Looks Matter, But Business Savvy Is More Important

Published in UT San Diego, April 14, 2014

Today’s column is a bouillabaisse. That is a $26 word that suggests I am going to throw everything into the soup, heat it up and hope you don’t get sick.

First, as you know, Ms. Bry and I are big supporters of smart female entrepreneurs. However, it seems we are in the minority. A team of researchers from MIT, Harvard and Wharton has done a study that indicates strongly “that venture capitalists prefer to back entrepreneurial opportunities when pitched by a man.”

OK, I get it, nothing new there. But the next sentence in the study might flatten you a bit. “They are more likely to offer funding if the man is good-looking.” The paper was published in March in the Proceedings of the National Academy of Sciences.

So, now I know why it is so hard for most of us to get venture financing — we don’t look like Brad Pitt. And to top this off, the study indicates that it doesn’t matter if the woman pitching the deal is good looking.

Huh, you mean to tell me you wouldn’t fund Scarlett Johansson even if she were pitching online pet food? (If she were delivering the stuff personally, she could get a $100 million pre-money, and Kleiner Perkins and the boys in the Valley would fund without a blink.)

The study is detailed and has lots of percentages and impressive calculations, but at the end of day, the conclusion is that beautiful men do better in getting investment dollars than average men, as well as all categories of women, gorgeous or otherwise. If you want a link to the study, send us an email.

Second, over the past few weeks, my partners and I have seen a variety of deals, and one theme emerges clearly. The entrepreneur needs to “answer the question being asked.” We had an instance in which an entrepreneur gave a series of fuzzy answers to some direct questions.

As the pitch ended, I suggested to the entrepreneur that there were only two possible answers — one, the correct and true and honest one, and two, it is OK to say, “I don’t know.” The rule here is a simple one. I have a Ph.D. in bull—-. I teach the course in that subject, so do not try to bull—- me. It detracts from your credibility. It is OK to not know the answer, just be willing to say so.

Next, you have to get the easy things right the first time. We see a lot of deals in which the founder comes in, and we are interested. In probing further, we find that there is “hair on the deal” — meaning that there are some basic mistakes that need to be fixed — like the corporate structure, valuation at first funding from friends, vesting, co-founder issues.

This is basic stuff that should never get in the way of advancing your company. And the sad sentence is that fixing is always harder than getting it right in the first place. Fixing means there are going to be uncomfortable conversations, so why create brain damage if you don’t have to?

Last week, we had a pitch from some very smart young men (and attractive as well), but when I asked them the infamous rich vs. king question, the three of them flunked it unanimously.

I know the founder has the vision, the passion, the desire, etc., but let me tell you, being CEO is overrated. It is a very tough, often miserable job. If you can get someone better than yourself, then do it. Be the founder, own the most stock and let someone else wage the daily wars — particularly someone who has done it before in your domain.

Recently, we were willing to fund a young genius, and at the final interview, he asked me if he could make the “business decisions.” I said, no, not in the beginning. He was a technical genius, but in my opinion had only modest business skills.

He said he wanted to learn and that it was important for him to make the business decisions. In other words, he wanted to learn on my investment.

If he really wants to learn the business side, then he should go back to school — but why do that when it’s better to get a co-founder with those skills?

Rule No. 349

The entire world of entrepreneurship is encapsulated in the Seinfeld “Soup Nazi” episode. Watch it again.

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