My client had a difficult choice for his first venture round.   He had an offer from a boutique VC firm whose partners he really liked; he got an excellent counter-offer the next day from a Tier One VC firm.  I was in the midst of the due diligence on the boutique investors.  His three other advisors told him to go with the Tier One. He called me last for my opinion.

“Do you like these Tier One guys?” I asked, hoping not to sound silly.

“No, they are cold-fish VCs—they told me that I was Investment #147.”

“Yes,” I said, “and you like the boutique guys, and my due diligence on them says they roll up their sleeves when things get tough, and don’t look for blame. All 30 of the CEO references I have spoken with in the last 24 hours said they wished they still had these guys on their Boards.”

“But my other advisors tell me to go for the Tier One, as it will raise our valuation. Isn’t that what you are supposed to help me with—to drive up our valuation?” he said.

“Absolutely,” I said. “And you are just starting this company. And you don’t need a Tier One VC until the penultimate round before your IPO (particularly ones you don’t respect). Just before an IPO, a Tier One firm can make the difference between a $600M play and a $1 Billion play. But before that, it is better to drive your valuation with capital partners you like and can work with, while you are building. There will be Tier One VCs when you are ready for them.”

I am glad to say, he chose the boutique venture partners, who are still his loyal partners, through all the good times and bad, through the changes in the business model, and two economic crashes, these many years later.