Silicon Valley VCs and "Everywhere Else" Investors

Below are a couple of tweets from Silicon Valley investors that are pretty dismissive to outside geographies.

There's Silicon Valley, and there's "Everywhere Else." The rules and ecosystem in place in the Valley for tech investing are different. Some of the protections naturally available in SV don't apply to Angels from elsewhere.

That's OK.

Not-SV investors in tech can do things that can help make sure things work out well if their companies that later raise funds in the Valley:

  • Understand how SV works and how it thinks. The tech industry in the Valley does not act like flyover America. This is a region of the country where swinging for the fences is the norm, and big venture losses are part of the game of trying to hit home runs like Uber, Facebook or Twitter.

  • Realize for most folks in SV, the world ends just south of San Jose. That's OK. There's plenty of innovation in the rest of the world.

  • Have conversations early on with your founders to get on the same page with regards to expectations. It's entirely typical for SV investors to say, "We'll invest, but you must move to San Francisco." Is that OK for you as an investor? Tl;dr: It should be OK with you as an investor to support whatever is best for the company.

  • Document everything well. Just like everything else in business, plan for the worst in your legal documents. Get a good startup lawyer and make sure the docs are fair. My advice is a good startup lawyer will have done a minimum of twenty deals just like yours in the past three years. If they haven't, find another one. I've seen lots of not-startup lawyers representing investors and really creating a mess for the company.

  • When downstream investors put money in, the previous flyover investors aren't a big concern. In Silicon Valley, there's a repeat ecosystem of angels sending deals to VCs. So, they protect early investors so they can keep the deal flow. Remote angels without a track record don't get that privilege, so there's little incentive for VCs to protect their interest. Your legal docs should be robust to keep you safe. Nothing is worse than actually hitting a home run as an angel and discovering people have arranged to take all your upside.

  • Stay involved with your companies. It's much harder for a founder to allow early investors to get steamrolled if they are getting help from you regularly.

  • Pick your founders well. The best founders will appreciate the risk that early angels took. They will fight to take care of you no matter the pressure from downstream investors.

  • Michael Girdley