So. You’ve just bagged a job as a partner at a VC firm. You want (badly) to impress the people who just showed a lot of faith in hiring you (if they only knew!). So you make a lot of rookie mistakes…
VC ROOKIE MISTAKE #1
The Kansas City Shuffle (a.k.a. Dog Deal Afternoon)
The Kansas City Shuffle, best characterized by Bruce Willis in the movie, Lucky Number Slevin (not a masterpiece but fun watching with your college-aged son on winter break), is a con in which a combination of distraction and subterfuge cause the mark to turn their attention away from the plot which proceeds in the opposite direction.
You, as a rookie partner in a VC firm, are the obvious mark for the Dog Deal Afternoon version of this con. To “start you off”, the old guard partners give you a couple of deals to “work”. They typically are dog deals of the highly P.U. variety. Various types of syrupy flattery ensue to convince you that you were brought into these deals because of your superior expertise.
You were brought into these deals for one reason, and one reason only. Deal attribution.
If you pull a miracle out of your butt and get the investment exited somewhere north of cost, the deal attribution will remain with the original investing partner. You typically get no *outside* credit (yeah, you may get a pat on the back internally to assuage any misgivings you start to have about what you got yourself into, but, to the outside world, the original investing partner is king.)
If you work your butt off but still cannot manage to save the company (which was on life support anyway), the deal attribution goes to (you guessed it!) YOU. (Sucker!)
Probably the single most important aspect for your personal longevity in VC is quality deal attribution.
(Read that, out loud, five times a day. Make it your mantra.)
MY TWO CENTS (Worth every penny, both of them)
Do not refuse to take on crappy companies – they actually are great learning experiences. Truly. Bring them on. But don’t get lost in the shuffle. Simply get it agreed to, up front (and IN WRITING – e-mail is usually good enough) that you DO NOT get attributed with the company if it fails but that you DO get attributed with the deal if it succeeds (or you share attribution, as the case may be – but start the negotiation from all of the upside and none of the downside). Publicly. With your LPs and the outside world.
Be great. And prove to your partners that there are no crappy companies, only crappy investors. (Good luck with that.)
Okay, so I numbered this Rookie Mistake #1. Where are #2, et al, you ask? In my head. It’s busy season for bean counters like myself but I want to keep to two posts on PEHub a month, thus the brevity of this posting. Maybe I’ll get around to more of these later, if there is enough interest.
I’m headed to Colorado next month for VC in the Rockies and look forward to visiting with my poker buddies, the Rutherfords; Lisa is hosting a charity poker event during the conference with lots of really cool swag, I hear. Hope to see you there!