Venture Capital Angel Investors Don’t Know Jack

If you’ve ever pitched your new business idea to a venture capital angel investor, only to be tortured with an endless list of reasons your idea will never work, my sympathies go out to you. The rejection of being told your business idea sucks can be incredibly painful.

That said, I think you need to keep one thing in mind while you’re being told what a buffoon you are for presenting your idea – maybe this venture capital angel investor has no idea what they hell he’s talking about!

It’s true, most venture capital angel investors don’t know jack. Don’t get me wrong – they think they know it all, but the truth is that most investors have a lot to say, and very little to deliver. The problem for entrepreneurs is that they tend to think that because venture capital angel investors can write a check, they must be experts on investments. That’s like saying that because you can buy a few shares of Gillette that you might be Warren Buffet. Not quite.

Consider the Source

When you’re listening to the feedback from anyone, investors included, you should evaluate the credibility of that feedback with healthy skepticism. You should be asking yourself “What makes this person qualified to validate my business idea?”

While many venture capital angel investors have experienced success in one or two industries at some period in time, that doesn’t necessarily make them an expert on your current business opportunity. Just because an venture capital angel investor made a gazillion dollars in the real estate industry in 1976 doesn’t mean he’s qualified to tell you about the state of the software industry in 2006.

Ideally you want to solicit feedback from venture capital angel investors who have “been there and done that” in your particular industry, preferably sometime in the last decade! The last thing you need is to waste your time listening to ancient war stories of an venture capital angel investor who hasn’t suited up for the game since before you were born.

Venture Capital Angel Investors Make Bets, NOT Predictions

If venture capital angel investors knew exactly which market opportunities were going to be the next big thing they wouldn’t need you – they could go start the company themselves. Investors aren’t that gifted, so they need to make lots of bets in hopes that a few of them will hit big while the others fall away and die.

When an investor tells you they don’t see the viability of your business, they are simply telling you that they are not willing to bet their money on your particular idea (or in many cases, on you in particular). It’s not the same as making a prediction that you will fail. The truth is the investor has no idea whether or not you will ultimately be successful, only whether they have enough confidence to bet on your success.

Bad Investors Are Like Black Holes

Not every investor is worthy of your time either. Bad investors, particularly those without much success at investing, can be a black hole for entrepreneurs, sucking up time and space at an incredible rate.

They spend countless hours asking inane questions that they should know the answer to. They spend a lot more time talking than they do listening. They ask more questions not because they want to know more, but because they don’t know enough to begin with. If you find yourself in front of this investor – run away as fast as you can! They are going to suck the life out of you.

Conversely, good investors get to the point quickly. They understand the industries they invest in and they don’t need to be “brought up to speed” about industry events that have occurred in the past few years. They are less concerned about learning your industry and drive straight into the few aspects of your business that will make or break you. They can do this quick analysis because they actually know what they’re talking about.

All Investors Are NOT created equal

It’s no surprise that the best venture capital funds consistently churn out the best startup companies – it’s because they are better investors than the other funds. Just like investors are looking for the best ideas, entrepreneurs should constantly be looking for the best investors to pitch their ideas to.

Unlike entrepreneurs who often only have one hit, good investors typically have a long track record of successful investments. If they don’t, that should be a big red flag to the entrepreneur. They might have some money, but that doesn’t mean they have talent.

So the next time you’re sitting across from some know-it-all investor who is telling you how your company couldn’t possibly succeed, ask yourself “is it possible that this guy has no idea what he’s talking about?” Surprisingly, the answer will often be yes! And when it is, don't hesitate to find yourself a competent venture capital angel investor.