VC Mike Troiano Minces Zero Words.Jul 06, 2022
I first met Mike Troiano years ago when my partner and I were struggling with messaging for our Cat Perkins shoe line. My brother, Bob Hower, a VC at G20 Ventures, recommended his partner, Mike, because he was the best storyteller he knew. I reached out to Mike to kick off our VCs We Love segment because he's a smart, thoughtful, no BS guy, and makes me laugh. He’s been on the investing side for a few years now, but spent most of his career as an entrepreneur and startup exec at VC-funded success stories like m-Qube and Actifio. Before that was a brand strategist in New York and San Francisco, helping brands like AT&T, Coca-Cola, Taco Bell, and Jiffy Lube grow.
Interacting with Mike looks like this: You blather for 10 minutes about your biggest business problem. Mike shrugs then utters three Yoda words of wisdom that solve everything. You can follow Mike at @miketrap on Twitter, and his blog on Medium at miketrap.com.
Deb: If you had 10 pebbles to allocate to what influences you the most to make an investment, how would you allocate them between:
- a great story
- great evidence/data
- a great team
- market opportunity
- something else
Mike: I’d put 2 against story… not based on importance (#1 for me,) but based on the belief that’s where we can help a company the most. I’d put 2 against data because it’s always hard to find data you can trust; 3 against team measured specifically against founder/market fit, and 3 against the size of the market opportunity. This last one is way more important to VCs than it seems to be to entrepreneurs.
Deb: Recognizing all funds are opportunistic within the frame of their prospectus, what's is G20’s "sweet spot," and why?
Mike: We’re early traction capital for East Coast enterprise tech startups. Means we like Series A (proven product-market fit, shifting focus toward scaling go-to-market), geographic focus Maine to DC (we like to build close working relationships with portfolio entrepreneurs,) B2B with strong underlying technology.
Short version of why is we like that part of the risk curve, where the strength of the customer value proposition can be quantified. We think that’s the foundation of a strong go-to-market model, and that’s the place we can help the most.
Beyond that we like the “concentrated risk” model of VC, where we’re heavily invested and “first phone call” to a small set of entrepreneurs we’re committed to, as opposed to a “spray & pray” model where we plant a lot of seeds in a lot of pots then see which bear fruit.
Deb: How do you assess the founding team? What qualities are you looking for? Be honest, are you more likely to fund a company if one of the founders went to an ivy league school? :)
Mike: I like people who’ve risen to the top of whatever environments they’ve occupied. High standards of ethics and leadership abilities are of course key, and the “no asshole” rule applies here.
In the end no one is great at everything, so what we’re really looking for is how the core competencies of the founding team stack up against the dimensions of competition in the market opportunity they’re chasing.
It’s really a question of fit.
Deb: Mike, you’ve mentioned that founders need to be prepared for obvious questions, like TAM, so, what are the obvious questions?
Mike: The questions I always start with:
- Why this? What’s exciting about the problem they’re focused on, or their solution to it? Is this really something I want to spend a ton of time on?
- Why them? If this is an opportunity with great potential, is this the team to bet on in the race to capture it?
- How? How do they plan to do whatever it is they claim they’re about to do? Is that plan reasonable? Are risks and contingencies carefully considered? What’s the probability of success?
- Why now? What’s changed in the world to make this the time to invest here? What needs to change before that investment can deliver a venture return?
- Against whom? How does this business stack up against the competition?
- How much? What is the maximum effective price we’d be willing to pay (once all the transaction terms have been factored in) that still gives us a reasonable shot at the returns we need?
Deb: Recognizing all founders embellish, but none should lie... How far do you expect a pitching team to go in terms of packaging their stats, status, and achievements? How far is too far?
Mike: I started my career in advertising, and spent part of it at a global agency called McCann-Erickson in NYC. They had a motto I always liked: Truth well told.
That’s what I’m looking for. Effective people are all able to manage perception, to build narratives that move people in the ways they need to be moved. Doing that without lying takes some skill, and - in my experience - it’s not a skill you can really teach.
