VC, Startups and Torah. Wait, what?
My venture partners and I recently tripped over a profoundly relevant regulation buried deep in the Talmud, which is a body of Jewish law dating back 2,000 years.
We came across the decree in the middle of a weekly Torah learning session, during which we pause our investment work to grapple with more timeless and thought provoking matters; namely, the work of living a more meaningful life.
The law we encountered stipulates that you can not ask a merchant the price of an item, if you have no intention of buying that item.
Seriously. That’s a 2,000 year old Jewish law.
In other words, you can not walk into Best Buy and grill the salesperson on the differences between the Sony and Samsung plasma televisions if you know you’re just going to buy it on Amazon.
The rabbis (two millennia ago) provided several reasons for this prohibition. First, they noted that the practice would be a colossal waste of the merchant’s time. Second, it could be construed as a form of stealing: you’d be appropriating valuable information without giving the merchant even the possibility of compensation.
But there’s another even more important reason for the prohibition: You’d be raising the merchant’s hopes for a sale.
That’s a fairly remarkable statement, especially when you consider how primitive the world was 2,000 years ago. You can not mislead a merchant by raising his or her hopes for a sale. So, several hundred years before the gladiator games ended, the Talmud was concerned with how to treat merchants ethically. That’s pretty cool.
The partners at our firm were pondering this tractate as it relates to our own investment process.
Our fund, for example, has specific mandates and hypotheses that drive our investment strategy. Those hypotheses, created in partnership with hundreds of corporations, animate our proactive approach to sourcing startups and deals.
But, sometimes, we receive inbound inquiries from entrepreneurs — or other venture capital firms — regarding businesses that fall outside our mandate. In an effort to be responsive to those entrepreneurs and treat them with respect, we have gone out of our way to meet with them and help them.
Now, the Talmud’s prohibition echoes in our ears: You can not raise the hopes of a merchant. Are we — and other VC firms —raising the hopes of the entrepreneurs?
This Jewish law raised myriad questions for our firm to struggle with. For example, if the startup is outside our areas of focus, are we doing them the favor of a “courtesy pitch,” or are we actually wasting their time? Sometimes the random inbound inquiry from an entrepreneur is actually a remarkable company. So how do we balance being opportunistic as a fund, while also being sensitive to the challenges of being an entrepreneur?
Having been a entrepreneur myself — six times, in fact — I know how important meetings with VCs can be. At the same time, I understand the immense value of time, time wasted, experience gained, and relationships built.
Our fund has been intentional about its approach and processes since Day One, and we’ve tried to mature those processes over time. Among the tenets to which we’ve tried to stay true:
FULL TRANSPARENCY — Since our fund has specific investment hypotheses, we try to make clear to entrepreneurs up front whether we think there’s a match before we meet. In other words, we might say, “It looks like your company is outside our area of focus, but we would be happy to chat with you about your business, brainstorm your approach, and see if we can help, even if we don’t invest.” That way, the entrepreneur can decide whether he or she wants to allocate precious time to a meeting, and wants to take a “practice swing” with our firm. Sometimes those meetings do result in an investment, but we believe it’s important for entrepreneurs to know the odds before spending time with us.
THE 24 HOUR RULE — Knowing how precious time is to entrepreneurs, we obey a “24 hour” rule, never letting an entrepreneur go a full day without a response. In addition, after our first meeting with entrepreneurs, we’ll always attempt to be clear about when they might hear from us next. For example, we might say, “We’re going to try to discuss this as a team tomorrow, and our plan is to speak with you before the end of the week.” Speed is critical to startups. We know that, and — unlike other firms — we would never want to disappear, ghost, or leave entrepreneurs dangling in the wind.
STAY TRUE TO MISSION — Our fund has a mission of strengthening the bonds between Israeli entrepreneurs and the U.S. market. And we are committed to fulfilling that mission, even if we don’t invest in a particular company. For example, it is not uncommon for us to meet an Israeli startup, fall in love with the team, but ultimately decide that an investment is not appropriate for a particular reason (stage, sector, price, etc.). In those cases, we will still try to open our rolodexes to the founders, help them think about how to tackle the U.S. market, and provide additional assistance if we can.
Two thousand years ago, the Torah stated that you can not ask a merchant the price of an item if you have no intention of buying that item.
In other words, you can’t raise the hopes of a merchant, or waste his or her time.
We believe the same rule applies to entrepreneurs.
Click here for more information on our fund.