The Anti VC

My friend wrote this to me about an entrepreneur we know:

"He's looking for the anti VC"

Now that's an interesting statement. What exactly is "the anti VC"?

I presume the anti VC still invests money in your company. If that's the case, what exactly defines the anti VC?

Please add your feature requests in the comments, and I'll assemble the top ten things that define the anti VC by the end of the week.

Comments

[lawrence]

Here's a superficial one: how about a VC who is rumpled, jolly, and a little bit out of shape? I'm tired of meeting all these buff, trim terminator guys who are smarter and more well dressed than me. I'd feel more comfortable pitching if my VC's looked and acted like Norm from Cheers.

[whooknew]

Fred,

I'm not sure if one is qualified to request an anti-VC without experiencing a real VC. However, as an entrepreneur I believe an anti-VC would have all the traits of a real VC minus the following:

1) onerous term sheets a.k.a protecting interests of the LPs
(liquidation preferences, anti-dilution rights, etc.)

2) immediate board control a.k.a providing strategic guidance

3) preferred stock a.k.a protecting the investment

4) removing the founders a.k.a leveraging the network

Or all of the above a.k.a maximizing return on investment

Again, as one not qualified to compare, I would argue that if anti-VC = (real VC - the above), then an anti-VC can be an entrepreneur's best friend and a VC's kryptonite. If you could reincarnate yourself (with all of your infinite wisdom) as a young entrepreneur and was seeking funding, who would you want to be your Superman?

I know, I know.....it depends.

[Bogus Jones]

Apparently the anti-VC is every VC I've reached out to so far...as my recent venture has yet to gain funding but has a solid management team, a massive audience, a novel technology, a strong path to being cash-positive, and is aiming forward at the massive convergence of mobile, web, SMS, and advertising...but I digress. :-)

From the 'down here' perspective I think some of the comments here are pretty harsh...there is massive competition in the private equity market to find non-traditional places to put money. The incredibly increasing rate of the number of people with lots of money to invest might just be out-pacing the rate at which the other half creating new and worthwhile business.

It's maybe a case of financiapreneurial convergence...and VCs carry the burden of careful deal allocation.

[Mary]

An Anti VC would be someone who isn't arrogant and rude. But just like fairies and unicorns, sadly, they don't exist.

[Scott Yates]

Same first letters, but whole different idea: Visa Card.

(The home for the Credit Card VC, by the way, is CreditCardVC.com)

[Dan Malven]

The anti-VC has an "open-source" personality. He believes in sharing his real thoughts and ideas for free with whoever wants to listen, for the betterment of the community. Just like open-source software, if the community is better, then the anti-VC (and his LPs) end up better too. Regular VCs are closed-source. They believe that sharing of their true thoughts is a zero-sum game so they avoid it at all costs.

Good anti-VCs use the same financing terms as regular VCs. They are just transparent with everyone about what, why and how they do their job.

It works. More VCs should try it.

[Zviki]

* Invests in competent people who are doing this for the first time.
* Invests in a business even if it's obviously not the next Google (or, for the sake of argument, has potential of less than $100M).

[Kris Nair]

He's the most passionate partner in your business - Fallen in Love with the product - He won't even mind killing the founders to make the Product Big!

[ I think so ]

[Fred Destin]

Getting VC is a contract. It means getting engaged "institutional" money growing and pushing for an exit within 4-5 years if possible. The benefit of VC is that it is a fairly "pure" form of capital: the rules of engagement are clear.

Assuming the anti-VC is still a financially motivated investor, the anti-VC would be a Warren Buffett for the early stage world. A kind of industrial holding where you would get a long-term financing partner who is looking to build wealth over 25 years, who builds a coherent portfolio of assets and looks at very long-term capital appreciation. He would be a VC in almost every respect (you know, wanting a well run business that is fulfilling its potential :-)) except for the time horizon.

As an aside, those who reliably complain about "horrible VC terms" (preference, drag-along etc.) should really think about why, despite the insane levels of competition amongst VCs and the fact that many VCs are former entrepreneurs, these requirements keep popping up. The answer of course is that the industry has honed over long periods of time a balance of legal requirements that is necessary to make the venture proposition work. It's just rational.

[Laura Glynn]

The definition of "anti" is against. So wouldn't an anti-VC be one who is against receiving funds?
The comments sound like they are describing what they feel is the opposite of a VC. So perhaps the word would be "counter-VC".

[krishna]

The one who -

- is a natural, early judge of an opportunity.

- is willing to bet on the team than the idea and invests only when he has full faith its capabilities.

- goes by time-tested positive gut feel and does not fall victim of a herd syndrome.

- acts as an independent voice of reason even as not many facts are available.

- will open out that he sits on the Board of 10 other portfolio companies, not to expect too much involvement from him other than attendance at quarterly Board meets.

- sets a broad direction even while he keeps a hands off approach, puts the venture back on track occasionally when it tends to veer off.

- motivates the team to fix it, even as something that can break ain't broke.

[Graeme Thickins]

This is easy. The anti-VC is one with actual operating experience. Count them sometime -- you'll be shocked.

[proales]

VC's
- John Doerr
- Mark D. Kvamme
- Arthur Rock

Anti-VC's
- Paul Graham
- Mark Cuban
- David Cohen

[Bobby Martyna]

Many, or even most VCs are trend followers, just like investors in other asset classes. In many instances, it's a profitable strategy or at least a safe strategy.

The Anti-VC isn't that at all, but rather is a maverick who puts real risk capital on the table commensurate with the risk put down by the founders and is willing to stick it out with them, foxhole style.