Deb: What is the most effective way for a founder to answer a question they don’t know the answer to?
Mike: “That’s a good question… let me think about it and get back with some thoughts.”
People who have an answer for everything can come off as a little shallow. I never like that, much prefer someone who can face the truth, and be deliberative in addressing concerns / objections.
If I stumble on a real risk, I want to hear “That’s a problem for us… here’s what we’re doing to manage it…”
Deb: Should founders send a deck to VCs ahead of, or instead of, a face to face meeting?
Mike: Easy one… Send the deck.
The goal isn’t to get meetings, it’s to raise money. You shouldn’t waste your time on meetings with people who aren’t both informed and interested, and you can’t be both without seeing the deck.
“But my deck doesn’t really tell the story if I don’t present it,” you say. OK. That means your deck sucks, and you need to fix it.
Deb: Do you care who invested in the rounds prior to the one you’re looking at? Why?
Mike: Yes. Smart money in a deal validates the concept, and it (usually) means a cap table clear of “cats and dogs,” which often create complexity down the road.
Deb: What are the top 3 reasons that you don’t invest with a team?
- I’m not sufficiently interested in the space to educate myself about it.
- I’ve read the blurb, spent some time taking a look, and still can’t figure out what they do or why it matters.
- Weak value proposition, usually a business that feels like a solution in search of a problem.
I actually wrote a whole blog post about this, available here.
Deb: Why do you think that there’s such a disparity between men and women getting VC funding?
This is a relationship business, and human nature is to like people like you. My network indexes high against white male ex-varsity athletes. If I want to invest beyond that demo - and any rational person would - I need to apply energy toward expanding that network, to reach out to women and people of color in particular.
While I don’t think most VC’s are the sexist, racist assholes they look like from the data, most don’t do enough to build relationships with people who aren’t like them, and as a result a bad system (in both ethical and financial terms) persists. I think this is changing, but we’ll see.
Deb: What can women do to improve their odds of getting funded?
Mike: Build relationships with VCs, even when they’re not raising money.
I have no illusion that this isn’t harder in many ways for women, but that’s the honest answer. You’re an entrepreneur, find a way.
Deb: What kind of board member are you? What do you see as your “job” on the board, and what role do you normally play in the board dynamic?
Mike: I try to be a supporter of the person with the much harder job than mine, the CEO. I try to listen, maintain “beginner’s mind” as problems come into focus, and look for direction on where the company needs help. I’m willing to do work - including the production of deliverables. I have empathy, having been on the other side of stupid VC questions for so long.
On a good day I spot something in the bigger picture management was too busy running things to see. And when things get hard, as they always do, I default to supporting the team.
Deb: What’s the biggest mistake founders make when choosing a VC?
Mike: They buy money at the cheapest price (meaning they take it from whomever offers the highest valuation.)
On average, a VC relationship lasts longer than a marriage. Seven years is a long time to be dealing with an asshole for every tough decision you need to make, in either case.
Deb: Describe the best presentation that you’ve ever seen from a founding team.
Mike: It was from an entrepreneur I knew by reputation and in person. It told a story, starting with a problem I could both understand and get excited about quickly. It seemed to anticipate and answer my questions, indicating to me it had been “road hardened” through contact with other human beings. It inspired confidence by being specific, self aware (humble in the face of key risks and unknowns,) and thorough, despite using only half the time we’d allocated for the meeting.
We spent the rest of the time talking, digging into the real issues, and it was glorious. I left both excited and able to get my partners excited as we moved to the next phase.
Note from Deb: Everything Mike teaches is magic. He's the guest instructor in our Broadly Advised Class and you can watch one of his (highly amusing) videos here!
Deb Perkins is a serial entrepreneur, funding strategist, and founder of Broad of Directors, an educational platform for early-stage entrepreneurs that need a no-nonsense guide to build a great team and get funded.