7 Questions LPs Should Ask VCs (But Don’t)


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eat with undergrads. This is the Fortune 100 executive equivalent to eating lunch with the third shift. The third shift eats at 3:00 am, since they work from 11:00 pm – 7:00 am.

The Silicon Valley equivalent to third shift lunch is eating a fourth meal with CS majors at approximately 12:30 am. Plot spoiler: when you show up, you’re treating. The difficulty is getting the kids to come out from under the rock where they are coding.

Have you trolled computer science majors at Stanford? How would you?

Sure it’s a hits-driven business, but what drives the hits are CS kids.

How do you charm a CS kid? Where do you take these CS kids on field trips? You need a strategy to find the next Larry and Sergey. Remember, according to Silicon Valley lore and urban legend, KPCB found Sun on the second floor of the Stanford CS lab, but lost Cisco to Sequoia because KPCB didn’t check the basement.

7. How are you adapting to a world where some investors are offering $800K convertible note rounds with no board seat and no cap?

There is a problem when you are taking equity-level risk with near commercial debt lending-level returns. Getting all the downside risk with a small sliver of the upside is not going to help anyone’s TVPI. (TVPI distributed and undistributed portfolio value to original invested capital.)

Me, I am doing guaranteed exits while they’re in school and looking to fund pre-seed pre-preneurs.

By “guaranteed exits” I mean having 2 to 5 CS majors executing 20 to 45 steps. Their startup isn’t concocted from scratch. It is a sequel business meaning it is 80 percent stuff that exists already and 20 percent new. The industry problem is sourced from some industry expert veteran. It is “guaranteed” in that it works about 60 percent of the time. It is done under the umbrella of a course called “Unofficial ENGR 145” at Palo Alto Community College (aka Stanford).

Upon “sale” of company in the $20K-50K range, the CS majors commit the next two summers.

When I say “fund pre-seed, pre-entrepreneurs,” I mean you should pay to get student pre-entrepreneurs into tech conferences like Web 2.0, TechCrunch, Launch, DEMO, SXSW, Summit at Stanford, and CES. The management fee itself can and should be invested. It is the execution of paying founders to do lead gen from above point No. 5.

By asking some of these tough questions, LPs can stimulate VCs to innovate and perhaps get better returns.

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Larry Chiang is CEO of Duck9 and teaches Engineering 145 as a Stanford Entrepreneur in Residence. He has a fund called "Larry Chiang Stanford G51 Fund of Stanford Founders." Follow @

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12 responses to “7 Questions LPs Should Ask VCs (But Don’t)”

  1. Peter Mullen says:

    Dude, why are you giving up all your secrets for success in a public forum? This is great stuff. I’ve long advocated the event circuit (and I guess now you can add the cafeteria circuit) as the absolute best means, not just for lead gen (I’m in sales/bus dev) but to initiate and foster long term trusted relationships with entrepreneurs and those who love them. Not many people get this. Thanks for the post.