rich manAt a recent Silicon Valley party, I met a venture capitalist from a very well-known firm. The conversation went like this:

VC: What do you do?

Me: I run PPC Associates.

VC: What’s PPC Associates?

Me: We’re an online advertising agency.

VC: Cool. I’m going to get some food, bye.

Little did he know that over the last 14 years in Silicon Valley, I’ve developed an uncanny ability to read VC minds. With that, here’s the conversation again, but annotated:

VC: What do you do? (Are you another VC?)

Me: I run PPC Associates.

VC: What’s PPC Associates? (Is your company a potential investment for me?)

Me: We’re an online advertising agency.

VC: Cool. I’m going to get some food, bye. (You are not worth my time.)

This VC, in my mind, is a “poor VC.” For all I know, he might be ranked on the Forbes’ Midas List and may have hit the jackpot on a few past investments such that he can afford an army of Teslas and Land Rovers to spirit him from his estate in Portola Valley to Sand Hill Road, but his future success will be stunted. Venture capital is different today than it was 10 years ago. There are a lot more investors (both at the seed level and beyond) and there aren’t enough good deals to feed all of these mouths. Simply walking into an entrepreneur’s office with a business card from a top firm does not guarantee that he or she will want your investment. To quote a venture capital friend: “Our job as venture capitalists today is selling money.” If everyone’s money is the same color of green, how does one venture firm differentiate itself over another?

An easy way to sell money better is to not sell money at all. Because almost every startup needs the same help – recruiting, legal support, expert advice, marketing, tech help – a venture firm that can assist in some of these is likely to have an advantage over a venture firm with a reputation of throwing money at dozens of companies and letting Darwinism determine the winners and losers.

And guess what – the hottest venture firms in Silicon Valley are doing just that. The poster child of this trend is Andreessen Horowitz (A16Z). As co-founder Ben Horowitz noted on his blog:

– In 2011, we hosted over 600 portfolio presentations to corporate customers and partners at our office in Menlo Park. These presentations resulted in more than 3,000 introductions between portfolio companies and prospective Fortune 500/Global 2000 senior executives.

– We’ve built relationships with over 4,000 engineers, designers and product managers, and we’ve made more than 1,300 introductions to our portfolio companies, resulting in 130 hires within the portfolio.

– We added over 550 executives to our network in 2011 and made more than 300 executive introductions to our portfolio companies.

– We’ve had nearly 400 interactions with media on behalf of our portfolio companies.

That $1 from A16Z is now worth $1.50; it’s extra-green money.

And that is the approach of “rich VCs.” If the VC I had met was a rich VC, the conversation would have looked something like this:

VC: What do you do? (Are you another VC?)

Me: I run PPC Associates.

VC: What’s PPC Associates? (Is your company a potential investment for me?)

Me: We’re an online advertising agency.

VC: Cool. What makes you awesome? (How can you help my firm or my portfolio companies?)

In 30 seconds, I might have told him something that could have been immensely valuable to his investments, and if I didn’t, at least he would have known to avoid me in the future! Rich VCs understand that the crab cakes aren’t going anywhere.

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David Rodnitzky
David Rodnitzky is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including Rentals.com (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up. David is a regular speaker at major digital marketing conferences and has contributed to numerous influential publications, including Venture Capital Journal, CNN Radio, Newsweek, Advertising Age, and NPR's Marketplace. David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not necessarily in that order.