Secrets of Success

William Paiva, a partner with lead venture capital firm Sevin Rosen Funds, spilled the beans with a talk titled “Top Ten Venture Capital Lies.” Using 20 slides, tongue-in-cheek humor and personal experience, Paiva offered some meaningful advice to entrepreneurs seeking outside investment.

He expounded that advice in a recent interview with Tulsa Business Journal.

1. “Find a quality lead venture capital firm, and we will invest.”

Paiva said entrepreneurs will often run into venture capitalists who like their idea but aren’t willing to “hold their nose and jump in the deep end.” By instructing the entrepreneur to find a lead investment firm interested in his opportunity, the VC is telling him to find someone “bigger, better and smarter” to validate the investment.

2. “None of our portfolio companies compete with each other.”

Essentially, this is true, said Paiva.

“Venture capital guys are usually sensitive about having competing companies in their portfolio,” he said.

During the pitching stage, however, it’s not unusual for a VC firm to set up multiple appointments with similar companies. Paiva suggested keeping this in mind when scheduling meetings with VC firms. Also, research beforehand what companies are already in the VC’s portfolio. If you find one similar to yours, you might be headed to an appointment with a VC who’s just mining for information. If you’re really smart, Paiva said, you’ll use such an opportunity to do some digging of your own.

3. “Submit your business plan through our Web site.”

If you happen to meet a VC and he tells you to submit your business plan through his company’s Web site, he’s basically telling you to throw it in the trash. Plans submitted online usually end up nowhere. The best way to get an appointment with a VC, Paiva said, is through a referral. Make the acquaintance of a CEO he’s invested with or a lawyer he’s worked with. Having a referral from a trusted source almost guarantees you an appointment.

4. “We are hands-on investors.”

“We take a decent piece of your company for what we put into it,” Paiva said. “My advice is, if you’re going to give up that much of your company, make sure you’re getting value out of it.”

Make sure you’re not only getting money, but you’re also getting plenty of resources — referrals for suppliers, customers and other relationships.

“The only thing worse than being undercapitalized is being capitalized with an investor who’s not a good investor,” Paiva said.

5. “We have lots of experience in your industry.”

Paiva reiterated thoroughly researching the VC firm you want to work with and ensuring it does have the experience required to add value to your opportunity.

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