Jonathan Murray: Confessions of a Midwest VC

Musings on a decade as a contrarian investing in early stage technology companies in the Midwest.

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Death is not the greatest loss in life. The greatest loss is what dies inside us while we live.

There are times in life when you need help. How people react when you reach out is fundamental to their character. It tells you things about a person that you can learn in no other way and at no other time. If they help, they are a true friend; if they hide, dodge, or make excuses, they were never your friend.

Jamie Ireland was a true friend. When asked for help, he gave it. Not just to me but…

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The Death of a Modest Man of Greatness

My friend Frank Samuel died yesterday in a one-car accident not far from his home in Geauga County. He was driving alone, wearing his seatbelt, in the middle of the day on a familiar road. His car slipped on a turn, spun clockwise, rammed into a guardrail, and his life was extinguished. The police have said that alcohol was not a factor, but anybody who knew Frank would have known that anyway. I…

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Culture is Everything

I had the opportunity last week to tour a dozen or so of the more than 40 buildings in downtown Detroit that Dan Gilbert and his various associates and companies have bought and refurbished. It was an amazing experience. Building after building, interconnected by walkways and underground passages, has been repurposed into really cool workspace for young tech workers (with a few of us seasoned…

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Detroit Comes Alive--and Still Has A Way To Go

Detroit Comes Alive–and Still Has A Way To Go

I spent last Thursday and Friday at TechWeek Detroit, which coincided with the first extended nice weather of the spring. It was a great event, bringing energy and vitality to a downtrodden city that is experiencing a rebirth. Detroit is on the way back, and in a big way. The scale of what is happening surprised me. Here are some impressions:

I stayed at the recently renovated Pontchartrain Hotel

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The Overuse of the “C” Title in Startups

I visited with an early stage company recently—or I should say they visited with me—and it had many of the features an early stage VC likes to see in an entrepreneurial team. Vision; energy; a variety of skills; belief; and passion. They had a completed…

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Bizarro World Comes To The Solar Industry

Fans of DC Comics and Seinfeld will remember that “Bizarro World” has come to mean a situation or setting which is weirdly inverted or opposite of expectation. This is what immediately came to mind as I was reading an article about the Spanish solar…

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Government Is An Anachronism

In the last decades, technology has rolled through one sector of the U.S. economy after another, rationalizing processes like supply chains; enhancing factory productivity by replacing labor with automation like Linestream’s advanced motor controls…

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Crowdfunding, Marketing, Big Data and The Death of Direct Sales

I was sitting in Demo Day the other day at FlashStarts watching ten companies present. The event had been scheduled to coincide with the first day of Title II of the new JOBS Act,which allows companies to directly solicit investment over the Internet or…

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Wealth Creation is A Precondition of Job Creation

I was pleased the other day, while attending Demo Day at FlashStarts, to hear founder Charles Stackstate that the goal of the accelerator and each of its companies was “wealth creation.” That was the only goal he discussed, and he pointedly mentioned it…

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Why I Like Mid-Career Entrepreneurs

Earlier this year I was asked to participate in a business plan competition at one of Cleveland’s elite private schools. The format was a “Shark Tank” and, like the television show of that name, the idea was that a group of investors would bid on which…

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The Emergence of “Human Capital Management”

I had dinner a couple of nights ago with two of my favorite executives, the CEO and COO of an enterprise SaaS company. The CEO rose through the sales ranks, and the COO through what used to be called HR and is now being called HCM—human capital…

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Why Expensing Stock Options Makes No Sense

Background

In the third of my three posts on stock options, I would like to address the issue of expensing stock options on a company’s income statement. I think that this policy, which was developed by the Financial Standards Accountability Board (FASB)…

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Stock Options for Overseas Employees?

In the current age, business has gone international and even early stage companies may have employees overseas. Stock options are becoming a part of expected compensation, particularly in technology companies. Stock options are an important component of…

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Stock Options for Everybody?

I have been thinking about stock options today, and I had three subjects I wanted to cover, which I’ll separate into three posts:

Whether a company should give stock options to all employees or just key employees

How to handle stock options for overseas…

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Why I Hate Pitches

Over my years in VC, I have had many entrepreneurs call me or e-mail me who were convinced that if they could just schedule time to “pitch” me that I would quickly see the merit in what they were doing and immediately decide to invest.

Early in my career I took a lot of these meetings and, on the urging of partners and trusted sources of referrals, I still take a few. More often than not, though, I find myself leaving pitch sessions dissatisfied—enough so that I have spent considerable time reflecting on the source of my dismay.

My conclusion is that pitch meetings are so unsatisfactory because there is a 99% chance that I will have to tell the entrepreneur “No.”  The venture capital industry funds only 1% of what it sees. Who likes those odds? I don’t enjoy delivering the message, and entrepreneurs don’t like receiving it.

The pitch session is structured like a sales call. The entrepreneur is “selling” and is often certain that conviction or passion or vision will sell me. I react to being pressured like most people do—defensively—activating instincts that interfere with my ability to listen to what the entrepreneur is saying or to get beyond the packaged pitch to the essence of the company’s value proposition. How can this be good for anyone?

My standard response now is to ask for something to read so that I can think about the company before being confronted with a “Yes/No” investment decision. Then I try to talk the entrepreneur out of putting a big stack of chips (to use a roulette metaphor) on the single number of depending on a pitch. Instead, why don’t we have coffee, sit on the same side of the table, and just talk about the business? Let me provide perspective and advice about how to increase the odds of receiving a “yes” from a VC; or thoughts about whether venture capital is the right financial product for this particular company and what other choices are available. Let me get to know you better and to see how you react to advice and suggestions.  Who knows, the freer I am to understand the business and the people, without the pressure of an investment decision, the more I may be willing to put time into developing an investment thesis.

For an impatient entrepreneur, spending the time to develop a relationship with a VC may be frustrating. But fund-raising is a process, not an event. You’re going to be in a relationship for five years, or maybe ten. Don’t put all your chips on a pitch. As Congreve wrote “marry in haste; repent in leisure.”

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Marry in haste; repent in leisure

Congreve