through why, help us understand some very fundamental things about the VC world we didn't quite have right, and generally be brutal but extremely useful in us framing what we were trying to do.

She didn't have to do that. She could have nodded along and then given us a polite "no" like everyone else. She could have cut us off and given us a rude "no". But she didn't -- she made sure to use the time we had to help us as much as she could, even if she very adamantly was not going to invest.

Not a big gesture or anything, but kind and helpful. There's a lot of that. But it doesn't make headlines.

The non-horror stories are usually pretty boring: VC heard the pitch, then either passed politely or wanted to be part of the round. If they joined, they wrote a check and wanted updates.

The VC landscape has changed a lot since some of these stories happened. Many years ago, there were few VCs and even good companies had a hard time getting funding. This created weird environments with some VCs raised funds and then liked having companies crawl to them to beg for the money.

There are still some VCs like that, but there has been an explosion of VC funds and money. Most VCs know they need to work hard to earn the trust of founders that they want to invest in. Leaving a bad impression could mean you're left out of the next round if you want it.

This goes against the popular idea of VCs, but most VCs I've worked with are actually pretty boring, normal, nice people.

I believe Eric Vishria is the best Series A board member of this generation. I've learned more from him about it what it means to be a great CEO over the last 10 years than anyone else. I haven't heard of another founder who has spoken as highly as their Series A investor.

I've been meaning to write up my story with him. Now is a great time with all the horror stories on others that have been coming out.

He sticks through his companies for over a decade, which is rare in this business: https://x.com/ericvishria/status/2051459386372149506

There are tons and tons of mundane VC stories. They all mostly just go "we came, we presented, we were funded"

Tony Conrad [1] was the VC that guided our related content engine (Sphere: a vector database before vector databases were cool) through a $25 million exit. Chump change these days but he took really good care of us, leading us through a global recession and then two acquisitions.

[1] https://about.me/tonyconrad

Casey Aylward from Accel has been mentioned in all void0 company posts. So she must have been very useful for the founder. (I don't have any insider information about void0, I've met her a few times and she is amazing)

https://voidzero.dev/posts/voidzero-cloudflare#acknowledgeme...

You might want to listen to the Ron Conway episodes of the https://www.thesocialradars.com/ podcast.

I was just an engineer at a vc backed startup but our interactions with the VCs were totally normal - they were no better or worse than when we worked with publishers or other external funding sources.

The best possible case is that you get a cash infusion now in exchange for giving up a huge percentage of your future revenue and control of the company.

i raised twice from USV. class acts all around. too many stories to count, but they always had my back.

Sure. They are usually just very boring: you made a pitch, got funded. The VCs used their connections to get you good advisors and/or introduce you to prospective clients.

I think a lot of people fail to recognize that they're the next target, or convince themselves they're special in some way that makes them immune. It's like when someone knowingly participates in an affair and tells themselves "Sure, they're cheating on their current partner to be with me, but after they break things off I know we'll be together forever!"

Because if you get involved with most VCs, you will then have to watch your back until the end of time.

None of those "worst experiences" seem all that unusual to me (though nobody will say #1 out loud anymore until after they've invested), and #3 is completely in character for Vinod.

Because rich and powerful people also have massive egos to go with their power and money. Some of them will find your rejection a personal attack and try to actively sabotage you. Not all VCs are like that, but there are enough of them that you need to be careful about how you handle the situation.

I had the same thing happen (though seed round). I don't think it's uncommon. Also never took another meeting with the guy.

omfg that’s the beach access guy

Sadly, I've experienced this myself, and I'm aware of other people who were cut off from opportunities in similar ways. I applaud the tweet because this is important to say out loud: we are often not living in the world we think we are observing. Many people know this, but few talk about it. It's an open secret.

Vinod is insane. You can hear more of his really bad takes on his recent Sam Harris podcast episode: https://www.samharris.org/podcasts/making-sense-episodes/479...

My pet theory is that it is more nurture than nature. These (VC) veterans have seen thousands of startups come and go, and become so desensitized to the ruthlessness.

Of course to people like the author, it seems borderline sociopathic to casually suggest such levels of betrayal. It is like trying to get into the most exclusive nightclubs, and when you're finally in the front, the bouncer will look at the group and say "You can get in, but not those two". It sucks, but to the bouncer it is just business as usual, and you're just another face.

