Why Investors Won’t Talk to Competitors

http://www.danshapiro.com/blog/2012/08/why-investors-wont-talk-to-competitors/

by jheitzeb • 14 years ago

26 11 14 years ago

jheitzeb• 14 years ago

Great post. Just a thought to add to the reasons: at least some investment firms approach markets proactively and will work hard to identify emerging market opportunities and seek out the early innovators and strong teams -- especially in areas where there are first mover advantages. Their strategy is to identify the strongest team and earliest leader in the space and fund it to help it move fast. By definition if a company wasn't on their radar months ago, it is behind the curve.

danshapiro4• 14 years ago

On a related note, if an investor with a competitive investment comes a calling, their motives may be less than pure.

krickle2• 14 years ago

If you've disabled Javascript on your mobile device, this website will overlay an opaque black square over the content. A note to danshapiro.com -- when you are needlessly restricting your viewers from accessing your website for arbitrary reasons in this way, you should limit the size of the box holding the content, as I was still able to read the majority of your article.

danshapiro4• 14 years ago

That is crazy. It's apparently the default behavior of a WordPress plugin I'm using, ostensibly to make the site more readable on mobile. Thanks for telling me.

danshapiro4• 14 years ago

It's WPtouch - that behavior is inexcusable. I've disabled the plugin so you shouldn't see the problem any more (although it will also not look quite as nice on mobile, unfortunately).

sudonim• 14 years ago

Helpful to understand what the responses mean, but what should you do when you hear this? Do you say:

Can you introduce me to someone who would be better suited?

Thanks for your time!

How should an entrepreneur handle this response?

biot• 14 years ago

If an investor tells you they're already invested in your space? Always ask for the referral. The worst that can happen is that they'll say "no" a second time. But who knows? What you're doing may actually be more impressive to them than their current investments and they'd be happy to recommend someone else to you.

salsakran• 14 years ago

NEVER ask a VC who said no for a referral.

You're better off going to the next investor cold (or just do the leg work and get to them from a different direction) than via an introduction that reads "here's this deal I passed on".

danshapiro4• 14 years ago

Let's think through this conversation: "Bob, let me introduce you to footwear.me." "Are you an investor?" "No, I invested in shoes.tv because I thought they were the best company in this space."

It's going to be a really lame intro, probably worse than if you cold-called the person. So unless you're desperate, I wouldn't ask.

A better plan would be to pump them for competitive information. "Oh, shoes.tv! They're really neat. What was it about them that made you pull the trigger on the investment? Do you think that footwear companies are hot right now? What other companies did you look at? What do you think of their product so far?" If you're friendly and open, you might get some useful (non-confidential) information about the space, and how investors in the space think about it.

webwright• 14 years ago

This might be different for seed stage folks, accelerators, etc. YC, for example, would quickly run out of markets if they avoided potential competitors. Also, pivots happen a lot early, so you see early stage companies oftentimes become competitive after the investment. There are good ways for investors to deal with this... See Andreessen Horowitz and Instagram/Picplz: http://thenextweb.com/insider/2012/04/23/ben-horowitz-on-why...

Why Investors Won’t Talk to Competitors

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