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Jon Bradshaw & Peter Harris

Welcome to the Venture Capital Podcast with your hosts, Jon Bradshaw and Peter Harris. In this episode, Jon shares a fascinating story about a founder's experience with a venture capital firm and why the deal didn't go through. The episode is titled "Why Did The VC Pass," shedding light on the intricate dynamics within venture capital firms.

Why Did The VC Pass?

Welcome to the Venture Capital Podcast with your hosts, Jon Bradshaw and Peter Harris. In this episode, Jon shares a fascinating story about a founder’s experience with a venture capital firm and why the deal didn’t go through. The episode is titled “Why Did The VC Pass,” shedding light on the intricate dynamics within venture capital firms.

Jon, representing the founder’s perspective, narrates how a seemingly promising deal fell apart after discussions with a fund. The founder, excited about the potential investment, engaged with a junior partner and a mid-tier executive in the firm. Everything appeared positive until the unexpected rejection, citing reasons like being too late stage, concerns about valuation, and the market size.

As Jon digs deeper, he unravels the internal politics at play within venture capital funds. He highlights how the managing partner’s ego and the concept of attribution can significantly influence deal outcomes. Junior team members often find exciting opportunities, only to face challenges in getting them approved by managing partners who didn’t source the deal themselves.

Peter explores the delicate balance for junior members in venture funds, caught between the desire to get credit for their deals and the risk of facing consequences if things don’t go as planned. The episode emphasizes the importance of understanding a venture capital firm’s internal dynamics and navigating the politics to secure a deal successfully.

Listeners gain valuable insights into the behind-the-scenes workings of venture capital, with Jon and Peter discussing the intricacies of deal-making, the significance of relationships within a firm, and the need for founders to navigate these dynamics strategically.

As the hosts wrap up, they encourage listeners to share their experiences and thoughts in the comments, fostering a community discussion about similar situations. To stay updated on future episodes, visit and explore various subscription options on platforms like Apple and Spotify. If you found this episode insightful, the hosts welcome five or six-star reviews and appreciate comments about the advice provided.

Join Jon and Peter as they pull back the curtain on the venture capital world, offering entrepreneurs and enthusiasts a deeper understanding of the complexities involved in securing VC funding.

