From time to time, some technical person I know will come ask about whether they should go be a VC, and I always ask “Do you like sales? Because it’s selling money”. They always look shocked, but that’s really what that job is - the VCs first sell their ability *to* sell money, to their own investors, the LPs. But once they’ve raised the fund, they don’t get paid (much, at least on their terms) and they don’t get to do it again, until they’ve *deployed* the fund. So, fundamentally, they’re in the business of getting companies (hopefully the right ones) to take their money, which is, ultimately, selling. And the good companies and founders have lots of choices, so it’s hard to sell where you want to.
There’s another important thing about venture that most people don’t understand. This is that venture returns are usually distributed along a power law - meaning, roughly, that all but one of the investments in any fund will just pay back the fund (usually out of 20, something like 10 will fail, 9 will return something small), and if you’re lucky, one will hit really big and make all of the profits.
That means a few things - first, and foremost, it means that you are just part of a portfolio. If your company fails, it’s horrible for you, but roughly a coin toss for the VC, and just a normal part of managing a portfolio - it’s not a tragedy if they have enough other winners. And remember - they need to “sell” their money, so they’re motivated to find at least plausible ideas. But more importantly, they’re very motivated to make them be the 1 deal that “makes the fund”. And if this is the deal that makes the fund, they want as much of it as they can have. They’ll sell hard.
If you put all of this together, you get a lot of pressure to pump money into companies that seem to be doing well. Doesn’t sound so bad…except that sometimes the money creates the illusion of doing well. We can see a lot of that…when the market turns and money gets tighter, like now. But it also happens at other times - sometimes companies falter. When that happens, you can bet that the VCs, who do this for a living, are better prepared to come out whole from distressed rounds than the founders are (if you don’t understand things like “participating preferred” and “pro rata”, you shouldn’t have anything to do with VC until you do).
What’s the point of all of this? Mostly that you should be careful with how you use venture money - it’s useful, but you’re working with someone who has a very different set of incentives in some of the scenarios. Even though you both want the company to succeed, you want it in different ways and for different reasons, at different times. Making sure you understand the incentives and motivations of your investors is really important. It’s like any other salesman - the good ones do genuinely want you to be happy with their product and seek to understand your needs, but also, they need to sell, and if they can convince themselves that you “really wanted” the deluxe package and the warranty, they will happily sell it to you if they can.