[Chip Griffin]

I think Graeme has it right. The "anti-VC" will have entrepreneurial experience rather than a finance background. Harder to give sound advice to someone in the trenches if you haven't been there yourself.

[lucinda]

ok, so this thread has become an exercise in defining "what i wish vcs were" rather than defining the anti-vc. in that vein, i'm with andy - i think that the key is transparency.
i've raised a lot of vc in my career and have found that the one consistent issue is lack of transparency. sure, some vcs are arrogant no-value vultures, but others are great.
what is always true is that our interests go from being aligned (we all want to build a successful business) to not (this is a life-changing exit for me, the multiple isn't that exciting for you; i have all my eggs in this basket, you have a diversified portfolio). you know everything about my business but i know nothing about yours (where are you in the fund? where do i fit in your tiers of expectation? what value are you carrying me at?) even though your business can affect how you think about mine. when you get multiple rounds with multiple players all of this gets even more complicated. mid-tier funds want to bring in top-tier funds for their own benefit, not necessarily the company's. funds that are out of cash don't want another round raised even though it's the right thing for the business. the examples go on and on. and these issues are extremely difficult for entrepreneurs to spot.
at this point, i like to work principally with people i know. so that when these times come, i can say "ok guys, let's be real, this means x for me but y for you." but i have the experience to know what to ask when, and have the scars to show for not knowing when i started.
i think that vcs should take the responsibility to be clear about this stuff, since they do it all day every day while we're busy running businesses. in the short term, they'd lose the advantage of playing us, but in the long run they'd be backing better entrepreneurs.

[Leigh]

not to be literal BUT....

"Anti" pretty much means to hold an opposing view

So if the VC wants to make money
I guess the anti-VC doesn't want to make money

If the VC wants to work with great entrepreneurs
I guess the anti-VC wants to work with idiots

If the VC wants to invest in the next big thing,
The Anti-VC is into recycling old tired ideas (oh wait I could make a comment here ..nah... ;-)

and so on...

In other words...There is no such thing as an Anti VC

[Grand Egress]

The "anti VC" would be a VC who does not say "do as i say, not as i do" -- that is, who is willing to offer the entrepreneur/founders/management team essentially the same deal that the VC argues for and gets for himself from his own investors/LPs:

fixed economics (e.g. 20% "carried interest" which pays after vesting and after after certain threshholds are met)

management discretion to divide/allocate the "carried interest" internally

a commitment to total capital needed at the outset, then a series of draw downs along the way

a long time horizon without unrealistic or unhelpful short term analysis of short term metrics, milestones, etc.

[Shreyas]

If VC (and therefore anti-VC) define a culture, the anti-VC is probably female among other things.

[charlie crystle]

social venture capital--socially responsible investors, who care about the TRIPLE bottom line of people, planet AND profits.

So Wayne Silby of Calvert, Josh Mailman, David Berge (underdog ventures), Ben Cohen (angel, but you get the picture), Mark Finser of RSF Social Finance. They invest in great businesses that have social missions built into their models.

Funny, just the other day I told a VC that my co-founders and I donated 10% of our founding stock to Underdog Foundation in a donor-advised fund, and I matched it so we were 20% nonprofit owned.

He said he didn't care, just make me money, and I said, well, think of it this way: we personally have to work hard to make 20% more to make up the gap. He liked that.

Of course, 20% of what? I encourage all of you entrepreneurs to set aside stock early for philanthropy, before you can assign some value to it, because it gets LOTS harder to do it later when there's actual value.

Just my 2 cents. Fred, you're not a typical VC, as everyone knows, so I hope you don't take those other opinions personally.

[Tod Whipple]

Anti-VC is an evolved species of VC from the startup revolution currently raging.

The anti-VC embraces the paradigm shift happening in the VC industry. Micro-funding with no terms attached to obtain "proof-of-concept" startups. The proliferation of cheap and innovative startups coupled with an all time high of large VC money makes for a toxic formula.

The anti-VC is able to combat that formula by investing in hundreds of possibilities. Supporting the 100:10:1 ratio. Invest some money (10K) in 100 startups, then invest lots of money (VC fund) in 10 and hopefully retire on 1.

[just.a.guy]

I'll presume that both VC and anti-VC are equity investors and looking to maximize returns. If you lift the equity investor proviso, then you wind up in the territory of Mother Theresa or big-name politicians... which is a pretty meaningless comparison

VC - invests in private companies
anti - invests in public companies

VC - relatively short time horizon (3-5 yrs typical, though would sell to the right buyer in <1 if the timing and deal were right)
anti - in it for the long-haul

VC - invests in new and potentially rapidly expanding markets (likely currently small ones)
anti - invests in established, probably slower growing markets (likely large ones)

VC - invests dollars for rapid growth... usually hiring
anti - invests dollars into 'working capital' and isn't afraid to thinly capitalize

VC - willing to underwrite technical risks and understands an investment may come up a donut
anti - obsessed with loss ratios and capital preservation

VC - concerned with the fashionable (what's hot or will be hot to the 'street in 3-5 yrs)
anti - bucks fashion and conventional wisdom

...

So, the anti-vc looks like the unfashionable, technology-risk-averse investor makes long-term contrarian investments in out of favor public companies in established markets.

I think the anti-VC would be someone like Warren Buffet, Bill Miller of Legg Mason, or Ron Muhlenkamp...

[the lone ranger]

An anti-VC is one who allows his entrepreneur to buy back his business at a reasonable price when it does not conform with the exit strategy, that is..... the anti-VC admits his mistake...... is this possible !!!