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Episode Transcript

jon: Welcome to the Venture Capital podcast. Peter Harris from the University Growth Fund. I'm Jon Bradshaw from Codebase. I give the founder perspective today.
Peter: And I give the VC perspective.
jon: The VC. Everyone knows you're busy. Then I cover University Growth fund.
Peter: Well, no, you're just like you're like, this is a venture capital podcast. And I give I'm Jon Bradshaw and I.
Peter: Give the founder perspective.
jon: This is why here.
Peter: We're talking about.
jon: Why your students think we've heard. This is why right here.
Peter: All right. All right. That's okay. I'm not important. You're important, Jon.
jon: Why did the VC pass a story about junior partners? That is the F, the title of this podcast.
Peter: Okay, so.
Peter: Here's what happened. So as I go to this founder and he comes to me and he's like, Hey.
Peter: So I was having these conversations.
Peter: With this fund that was looking at leading around. I thought the conversations are going really, really well. you know, I talked.
Peter: To this junior guy.
Peter: And then I talked to his.
Peter: Boss.
Peter: It was like kind of a mid-tier guy, probably like principal VP or something like that, but not like senior managing partner.
Peter: And they seemed like super jazzed about it. What was going on. And in this case, I actually knew this fund and I knew the people.
Peter: He's talking about and like I talked.
Peter: To them and sure enough, like they were like, yeah.
Peter: Like we loved it super great, like tons of conviction around the deal. and, and he was like.
Peter: He's like, yeah. And then they, they just kind of were like, yeah, it's not, it's not a fit. and what they had told him was it's not a fit.
Peter: Because you guys are trying to remember what they told him. It was like, I'm just going to make something up.
Peter: So they told him, like, look, like this is not really a fit because.
Peter: you guys are too late stage for us.
Peter: And I went back to him and I was like.
Peter: I was like, Really?
Peter: Like what?
Peter: What's going on here? Like, why? Why did you end up passing.
Peter: And, you know, they were like, well, you know, yeah, it was like two late stage. And then we had, like, concerns around valuation and then we, you know, and all this stuff. And then the partner was like, well, the market's like probably just too small, like once you.
Peter: Factor in the valuation and, and, and I was like thinking to myself as he's telling me all this stuff and.
Peter: Realizing that this poor entrepreneur.
Peter: Had just fallen victim to the internal politics of the fund, and.
Peter: That is that the managing partner and I could be.
Peter: Off on this.
Peter: But reading through the tea leaves.
Peter: Which you know, I feel like I have a decent amount of experience doing at this point. Okay.
Peter: it wasn't the managing directors deal as in, like he didn't sauce. He didn't, he wasn't the first to get excited about it, like it wasn't.
Peter: His and.
Peter: Therefore it could.
Peter: Not be a good deal.
Peter: And like, this happens, like, all.
Peter: The time within venture funds.
Peter: Like some junior junior.
Peter: Staffer gets finds a deal.
Peter: That's really interesting, get super.
Peter: Excited about it.
Peter: And then they bring it to the managing director.
Peter: And the managing director is like, Well, if I didn't source it, then it can't be like that. Good. Or of like.
Peter: You as as junior.
Peter: Staffer could have found it, then it must not be that compelling. And they end up passing and they miss out on like great opportunities because like there's this, the other.
Peter: Thing that's.
Peter: Going on within these venture funds is this concept of attribution.
Peter: So every every deal like gets attributed.
Peter: To one person within the firm, usually like one of the managing partners.
Peter: They're usually ones that sit on the board. They're the, you know, the ones that supposedly, like, found the deal, did the diligence accept, negotiated the.
Peter: Terms, like all that stuff.
Peter: And sometimes it's really easy to like.
Peter: Clearcut that, right? Like they did they sourced it through their relationships. They negotiated they sat on the board they'd like took it all the way. Right. Like all those kinds of things.
Peter: but more probably even more often than not, there was like some junior people that found.
Peter: The deal, cultivated it, did the diligence, got.
Peter: The man, you know, like teed.
Peter: Everything up, and then the managing director, like, basically came in at the 11th hour, sign the docs and takes the board seat. Right. Because they're the gray hair. and they take the attribution for it.
Peter: And it's tricky because if you're a junior.
Peter: Staffer at one of these venture funds, you're an analyst associate even like a principal, and you don't have like check writing ability.
Peter: you're caught in this.
Peter: Like, awkward.
Peter: Situation where you want your name to be tied.
Peter: To the deals because.
Peter: The only way you go from being non check writer to.
Peter: Check writer.
Peter: Is be by being able to convince the partners that you're going to grow the pie more than you're going to take.
Peter: From it, that you're going to.
Peter: Source deals that they don't have.
Peter: Access to.
Peter: And that like you.
Peter: Have good investment judgment.
Peter: And the only way you get that is tying your name.
Peter: To these.
Peter: Deals. The problem is, is that if you push too hard to get your name.
Peter: Tied to it.
Peter: The managing partner like politically, like they're just not going to support your deals. And if they do support your deals and this is the other.
Peter: Like awkward thing that happens in venture funds all.
Peter: The time is that the managing partners will like. They may say, okay, fine.
Peter: We'll fund that deal.
