Founders believe that VCs know how to build a startup, but 99% of the time, they only know crap

Beware of false knowledge; it is more dangerous than ignorance. - George Bernard Shaw

Founders frequently believe that VCs and investors know how to build and run a startup; however, 99% of the time, VCs only know useless and misleading s***.

VCs with no or low knowledge

An incorrect assumption among founders raises the level of fear or anxiety while fundraising or building a startup company.

They believe that investors are better than them. Or they (the founders) lack negotiation skills in comparison to investors while making deals. They are insecure about their lack of business knowledge, success, and experience.

This is not true 90% of the time. Many investors have low and useless knowledge about building businesses. Because many VCs have no prior experience in any business, startup, or even VC industry.

Nonetheless, they became venture capitalists.

One risk that founders should be aware of and fear is that venture capitalists freely discuss how to build a startup or what founders should do despite having no startup experience.

When investors with no expertise or actual significant experience in operating a business but have ideas about how to operate or build your business and freely express their ideas while acting as if they know what they're talking about, the situation becomes problematic.

Most VCs shouldn't advise a founder about how to build or operate a startup, but they do it, which is useless.

If a VC with any title or an investor starts talking about how to run their startup company, founders and entrepreneurs should think not twice, but ten times, because 99% of the time what they say is incorrect.

As a VC if you work as a partner or another title in a VC firm and have: 

- finance or VC, 

- or working at a corporate global company or a startup for a limited time (less than three or four years) and/or this work is not a high-level operating or executing role background, 

- or you have no previous work background but are just a fresh graduate from college 

you have not learned what it is like to be in a startup,

you have nothing to really advise entrepreneurs on how to build a startup. 

Still, if you feel free to give advice it's because you are ignorant. And your advice is stupid advice.

Simply let's make the warning more memorable for entrepreneurs and founders:

Beware, founders. VCs tell rubbish. And this is dangerous.

We are living in an era of unprecedented bullshit production.

VCs' ideas, feedback, evaluations, or judgements on how to build or operate your business are among those products.

Sometimes VCs and investors have no prior startup experience or accomplishment in the field, but they do not keep their mouths shut and instead speak freely and give you advice based on their zero or limited prior startup experience or accomplishment in the field.

They also do it with shockingly high self-confidence, as if they know something whereas all they know is useless shit.

What motivates them to do this? They do this because of their profound ignorance.

They can even become obstinate and demanding at times.

As a founder or entrepreneur, you should protect yourself from this type of no value advice, and these ignorant people, even if you just met them, are in a fundraising meeting with them, or they are already your investors.

If you, as a founder or entrepreneur, follow advice because the person in front of you has an investor/VC/partner title but no real, long-time, high-level operating, executing role in a startup that did incredibly well, you are ignorant and a fool to do so.

Because this advice can only harm your startup company as it is given by someone with no experience in the subject matter.

So advice coming from a VC or investor with no solid startup building experience is not just useless.

Because it is wrong, if this advice is trusted, VCs' thoughts based on ignorance will harm founders and startups.

When this happens VCs actually add negative value to the founder and startup.

These are bad VCs.

VC advice actually adds negative values to startups 70-80% of the time in San Francisco, but 99% of the time in Turkey.

The percentage of VCs with excellent startup-building experience varies by geography. That's what changes the percentages.

I'll go into more detail about this later.

Ignorance, delusions, and the ego of venture capitalists

I and the CEO of a startup attended a meeting with a venture capitalist. After saying hello and how are you, the managing partner of the VC said, "If you do marketing in this way, good things can happen," and then he brought in someone who had worked in the marketing department of one of the tech companies for a few months, and the marketing guy said, "you know this is one of the biggest tech companies in this region, they have grown big when I was in marketing department at that company, I did that..." it took 25 minutes to hear their ideas. We could only tell for 5-10 minutes before they said they had another meeting and would get back to us. They never got back to us after nearly 5 years. I contacted the founders of the tech company that the marketing guy at the VC was referring to, and they warned me to avoid him and never hire him because he is a low performer, obsessive liar, and bad blood who was constantly gossiping behind his colleagues and the company's founders.

