Dunn argues that "dumb" VCs are going out of business. He compares them to retail stores, saying that many of them won't be there in the long-term.
Here's the criteria of what makes a "dumb" VC, according to Dunn:
- "You don't realize you are going out of business." Dunn admits he doesn't know the exact math, but from what he's heard, roughly 2% of VC firms generate 98% of returns in venture capital.
- "You think you can help entrepreneurs." Dunn says investors from the top 2% of VC firms never sit down and strategize with their entrepreneurs.
- "You spend a ton of an entrepreneur's time before deciding." Dunn argues that VCs should be able to quickly decide whether or not they want to invest.
- "You have lots of advice about what entrepreneurs should do." Dunn claims that the top 2% of VC firms never talk to their entrepreneurs once they have already invested.
- "You never tried the product." If VCs want to get the deal, Dunn says, they need to show that they care about the mission.
- "Your portfolio sucks." If at least two companies in a VC's portfolio haven't reached $1 billion in enterprise value, Dunn says, it's not very good.
- "You are late." Only top-notch investors can be late to meetings, Dunn says.
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