Peter: That you are pushing so hard. But by the way, if this doesn't work out, you're done, right? So if you think about the typical.
Peter: Venture fund where like.
Peter: You're going to make like 20 to 30.
Peter: Investments and.
Peter: You're hoping that a couple.
Peter: Of them end up like successful.
Peter: And that the rest are just kind of met the likelihood that the junior guy.
Peter: Or gal.
Peter: Is going to find the one deal that carried the fund or the one of the three deals that carried the fund is like super low.
Peter: Likelihood.
Peter: And yet you are.
Peter: Judged.
Peter: On whether or not like you're able.
Peter: To do that.
Peter: Which is like entirely unfair for like a junior junior investor.
Peter: So.
Peter: So they're left in this like situation was like they either play the politics game and, and underwrite the deal and support it in such a way that the managing director like believes that it.
Peter: Was actually.
Peter: Their deal.
Peter: In which case they get no credit for it.
Peter: Or they try.
Peter: To take all the credit for it and they put themselves put their head on the chopping block. If it doesn't work out or the deal just doesn't go through because they couldn't get enough support for it internally.
jon: So the moral of the story is when the when you get that cold email from the analyst that says, hey, Battery Ventures wants to check you out, you pass.
Peter: No, I think you take the meeting.
jon: Okay.
Peter: I think you just need to know that like if you want.
Peter: To get the deal done, you got to play the internal politics of the firm.
jon: But how are you gonna know the internal politics as an outsider?
Peter: Well, ideally, you go talk to other founders that the fund has backed, which.
Peter: You should be doing anyways. That should be part of your own.
Peter: Diligence on the venture.
jon: Well, you're just saying if you get closer and the analyst says, Hey, this might be a good fit. Yeah, then you work your way around. Yeah. To the managing partner.
Peter: Yeah. Got it.
jon: Yeah, That's what I've done wrong all these years.
Peter: Well, look, I mean, I think. I think some entrepreneurs.
Peter: Make the mistake of blowing off the junior guys.
jon: Okay?
Peter: And I think that's a mistake. Because if the.
Peter: Junior guys.
Peter: Don't like you.
Peter: the managing partner can still move.
Peter: Forward with the deal if they really love it. But if they're junior team that's going to be doing all the diligence work is like hating it. It's probably not going to go well for you.
Peter: Alternatively, if you invest all of your time and energy.
Peter: With the junior, the junior staffer, and don't engage the the managing director.
Peter: Right. In a way.
Peter: That like the managing director, feels like they have ownership over the deal, it's probably not going to go well for you either.
Peter: So you got to kind of learn to play.
Peter: The politics of the firm a little bit.
jon: And you get to the managing director either through the analyst first or then through other people that they've invested in.
Peter: Personally, I think the best way to do it is.
Peter: You get some inroads with the analyst and then you get one of the founders that the venture fund is backed that they like to connect you to the managing director.
jon: Okay?
Peter: And then boom, once you buy all sides. Yeah. Like Gary.
jon: Vaynerchuk, JibJab.
Peter: Yep.
jon: Yep, yep. Whatever it is. His book.
Peter: Okay. I don't even know. So I don't know. What do you think? Have you ever seen that pop up?
jon: I have not seen that one. That was a unique one when you talked about podcasting about it, which makes sense, but I haven't. Yeah, I've done very limited VC pitching and I do I go straight to the partner because I know the partners, Right? Hey, I'm ready to pitch cause.
Peter: You're a big deal.
jon: Yeah, not a big deal.
Peter: You are a big deal, John.
jon: When you're 40, you know, a few people who who have got have climbed the VC ladder. Hey, take.
Peter: All the analysts you knew when.
Peter: You were in your twenties, and they were in their twenties are now 42.
jon: Maybe. Maybe that's what it is anyways.
Peter: this is helpful.
jon: I give this a test.
Peter: To you as an entrepreneur.
Peter: If you're a listener, like, what's going on behind the scenes? And like.
Peter: Part of my goal or.
Peter: Our goal with this podcast is.
Peter: To pull the curtain.
Peter: Back on like this monolith that is venture capital and to help people understand that, like when you think about Sequoia, there's not like this monolith called Sequoia. It's really just like a bunch of partners.
jon: What about this monolith called University Girls Fund?
Peter: it's a monolith. No, I'm just kidding.
Peter: It's me and Tom. Right? And then like, 50 students and, you know, we have structure.
Peter: And we try to adhere to.
Peter: The structure, but there's there's nuance.
Peter: To it, right?
Peter: And you want to understand it. And sometimes that nuance is not a bad thing.
Peter: Sometimes it is. I mean, with any firm, you just want to understand like what's going on, how decisions get made, who are the actors that are making the decisions. and, you know, just better understand kind of what's going on within these firms. So.
jon: All right, great job. Good job, team. We got.
Peter: To have a better.
Peter: Way of ending.
jon: These things so we could really use some nice five, six star reviews. If you want to leave us some of those reviews in Apple or Spotify or other places that we greatly appreciate it.
Peter: And leave us some comments. Was this helpful advice? Was this like have you had similar situations that you've gone through.
Peter: Where the VC is kind of like giving you some lame answer as to why they're passing and you didn't understand why?
Peter: Tell us about it in the comments.
Peter: And if it's a unique situation, well, we'll podcast about it.
jon: All right. Sounds good. Thanks, guys. Kind of venture capital firm and all the options to subscribe are there. Thanks.