The same managing partner ruined the journey of one of my founder friends by reaching out to VCs he was trying to fundraise from and trying to cut a deal for himself and his VC, and he killed the company's future. During the same event, his partner asked one of the college-bound young entrepreneurs, "Are you the guy building the pimp/selling prostitutes application?" Without knowing the entrepreneur and meeting him for the first time, the general partner embarrassed him in front of everyone. The 19-year-old entrepreneur has actually created a platform for hiring tour guides. He had two other co-founders who were also undergraduate students.

This is an actual venture capital firm backed by international financial institutions and other corporate investors.

Soon, I'll explain how these people became VCs and raised funds.

There is a Turkish proverb that can reflect this level of high self-confidence "I have created the small mountains" which reflects the delusional level false self confidence a person can have as no person can create or build a mountain.

Dangerous levels of ego, narcissism, and ignorance lead to people making freely expressed statements about topics of which they have no real knowledge and lack the necessary experience.

Can you imagine the venture capital highlighted above as an investor in your company?

Many startup investors, VCs are just like that.

Fake values, big egos, ignorance with no or low self-control when it comes to giving advice to founders.

By doing so, they negatively impact founders and startups.

As a founder, you must learn to recognise and avoid these ignorant people in order to protect themselves.

Otherwise you are putting your life and business future at risk by taking advice on how to build or run your startup from someone who has never built or operated a startup before. No experience, no value.

If the founder can figure out how to deal with these types of investors, the founder can accept money from them and use it as financial resources.

The percentage of VCs who advise bullshit varies by geography

When you're desperate or in a hurry, even crazy money is money.

In most developed ecosystems, such as Silicon Valley, the rate of no knowledge or no value VC and investor drops to 95%. The negative value VC figure is probably around 70-80% in SV.

Whereas in less developed ecosystems, such as Turkey, the rate of no value VC and investor rises to 99%. The negative value VC figure is probably again around 99%.

There is probably no other place in the world like Silicon Valley or San Francisco where no value or knowledge VC numbers fall to 95% and the rate of VCs and investors with great startup building experience rises to 5%.

As a result, that city remains critical for any tech company founder looking to build better and faster. Both to find help and learn more.

Why do founders believe that investors have quality knowledge about how to build and operate startups and investor advice about these should be trusted?

Biases.

Cognitive biases are frequently the result of your brain's efforts to simplify information processing. Biases frequently function as rules of thumb that help you make sense of the world and make decisions quickly.

But sometimes when trying to help you they may fail you instead.

"cognitive bias is a systematic pattern of deviation from norm or rationality in judgment.[1] Individuals create their own "subjective reality" from their perception of the input. An individual's construction of reality, not the objective input, may dictate their behavior in the world. Thus, cognitive biases may sometimes lead to perceptual distortion, inaccurate judgment, illogical interpretation, and irrationality." - Wikipedia

Two major cognitive biases or human misjudgments make founders and entrepreneurs believe that VCs and investors have quality knowledge that can be trusted about how to build and operate startups.

First one is the Authority Bias.

"The authority bias is our tendency to be more influenced by the opinion of an authority figure, unrelated to its actual content.

Like all cognitive biases, the authority bias is a shortcut our brains use to save time and energy making decisions.

Of course, placing trust in credible experts is a reasonable thing to do. However, problems arise when we rely too heavily on this heuristic and assume certain authority figures have more knowledge or skills than they actually do, which can lead to poor personal and professional outcomes."

Entrepreneurs and founders consider VCs and investors as credible because a. they have a functioning company and title related to startups and b. they hold the money, which is a symbol of power, success, and credibility in popular culture.

