Red Flags That VCs Should Look Out For
Arthur Law, the co-founder of Vectr Ventures, discusses why you shouldn't become a founder for the Lamborghini, qualities he looks for in deals and why you should remember what your mother taught you when pitching to a VC—all in the final episode of season one of our podcast, Up to Speed with UBS
Working at a venture capital firm means you’re probably one of the most popular dinner dates in town. But it also probably means you have a low tolerance for BS when it comes to being taken through another “deal of the century” pitch deck.
Beyond having a strong idea, solid credentials and backing from a famous family, what else does it take to secure VC funding? Is it all just about the founder persona? More importantly, what are the instant red flags that will kill a deal? Also, how has the Covid-19 pandemic led to the rise of the all-star founder?
We asked these questions and more to Arthur Law of Vectr Ventures in the final episode of season one of our podcast, Up to Speed with UBS. In conversation with Gen.T’s Lee Williamson, Law shares the story of one founder who drank too much Kool-Aid, the unsexy sector that’s getting his firm excited and why founders should first focus on making their product a must-have.
Here are a few excerpts from the conversation. Click the audio player below to listen to the full episode.
ON FOUNDERS WAITING FOR FUNDING BEFORE GOING FULL-TIME
“If you're not willing to take a risk on your own business, your own idea, your own concept, why should we? Why should anyone—until the founders are willing to take that risk?”
ON REPEATED PITCHING
“It's a red flag when you come in twice in the same calendar year, but with two different companies.”
ON THE RISE OF ALL-STAR FOUNDERS DURING COVID
“The strongest founders that we've seen, they've kept their entire team, or the bulk of it, especially the core members; they've improved the product; they've essentially got everything ready for when doors open up.”
ON DRY-POWDER SECTORS
“Food-tech, for us, has been a really hot sector for the last few years. We're seeing a lot more activity in a much more boring space. Agricultural tech: it's not sexy. You're never gonna see the brand name.”
ON FOUNDERS BEING IN IT FOR THE WRONG REASONS
“You don't have to question their work ethic; you don't have to question, are they going to be working today? You know they're gonna be working! You probably have to tell them to stop, to take a break, do some yoga... Don't do it for that Lamborghini next year.”
ON CREATING A MUST-HAVE PRODUCT
“Bear in mind the slowing market; there's still opportunity. Also, don't forget the basics. Don't forget what your mom taught you. Don't lie, and exhibit good manners and be respectful to those around you. And most definitely, make sure your concept and idea are something that are a must-have.”
ON NAILING THE BASICS
“Manners definitely matter. Founders sometimes think they have all the glitz and glam; they've just really drunk too much Kool-Aid, in my opinion. And they think their poop doesn't stink. And basic decency is something that I've always been taught is something that we should definitely value. The way we see it, we certainly hope that we treat everyone around us with the same respect that we expect in return. That's how we roll.”
Quotes are edited for clarity and brevity.