I interviewed General Partner at Flybridge Capital Partners and author of Mastering The VC Game Jeff Bussgang at TechCrunch Disrupt two weeks ago. I will be posting that interview in a few installments later this week. In the meantime, enjoy my review of the book below.

Mastering The VC Game couldn’t have been more timely or insightful for me. Having launched web-based software company SalesCrunch eight weeks ago, we are knee deep in building the product and raising money. We learned alot despite having raised $33M in my last company from prominent VC’s like Sequoia and Accel.

Being a sales guy at heart, I especially enjoyed “The Pitch” chapter. I have always been astounded how few technology entrepreneurs in Silicon Valley, New York or Boston understand or respect the sales process, which is exactly what raising money is. I have seen entrepreneurs with advanced degrees in quantum physics from Stanford and Harvard look like a deer in headlights when it comes to the sales process. As author Jeff Bussgang points out at the beginning of the chapter “many entrepreneurs are not naturally very good at this process, and many actively hate it.”…..”For the entrepreneur, it [the pitch] is the most critical salient expression of their business and confidence.”

I read “The Pitch” chapter two days before a VC meeting last week and made a few adjustments to our pitch as a result. The biggest change we made was to put in writing a list of potential risks to the business and what we were doing to mitigate those risks. We added this as a page in our business plan and a slide in our presentation. It seems counter-intuitive to show potential investors all your business’s potential weaknesses, but as Jeff points out it’s just the opposite. Before detailing the risks we always felt we were dancing around the elephant on the table or waiting for someone to raise them before we addressed them. But that always put us on the defensive and probably made investors question if we were aware of the risks at all. Acknowledging the risks and explaining how we were managing them had several positive results:

• it showed that we were not only aware of them, but thought alot about how to turn them to our advantage.
• it dispelled any fear that we might be blindsided by them or other risks down the road
• best of all, it put the risks on the table in neutral territory where we could have an intelligent conversation with investors about them together like a team. That resulted in more ideas how to avoid the risks or even turn them into competitive advantages and barriers to entry.

I really liked that Jeff profiled entrepreneurs from different fields to show how this process is pretty much the same across industries. I met one of those entrepreneurs, Dave Balter, right before he started raising money for BzzAgent. I introduced him to a friend who became a client and one of the references for General Catalyst Partners during the investment phase, so I was aware how weary Dave was of raising money. It was great case study to use for the book and I was glad to hear it ended well for Dave. A good friend of mine from business school worked for Gail Goodman at Constant Contact for eight of the ten years profiled in the book. Another great case study, as Gail built that company and raised money against all odds as the economy was failing down around her in the early 2000’s. I remember hearing first hand about the down-round and founder ejection discussed in the book and I can tell you it wasn’t a pretty time for the company. But its inspiring and educational to read how it all played out and how perseverance really does win the day.

The “When The Dog Catches The Bus” chapter about the fine print in venture capital term sheets should make any entrepreneur question the sanity of raising venture capital at all. If you ever heard Jason Fried at 37 Signals rant about all the reasons not to raise money from VC’s and wondered why, this chapter will help you understand. But as Jeff’s points out, the worst of the terms only get triggered when the entrepreneurs are not living up to their promises. Jeff helps you understand the logic behind each of the typical terms, how to navigate the terms and suggests doing so armed with a good lawyer. If nothing else, after reading this book you cannot claim ignorance. If you follow Jeff’s advice and negotiate the best terms possible, set ambitious but realistic expectations and meet or exceed them, you have nothing to worry about. If you don’t, well the VC’s go into preserving the principle mode, which is their job. If you put yourself in the place of one of the limited partners who invests her hard earned money into a VC fund, you would expect nothing less than the kinds of provisions VC’s use in their contracts to keep your money safe.

Happy reading. Thanks to author Jeff Bussgang for bridging the VC/Entrepreneur divide and helping increase the odds that us entrepreneurs realize our dreams and change the world.