While neither of these perceptions or understandings can prove that these people know how to build or operate startups, or that they have experience in any of these areas, founders' minds will still choose to believe that these authority figures have more knowledge or experience than they actually do.

The mere existence of a functioning business with funds to invest in startups does not imply any knowledge or experience in building and operating startups. These are not related in any way, despite our mind's insistence that "These are related, theses must be related!"

You can't give someone credibility for having knowledge or experience in topic A(building and operating startups) because they have knowledge or experience in topic B(investing in startups), which is completely different. They may appear or sound related when you think quickly, but if you remain rational, you will realise that this is not possible; knowledge or experience of A cannot come from doing something that is not A.

Remember that authority bias is common, and it occurs when we accept the opinion of an authority figure as correct without considering their background, skills, knowledge, or potential biases.

The second bias contributing to the issue is 'illusory correlation'.

In psychology, illusory correlation is the phenomenon of perceiving a relationship between variables (typically people, events, or behaviors) even when no such relationship exists.

Because they invest in startups, they know how to build startups.

Completely unrelated and incorrect. But with automatic thinking our brains are yelling to us "They are definitely related!'"

How to avoid ignorant VCs and not become ignorant?

And protect yourself as a startup founder

Two important questions for a founder and entrepreneur:

Who should you seek advice from as a founder and entrepreneur?

How do you choose the right VCs or investors to listen to and seek advice from?

A quick shortcut to recognise and avoid these ignorant investors who overestimate themselves and their ideas on 'how you can manage or build your startup company better' are making a background check and looking for at least one key long-term active role in the same or different successful startup companies.

People who have been there, done that, and worked in and built large successful startup companies or companies with active key roles that are only and exclusively CEO founders or COO founders (sometimes CTO/CPO founders, especially in highly technical products such as developer tools) and are now VCs and investors you can trust, listen to, and get advice from because they can provide valuable knowledge based on their extensive prior experience. More criteria will be provided below for help in selecting genuine advisors who can provide positive value.

Of course, none of this is guaranteed. Ex-CEOs or COOs who have seen and executed everything from the day the company was founded to the point where it has a billion-dollar valuation or serves a massive number of customers or users on a global scale may not be the right person to provide quality information for any business at any maturity stage.

In short, a person can be a great executor or manager of a task, process, or department at one company while being a terrible observer, interpreter, or communicator of the same task, process, or department at another.

Because they have not personally experienced it in their previous work experience, VCs or investors with other experience, engagements, or roles in their backgrounds cannot provide valuable information on how to build or operate a startup.

It is far preferable to avoid these types of investors' ideas or egos, who are unaware that they are harming startup founders. Avoid their money if possible and other options are available, as they can make your startup journey miserable by not being aware of their ignorance.

People like this are likely to have other attitude and behavioural issues as well. (Read the example provided above)

It is remarkable how much advantage founders can get by trying to do this all the time.

Avoiding crap from VCs and investors.

Fancy language will be used by VCs and investors to convince founders and entrepreneurs that they are credible and trustworthy. Terms and definitions, as well as the names of other successful people and startup names, will be used to impress you. Even quotes about terms and concepts they have never used while startup building(because they have never build startups) but saw, heard, or read at somewhere before. What will protect you and increase your chance to succeed in your startup journey as a founder is paying no attention to ideas or advice from people who have never done the same jobs and succeeded at them, preferably more than once, and who most likely know shit but are simply throwing ideas at you and your business with fancy verbiage.

It is not only beneficial for founders to ignore ideas with no solid foundation provided by VCs and investors who do not understand the limits of their knowledge and warn you that they are providing you with these ideas with no dependable experience, but it is also rational.

Again, it is remarkable how much advantage founders can get by trying to do this all the time.

Staying rational. Or unbiased no matter what all the time.

Another and more clear way to get a quality or health check while spotting quality investors who can provide information on how to build or manage a startup that you should consider listening to is to avoid or filter out startup investors or VCs who have no positive value knowledge but only have financial, fund, or VC backgrounds but no startup founder backgrounds. Founders should avoid advice from these investors because they have no startup experience and only have VC or investor experience.

