VC Cliché of the Week

I’ve always been a fan of the cliché. They summarize situations so well. Like my “hit by a bus” post.

I started out in the VC business working for two guys, Milt Pappas and Bliss McCrum, who had been in the venture business for close to 20 years when I joined them. They had developed a ton of experience and Bliss, in particular, had a tendency to summarize that experience with clichés.

I always loved it when Bliss would say something like “that dog won’t hunt” after meeting with a management team. He could have said, “I don’t see how that deal is going to work”, or “I think we should pass on the deal”, but “that dog won’t hunt” was always more colorful and more fun.

I’ve added a bunch more clichés to my repertoire over the years and I intend to lay one on you each week.

I’ll start out with one of Bliss’ favorites – Hope is not a strategy.

There is always an element of optimism in every venture deal. But often times the optimism gets in the way of critical thinking.

I remember attending a board meeting with Bliss early in my career and the CEO presented the sales pipeline. There were a ton of deals on the pipeline that were going to close within the next quarter.

But the company was running out of cash. The CEO was confident the sales would close and everything would be fine. Bliss asked him, “what happens if we don’t close the deals?” The CEO didn’t have an answer.  He simply hadn’t considered that possibility.

Out came the cliché. Bliss said, “well hope is not a strategy and I suggest you get one, and quick.”  That company developed a plan B which came in handy when the sales didn’t come in and we salvaged the deal and got our money back.

So when developing your business plan, don’t be too optimistic, think about the downside, and develop a strategy for dealing with it.

Comments

[Faisal N. Jawdat]

Overheard recently:

"What's the plan?"

"If we all clap hard enough we can save Tinkerbell!"

[Carlos N Velez]

"We do not believe in strategy"

This from the head of corporate strategy at an ex-US pharmaceutical company...true story.

[Dan]

Cliches are almost the sin qua non of business talk, huh?--I use them daily, sometimes to the chagrin of my colleagues or onlookers. But I don't care--clients love them and most always elucidate what otherwise might be convoluted financial matters or recommendations. For example, when I used to pitch stocks over the phone, I sold dozens and dozens of people by simply telling them to "pick up 1000 shares of stock ABC--it's a dunk shot." That's alot sexier than telling someone Corning stock was on its way up. However, I'll never forget when one of those clients ended up correcting me--"Dan, don't you mean 'it's a layup?'"

[Helmar]

"So when developing your business plan, don’t be too optimistic,", he sayeth, but forgetteth that unless you insanely inflate your figures and projections, most VCs won't even give you a second look. Why? Because if the figures are low, their "greed satisfaction level" isn't high enough, despite the figures being close to realistic.

So, their own mindset is often the culprit more than the entrepreneur's lack of planning or catering for "dog hunted: didn't bring anything hime" scenarios, and if you've shown some VCs the realistic version of your biz plan and got the cold shoulder, I am sure the next one is so fantastic it comes straight out of loony-land. It is likely to please them though. Oh well...

On that note: inflated and unrealistic figures usually lead to obfuscation and omission in other areas. In other words: if you're asked to bullshit, you don't limit it to the figures. And out goes honesty and integrity.

Just my 0.02 - speaking from experience.

[Peter Hoskins]

"Forget Plan B it distracts from Plan A." - Will Smith, Willenium

[Charlie Crystle]

Dad used to say "you can hiope in one hand and piss in the other, and see which one fills up first." Thanks, Dad.