The Groucho Marx Mandate

Venture Capitalist’s Self-Loathing Mentality

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If there's one trope that is common throughout teen angst its the idea that if you want someone to like you, treat them like dirt. Woven into that is a myriad of teenage psychological trauma, but it also isn't new. There's a common thread that represents a part of humanity. The best comedians capture aspects of what it means to be human, and this time is no exception. The person to capture this little nugget is Groucho Marx.

I've written before about this quote from the iconic comedian:

"I don't want to belong to any club that would accept me as a member."

Conveniently, that same piece I last talked about this quote was also about the psychology of VCs. That time, it was about wanting to be liked. But this time, its going the opposite direction. VCs, actually, thrive on being hated. As Zak Kukoff said, so eloquently in a tweet I also quoted last time, "all VCs are subs. The best founders are dom."

A Deal That Would Have Me As An Investor

VCs sit along a very strange spectrum between near absolute power and near absolute powerlessness. When a company is more desperate, they put a lot of power in a VCs hand. The same characteristics that make a company desperate are the characteristics that would make a VC pass. Customer concentration, bad growth, churn, negative customer reviews, employee turnover. The worse a company is, the more likely they are to offer a VC deference.

VCs are nothing if not pattern recognizers, right? So, whether consciously or subconsciously, they start to correlate deference as indicative of lower quality. The nicer you are to a VC, the more likely you are to be a bad company.

Now, the opposite is also true. The more a company is crushing it, the less deference they need to pay VCs. The more a founder ignores you, the more likely it is that the company knows its good. I don't know if this story is true, but I remember hearing stories about how, in the early days of Notion's inflection, some VCs sent them an unprompted term sheet and the Notion founders sent back a video of them lighting the term sheet on fire.

Once again, pattern recognition sets in. The meaner a founder is to a VC, the more likely it is the company is doing well. This goes on and on. The more good founders blow off VCs, the more VCs correlate that with success.

Unavoidable Diaspora of Deal Making

Like generational trauma, this cultural inclination towards self-loathing seems unavoidable. Because it isn't necessarily just hype. There are legitimate business factors that make a founder either blow a VC off or offer a lot of deference to them.

This informs how competitive rounds can be, how quickly a company is preempted, and how much VCs push value-adds like talent offering and story features. In many cases, this can become a self-fulfilling prophecy. Be mean to enough VCs and you may just will yourself into becoming a "hot company."

That's the reality of storytelling. The stronger a group of people believe something, and the bigger that group of people is, the more likely that thing is going to start getting reflected in reality. Just one necessarily reality of an inefficient market that is largely dictated by human emotions, whether founder or VC.

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