Even though they have 'general partner' or 'managing partner' titles.

Some of the deceptive background information about a venture capitalist that may lead you to believe their advice is trustworthy, but in reality it provides zero or negative value

Investors may have the backgrounds or characteristics listed below, but their advice should be avoided:

- have successful(4x or better returns) or unsuccessful(zero or low returns) VC backgrounds

- have VC backgrounds and invested in companies that grew big (successful investing)

- know things about finance, worked at VC, PE, or investment companies

- have helped the startup companies they have invested in somehow in fundraising, hr, or some other topic

- they might have backgrounds at some corporate or tech company for a limited time and at a not high level and not operating or executive role

Some of the items you just read may appear impressive, but none of them represent deep, broad, or long startup-building experience, so they can only have zero or negative value for building a startup company.

Not even a low and insignificant amount of startup-building experience they represent. But they cause biases that make you think that they are credible and can be trusted for advice on how to build a startup.

To impress you, VCs and investors will still mention impressive things about themselves and their backgrounds.

As a founder and entrepreneur, the only question you need to ask is, "Have you ever built a successful startup company by yourself or held a key role such as a C level role or VP role for a long time where you have experienced long progress through many stages such as pre-seed level to Series B level as key operator while staying in the same role? Are you a successful founder who built or VP who helped build amazingly big startup companies from zero to billion-dollar valuations?"

If the answer is no, then none of these promises valuable knowledge or information to you as a founder, and you should either ignore or approach any information, idea, opinion, knowledge, or evaluation from these people with extreme caution because:

a. as only dependable information you can get on any subject can come out from someone who has personally done what exactly she or he is talking about successfully at least multiple times. Preferably in a similar business model, product type, and industry and as a successful founder CEO. If not, COO. Rarely CTO. Who now is an investor.

b. Next, still acceptable but less dependable or trustworthy information source can be someone who has built a big successful startup company at least once as the founder CEO or COO, preferably-at least a hundred million valued, mid size company. Who now is an investor.

Some excellent examples of who's advice could be trusted as a VC:

Marc Andreessen, Ben Horowitz, and Vinod Khosla are excellent examples for investors to listen with all ears and accept advice from because of their excellent founder and investor backgrounds.

They are:

a. very successful startup founders,

b. top-level startup/tech company builders,

c. business executives who have "been there, done that."

They are a wonderful source of knowledge for any startup founder with these kinds of credentials. A16z VC(founded by Marc and Ben) and Khosla VC are two of the best venture capital companies in the world located in San Francisco.

The catch is that even if they were not investors, they would still be a tremendous source of information for any founder.

For a founder and entrepreneur to listen and get advice from, Marc Andreessen, Ben Horowitz, and Vinod Khosla are the right type of VCs and investors to get advice from because:

- they know the game,

- they've played it,

- run it,

- fought in it,

- and built something extraordinarily successful.

They have earned the right to advise entrepreneurs and founders on how to build a startup by doing so.

The interesting thing is that most of the time they don't do it, but when they do, they do it carefully by telling them that they are uncertain.

They are not VCs or investors with no value or negative value:

• who knew nothing about any business,

• didn't do anything for it or its operations and management,

• and tried to understand it by looking at a company or business with only the limited and carefully chosen information provided by the founders every couple of months in four to six-paragraph e-mails or bi-weekly calls forced by VCs and some impressive charts or sheets prepared to entice investors to commit more money in the future if they were the best option.

As the investor with a founder background does not match your company in business model, product type, or industry and has smaller success, the person shall be considered as less and less reliable or trustworthy information or knowledge source.

As a result, what should the founder do?

A. Listen to those who have been there and done that and have developed their own amazing success stories,

and

B. avoid those who continue to express and throw ideas and estimates around with high self-confidence and ignorance despite having no prior top-quality experience or accomplishment in the startup business.