It used to be that VCs wanted founders to pursue a singleton strategy, because they wanted the diversification to occur at the level of their portfolio - on the grounds that at the level of an individual startup, diversification would less likely to succeed. The catchphrase was that they wanted "pure play" investments. So it would be interesting to know why it's now a cause of friction. (The "pure play" thing was actually from before YC took off and gave founders a bit more agency; and before the "pivot" was popularised; I get the impression that VCs back then were not too happy for a founder to change direction and confuse their portfolio)

VCs are the shotgun cartridge and startups are the shot.

Someone asked him this down the thread. He replied that it was said to him. So it’s a first party account.

I came across this thread on twitter this morning but isn't he the CEO / co-founder and he's clearly a man? I guess I don't get the reference. I know he has a co-founder who's a female, maybe she was lead at the time?

"1. A Sequoia partner passed on Cloudflare because he didn’t think a woman could lead a security infrastructure company. Seriously. "

Really sad that people are still walking around with those beliefs.

The fact that you hear this often (also not only from the victims of this) should signal that, even without quotes, there is likely some truth to it.

Cloudflare is fantastic at marketing, and pretty good at technology. I evaluated them twice for enterprise contracts and both times picked a competitor. The first time, it was DosArrest for DDOS protection, which was a much better value per dollar (but they sucked at marketing.) The second time, we needed a CDN with particular features and Fastly was a better fit.

My point is that it’s very very hard to know in advance that a startup is going to be awesome at marketing. Their tech was not, on its own, a giant moat or a “must have” standout. So I can see why some VCs shrugged.

And as someone who briefly had to interact with Akamai, the deficiencies in their product are not even close to subtle.

Getting extreme wealth is more so about luck in various forms than competence/intelligence. If it were just about the latter everyone who's intelligent/competent would be rich. You don't hear about boring wealthy people either.

Why do you think people who lucked into vast riches by being in the right place at the right time would be especially smarter than anyone else?

In many cases the GPs are not, at least nowhere near as much as you’d think. Obviously there are power laws here as well. Non partners, forget about it.

The other thing is it is maybe the most nepotistic industry out there. Which somewhat makes sense given the actual job is so relationship based.

https://en.wikipedia.org/wiki/Affinity_fraud among other factors - being someone who talks right and plays metaphorical ball with the correct people matters more than any amount of intelligence or competence.

Competence, intelligence, merit have little connection to wealth. Wealth at that level is attained through arguably unfair means, not from reward for hard work. Conversely, poor people are not poor as punishment for lack of intelligence or merit

Greg Isenberg's viral tweet about VC that fell asleep during a pitch kicked off a bunch of other tweets about weird VC experiences this week:

https://x.com/gregisenberg/status/2061794787825479818

Some QTs:

https://x.com/dunkhippo33/status/2062768969560510486

https://x.com/typesfast/status/2062791307094048937

https://x.com/awxjack/status/2062605286683336757

https://x.com/travisk/status/2062224472426365045

https://x.com/mark_cummins/status/2062293061426663612

Well he did retweet another tweet that kickstarted the convo, very possible he saw that tweet, said to himself "I have some of these to share!" and then proceeded to... do so.

probably just been long enough that he doesn't give a shit

source: most of the bullshit i surface up nowadays

Tell us one or two, then!

>some of the wild stuff I’ve either been asked to do

Oh man, I'm really sorry you had to go through that :'(.

For some reason they're not threaded on the twitter link, but you can see them threaded on the xcancel link:

https://xcancel.com/eastdakota/status/2062860530360959273

The third is in a reply. Use the XCancel link to view it without logging in.

This. Here is my bootstrapped niche corner of the internet: https://www.sourcemeta.com

>> More and more I see why bootstrapping is the way to go.

That does not match the definition of success here...the trick is to become a billionaire and call yourself an entrepreneur without ever turning a profit.... :-)

Then keep getting acquired, become a VC, do the same on and on.

Clouflare is an example as a loss making company, every single Musk company with the exception of his state subsided Tesla, Epic Games, Snap, DoorDash, WeWork, Rivian, Lucid, Peloton, Roblox, Wayfair, Lyft, Reddit, ...

Being a real business, and turning a profit, is very, very hard, you have Google, Amazon and a infinitesimal few...

This quote is from a viral interview between Jensen Huang and Dwarkesh Patel, the latter made some points during the interview that were very condescending and betrayed a deep misunderstanding of technology.

If you're not aware that's actually a quote from Jensen Huang.

partner meeting

There was once a CEO who built a great company, then decided to fire 20 % of the company and call those people publicly "measurers", so they are basically tainted in the marketplace. Oh wait...that was eastdakota