Today, Josh Kopelman, managing director of First Round Capital, posted about how the process of making the rounds to venture capital firms provides entrepreneurs with free consulting. He couldn't be more right. The honest feedback from smart--really smart--people may often be more valuable than the feedback, coaching and mentoring of friends who may be cautious about telling you the truth.
Interestingly, I was talking to a client today who pointed out that the venture capitalists who hear the pitches are also getting a free education. Without hearing pitches from generally quality entrepreneurs who know their stuff (let's be clear, the riffraff don't even get to make a pitch) the venture capitalists wouldn't be nearly so smart. Every (good) pitch makes them a little bit smarter, seeing a bit of the world from a new angle, getting the insights from yet another smart technologist and her team.
What makes this all work is openness. Both the entrepreneur and the venture capitalist have to be willing to be open and honest, trusting that the other will use the information only to further their mutual interests. The open dialog eventually leads to a better deal being pitched--and to someone doing the deal!
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