If you give credibility to information, thoughts, and evaluations from people who have no prior knowledge of what they are talking about, you become delusional and wrong. And if you rely on this, you will fail more easily and quickly.

This is not only valid for startup businesses. But any business.

Evil VCs and bullshit filter

Building a startup company or entrepreneurship is a topic or a discipline anyone can throw ideas and can sound rational or right without being right. This is because there is no single, defined, scientific, and descriptive methodology to build something successful and big. It is still a complex art.

Smart and evil investors will also use their self-assurance combined with information that appears deep and broad but is actually shallow and limited to make you feel inferior in the communication and secure a better deal that kills your company's valuation while giving them a lot of rights and shares.

They will occasionally introduce you to other founders and entrepreneurs who are close to them in order to impress you and build a positive communication line with you in order to convince you to accept their money or make you believe their ideas are valuable, despite the fact that what they talk about is useless crap because they do not have real startup experience and they are just investors with investor experiences. They will use fancy verbiage, tell success stories of their portfolio companies, and say they have a great network or HR pool. Just beware.

There is a great short article by Jason Lemkin who wrote about evil VCs and their hidden agendas. I'll try to create a longer list in the future.

That is why the founder and her bullshit filter should be turned on all the time, she should choose her sources of information carefully, develop her own path based on the quality and credible information she has gathered, and make her own decisions. And of course would be great to detect VCs good intentions vs VCs evil agendas if possible-but its difficult.

When I share this information, founders frequently wonder how these people became investors.

How VCs become VCs?

Anyone who wants to play the venture capital or investor game can do it by using their:

a. network,

b. relationships,

c. sales skills.

Sometimes a need in the job market can even make people VCs or investors without those three attributes instantly. How?

When a venture capital firm needs a new employee for daily tasks or operations, they hire a new graduate or someone with experience at any company, most often financial companies. The new hire, who knows nothing about the VC business and has no experience in any business-probably a finance guy, now has the title of 'VC' on their LinkedIn account. Outer appearance VC, inner attributes an individual who has zero knowledge about what he or she is doing, work the new employee or "VC" does, paper work or founder hunting on Linkedin.

The truth is success in this game is challenging, with about 5% or less of VCs bringing a substantial profit, even in the most mature ecosystems, such as San Francisco, where many VCs have successful startup and VC track records.

Because most VCs don't know how to build a startup and aren't entrepreneurs or techies, they pick a lot of bad companies to invest in, which is another reason for VCs' high failure rate. They ask strange questions in order to understand founders and their startups, where the truth becomes revealed, and the investors frustratingly demonstrate that they have no idea about the technology founder is trying to build.

This is also why successful %5 VCs in the United States include investors like Marc Andreessen, Ben Horowitz, and Vinod Khosla. They understand what they are investing in and are being pursued by the cream of the crop founders simply because of their value.

The traditional or automatic belief that investors or venture capitalists are successful people in their field, which also contributes to the authority bias, is completely incorrect. Fundraising for a venture capital fund is only the first step in establishing a venture capital firm. Not the achievement. When you deliver above 3x or 400% returns to your LPs, you are successful in the venture capital business. Otherwise, you will not be successful as a venture capitalist, managing or general partner.

At other regions' success rates are lower (not in percentage terms because the number of VCs is limited).

The number is one percent (1%) in a less developed ecosystem, such as Turkey. The rest of the VC funds are going to fail delivering 3 x returns to its LPs. The funny thing is they even don't know they are failing. Where no or negative value investor and VC rates are around 99%.

If you want to identify the list of VCs who can add real value through knowledge or experience to you and your business to build something madly successful and big, look into their backgrounds. If your list includes more than 15-20 VCs from around the world, your criteria for recognising their knowledge and expertise are flawed, and you are expecting value from the incorrect source.

