How VCs Win Deals: Comic Books, Big Meals and Baked Goods

Palmer Luckey

When Palmer Luckey was raising money for his defense-technology startup Anduril, he got an unusual gift from a venture capitalist interested in investing: a comic book depicting Anduril’s team as superheroes.

The comic book portrayed a “magical chest filled with money with [the firm’s] logo and the money was glowing with a white light,” said Luckey. “The money was the power that was going to help us save the world from foreign military and protect western democracy from being destroyed by Russian and Chinese military.” For Luckey, a science fiction fan whose company develops image recognition software for surveilling large outdoor spaces such as the U.S. border, the firm’s gesture was more than apropos.

THE TAKEAWAY

For a highly sought-after group of founders, venture capitalists spend a great deal of time, money and energy wooing them into a deal.

The gift was the type of extravagant gesture that venture capitalists are increasingly bestowing on startup founders raising money. While some founders struggle to get attention from VCs, others find themselves being courted by powerful financiers who often spare no expense to curry favor. That can involve sending bottles of wine and desserts, offering rides on private jets, exclusive seats at major league sports games, tickets to artist events and, in one case, a private audience with a favorite chef.

Allbirds co-founder Joey Zwillinger received a gift of diapers—arranged in the shape of a multi-tiered cake— in celebration of the birth of his third child. (While a thoughtful gesture, Zwillinger said that the timing was “suspect.”)

Some investors said that courting founders’ interest has always been a part of the job, but competition among investors has increased as venture funds have grown in size. “It’s nuts,” said Luckey. “When you have funds like SoftBank throwing around untold billions, it’s definitely changed the dynamic, not only for me but for other companies I know.”

One misconception about VCs “is that they never have to sell themselves to a company,” said Elizabeth Yin, co-founder of early stage venture firm Hustle Fund. “But that’s just not true. There’s been so many deals where I have to pitch myself to founders.”

Not an Influence

Most founders say gifts don’t affect their thinking. Luckey, for instance, says the comic book didn’t make a difference when it came to deciding Anduril’s investors. “We were already planning on letting [the VC] in the round,” he said, declining to identify the firm because he was asked to keep it private.

Founders say they’re more influenced by a VC that can help their business. Dylan Field, the founder of design software startup Figma, said that prospective investors in his company’s Series C financing round once sent cupcakes to Figma’s offices. While the gesture was appreciated by Figma’s team, Field said that it wasn’t exactly persuasive.

“Investors that provide value are the ones that I get the most excited about working with,” said Field. “As much as I like baked goods, it’s not going to make that much of a difference.” Field said that he picked Sequoia to lead his company’s Series C financing round in part because the firm had laid the groundwork months before. “We’d had lots of conversations over the years,” said Field. “They didn’t just show up one day.”

In some cases, though, extravagant gestures may help. Carson Kahn, the founder of artificial intelligence company Volley, recalled a dinner that he and members of his team had with an angel investor at the Asian-fusion restaurant Tao in New York.

“This investor ordered one of everything on the menu,” said Kahn. “We ate a little bit, and then he ordered it all over again: one of everything on the menu. I’d never seen so much food before in my life. It was really impressive.”

Kahn said that Volley decided to give the investor allocation in the company’s financing round, although he said it was “not because of the 150 pounds of fish they ordered.”

“I think they were trying to convey the message of ‘I’ll spare no expense to make you happy,’ but I’m pretty sure that dinner cost more than what we were seeking for an investment in the first place,” he said.

Ryan Denehy, the founder and CEO of the technical support startup Electric AI, also said he’d once taken an unusual meeting on short notice at a SoulCycle class with a member of venture capital firm GGV. During the class, the GGV vice president Tiffany Luck “kicked everyone’s ass,” said Denehy. Months later, GGV led Electric AI’s Series B financing round.

“When you have an entrepreneur of Ryan’s caliber who you’ve known for some time, you drop everything, fly to NY during the holidays, and do a 7:30 pm SoulCycle class followed by a Japanese steak dinner,” said a GGV spokesperson. “Fortunately, Tiffany is a superstar on the spin bike and made us all look good.”

These overtures of courtship seem largely relegated to male founders. The handful of female founders who responded to The Information’s requests to be interviewed for this story said that they didn’t have any relevant anecdotes of investors courting their interest to share. (Forbes, however, reported last year that Mathilde Collin, the founder of software company Front, once received an elaborate Lego display from partners at Sequoia interested in investing in her firm.)

Laura Behrens Wu, the founder of shipping company Shippo, said that she hadn’t experienced much courting in the process of raising funding for her company. “Our seed was incredibly hard to raise,” she wrote in an email. “I pitched 125 investors to raise the round.” She continued, “I’d be curious [to learn] how many female-run companies had VC firms courting them with gifts.”

Let’s Be Friends

For some founders, certain gifts can be a turnoff. Kahn, now a partner at the New York–based venture firm Social Impact Capital, said that a bizarre gift from a venture firm once hurt the firm’s chances of investing in Volley. A day after taking a meeting with the firm, whom Kahn declined to name, Kahn said he received a slideshow of photographs spliced together of himself and partners of the venture firm. “The message of the video was ‘Let’s be friends,'” said Kahn. “It was not unlike a Facebook month in review video.” For Kahn, it was a clear sign that the firm was not a right culture fit for his company.

Other founders said that they were presented with gifts or opportunities that they felt they should turn down. Akshay Kothari, the chief operating officer of the software startup Notion, said that his team, while flattered by an overwhelming interest from investors, turned down several noteworthy invitations and gifts.

“We wanted to operate from a position of integrity,” said Kothari, whose company recently raised a $10 million round of financing at a valuation of $800 million from a select group of angel investors. “Taking part in these things and knowing that there was no opportunity for these investors in the company felt wrong to us.”

Some founders said that investors made nuisances of themselves in an effort to win a deal. “Everyone tries to monopolize your time once they issue a term sheet,” said the founder of a popular software company. The founder, who asked not to be named, said he recently had to ask prospective investors to stop coming by his company’s offices so that his team could focus on their work. “[These VCs] would be like, ‘We’re coming over. We’re coming over and we’re bringing some incredible wine,” he said.

Some startup founders said that venture capitalists appearing unannounced at their company’s offices with offers to invest wouldn’t necessarily be welcome. Audrey Gelman, the founder and CEO of the popular women’s co-working space The Wing, wrote in an email that she was glad that “no one [had] lurked outside The Wing to try to give us money.” Had they done so, Gelman wrote, “I’d probably call the cops.”

Philip Krim, founder and CEO of mattress company Casper, said that a seed investor once turned up at Casper’s offices with a $50,000 check in hand, eager to invest in the company’s oversubscribed Series A financing round. “It was very awkward,” Krim wrote in an email. “That’s a ton of money. He showed up in front of all of the employees and was very aggressive.” For Krim, the gesture was a bad sign. “Good investors don’t look desperate,” he said.

“When investors are pursuing a deal, there’s a fine line between being stalker-crazy and displaying a level of flattering interest,” said Alex Taub, founder and CEO of the social media analytics startup SocialRank. “It really comes down to the founder and how they perceive the investor’s behavior.”

Other founders are more understanding. “My view of this is that these guys are sellers of capital,” said Parker Conrad, the founder of human resources startups Zenefits and Rippling. “I know what it’s like to be in sales. Sometimes you need to make a big gesture to win an important deal.”