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Do VCs Take The Summer Off? Entrepreneurs Say Yes. Data Says No.
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With July 4th approaching, the unofficial summer is about to begin. In almost every board meeting with portfolio companies and other entrepreneurs who are raising money, I’m hearing the same refrain: “My VCs are about to shut down for the summer.” Phone calls and emails won’t get returned, partners meetings won’t be held, and you might as well put your head down and build your company as best you can and then show up after Labor Day rather than wasting time knocking on VC doors. I admit this is only my 7th summer as a VC, so I’m still new to this thing, but I just don’t get it. I still work during the summer. My partners work all summer. My co-investors and their firms seem to be working all summer. And even when I’m on vacation at the end of August, if there’s a board meeting, a financing or a crisis, I’m available to my CEOs. So are all the other VCs I know in the industry. When I switched from being an entrepreneur to becoming a VC, I remember my friend and mentor Ted Dintersmith telling me: “Jeff, take as much time off as you can in before you start off, because when you’re a VC, you’re never really ‘off.’ There’s always some crisis in the portfolio, a transaction that needs to get done, a personnel issue that needs attention.” It got me wondering what the data showed on this topic. If the urban legend was true that VCs took the summer off, you would expect Q3 deals to be meaningfully lower than other quarters in the year. So I looked at the NVCA funding data by quarter (www.nvca.org). The quarterly chart was revealing - I saw no discernable quarterly pattern. In fact, in each of the four years betwen 2005-2008, an eerily precise 25% of deals were closed in Q3 (25.0%, 24.6%, 25.1% and 25.0%, respectively)! Some may argue that the quarterly data is misleading because Q3 covers September and many of these deals get closed after Labor Day. But this argument seems specious given that all the hard work on both sides happens 30-60 days before a deal is closed, when the VC does their due diligence and term sheets are negotiated. Rather than rejecting this counter argument prima facie, I decided to dig deeper. So I looked at our own data at Flybridge Capital Partners and did a more micro seasonality analysis. We have closed 42 new deals since we started the firm 7+ years ago. Guess which month was our largest in terms of number and capital? August, with 9 new deals closed! December was second and July was third. So much for taking the summer off. Looking at the follow-on investments and new deals in aggregate (nearly 120 transactions), our data shows that December was the most active month and August second. So much for that theory. I’d be curious to hear what other VCs and entrepreneurs experience on this dimension, but I have to say that the data suggests the urban legend is false. VCs simply do not take the summer off and aspiring entrepreneurs can get plenty of deals done, all else being equal. Jeff is a partner with Boston-based VC firm Flybridge Capital Partners. Read his past posts here. |
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June 26th, 2009 at 12:25 pm
Really interesting analysis Jeff. For kicks, I just went back and analyzed all of the first investments (not follow-ons) I’ve been involved in since ‘95. Here’s the breakdown: Q1 17%, Q2 30%, Q3 23%, Q4 30%. I’ve always thought that we took a bum rap about taking the summer off. Thanks for taking a closer look.
June 26th, 2009 at 1:10 pm
It’s incredibly difficult to schedule meetings in July and August. People still work, but so many people take a week (or 3) off here or there in the summer.
June 26th, 2009 at 1:26 pm
I think the average VC takes two weeks off sometime in July/August. I agree, this is not necessarily taking the summer off and I don’t think VCs are checked out nearly as much as people think. But, when an entrepreneur has several board member schedules to deal with during the summer, it is probably challenging to synch all the vacation calendars and that leads to the false assumption.
June 26th, 2009 at 4:24 pm
[...] Do venture capitalists take the summer off? Entrepreneurs say yes, but the data says no, writes Jeff Bussgang, a partner with Flybridge Capital Partners, over at peHUB. [...]
June 29th, 2009 at 1:31 pm
GFR’s and Kim’s points about an entrepreneur’s frustrations scheduling board meetings in August is a good one. Conference calls are the best solution to that conundrum, I guess, as it shouldn’t be hard for VCs to carve out an hour if they really care about a project or portfolio company. If they can’t, then it’s a signal that, to quote the movie, “he’s just not that into you”.
June 29th, 2009 at 3:41 pm
The issue is not whether individual VC’s are working during the summer — most of them are. The challenge is the logistics of getting a full partnership together to make decisions. Most partners (and entrepreneurs) will take 1-2 weeks vacation in July and August, and schedules rarely overlap,. You also get folks “working remotely”. Since in-office schedules don’t overlap, you have trouble getting a partnership or board quorom together to schedule a company presentation or board meeting.
At my old VC firm, we gave up and didn’t hold partners meetings in August. Individual partners kept working hard - doing due diligence on prospective new deals and working on their portfolio companies. You’d get a rush to get things done in July, and the first meeting after Labor Day was packed full with all the stuff folks had teed up from work done in August.
For entrepreneurs, that means you can still do fundraising in July/August. You’ll make progress on the parts of the process that require interaction with a smaller number of partners. Your meeting(s) with the full partnership will be harder to schedule, and if those meetings are critical path items to a decision you will feel a summer slowdown.
November 8th, 2009 at 12:27 am
[...] that Jeff Bussgang says that VC’s work in August and he’s right. VC’s are never really “off.” Just like entrepreneurs [...]
November 9th, 2009 at 10:31 am
[...] that Jeff Bussgang says that VC’s work in August and he’s right. VC’s are never really “off.” Just like entrepreneurs they take calls [...]
December 12th, 2009 at 11:19 pm
[...] that Jeff Bussgang says that VC’s work in August and he’s right. VC’s are never really “off.” Just like entrepreneurs they take [...]