Another simple filter is that the VCs who can bring real value to you and your company are all in San Francisco, managing not millions but billions of dollars in funds, and then looking at their GPs backgrounds. A16Z and Khosla are two names on the list that have a lot of money and a lot of founders with successful startup histories who are eager to help their portfolio companies. Ari Zilka was one of them, and I was lucky enough to have worked with him during my Koding days because Khosla was our investor.

On the false assumption that founders believe VCs are or know more than them

Founders must convince themselves that the notion that investors know more than founders or better than them is useless.

On the contrary, assuming that they (founders) are smarter or better than investors is equally pointless.

In your head trying to use psychological pressure that incorporates feelings of superiority/inferiority on either side will not help you raise more money.

The most unbiased approach to looking at investor meetings is that, just as a founder is attempting to build a growing company and looking for funding to succeed, VCs are looking for great founders who can start and grow businesses.

Both sides are attempting to persuade each other and themselves to come to an agreement in order to leverage each other and benefit themselves.

A few things startup founders must understand in order to distinguish between a source of good advice and a source of bullshit advice

Founders must understand:

- Being an investor and being a successful investor are two very different things.

- Being an investor and being a founder/entrepreneur are two very different things.

- Being a founder/entrepreneur who built a successful at least a couple hundred million dollars worth of startup company and being a founder/entrepreneur are two very different things.

- Investing in startups vs. building a startup and operating it are two very different things.

- A long time startup building and operating experience with success that goes from pre seed to at least series b or c levels at a role of C level or VP or co founder means amazing experience and is not the same as being a manager, director, VP, or C level of a large company or startup for a year or two.

- Being an investor or VC and having quality knowledge about how to build a startup are two completely different things.

- Detecting bullshit of VCs is difficult.

- Finally also, success and value are not the same. Just like having a VC fund and being a successful VC is different.

A small touch that can strengthen and protect that unbiased approach is better to keep your bullshit radar and filter on as a founder all the time in investor meetings against investors with ideas and attitudes but without prior first hand experience about the stuff they talk about.

As a founder:

1. Google and books should be your number one source to learn how to be a startup founder.

2. Number two can only be learned through being a successful founder CEO and doing the job.

3. Learning from other successful founders who know their limitations can be number three. You'd have to be really lucky to come across this. Because many of them are not in a position in their lives where they can consistently devote themselves to assisting any founder who is attempting to develop a fresh success story. Most of the time, making another one for yourself is more appealing than assisting someone else.

I have not discovered any other source or method in my twelve years old experience, neither met a successful founder who discovered one.

A fact or two to never forget for founders and entrepreneurs:

- A frequent mistake that founders make is believing that VCs or investors have expertise in how to build and operate a startup, whereas, in reality, 95% of VCs know crap about startup building and operating. Beware of false knowledge; it is more dangerous than ignorance. Because VCs and investors are a combination of these two factors (false knowledge + ignorance), they pose the greatest danger to you and your startup.

- Many VCs and investors are unaware that they are failing, have failed, or will fail. This figure is also around 95% in Turkey. So be cautious.

- Many VCs are jerks and this fact is not going to change.

- What should you do if you are trapped in a meeting with a venture capitalist who tells you what you should do? Ignore them and their unfounded ideas. Do whatever you want in your own unique way, with your own perspective and evaluation based on facts that only you can value.

- What should you do if you're stuck in a meeting with a venture capitalist who criticises you and questions why you didn't do something a certain way?

Inform them politely that it is your company and that they should back off.

If they insist, the meeting should be terminated and not repeated until they correct themselves, learn how to behave, and understand that they are only investors and you are the company's founder and CEO.

- There are some exceptions, such as VCs who have useful knowledge of how to build a startup without actually building one, whose advice can still be valuable, but they are extremely rare. Regardless, these exceptional VCs choose not to give advice or do not consider it a right.

If you haven't realised how dangerous the situation and these people are, scroll up and read the proverb again. or my memories with a negative value VC. Or the whole article again.