When I started my first company I was employed at MIT as Director of Information Services. When I told a colleague, Cecilia d’Oliveira, that I planned to leave, she told me I should talk to Allan Bufferd, who was then Treasurer of MIT. Cec told that Alan was in charge in MIT’s investments. I knew Allan as we served on an administrative committee together.
When I saw Allan all I had was a two-pager we had written about our startup, Course Technology. I only remember a couple of things about the conversation. The most memorable was when he told me that “everybody’s money is green.” I told Allan I had no idea what that meant. He explained that all investors can put capital into a startup, the question we needed to ask was how else could they help us to be successful?
The other thing he told me was that if we had a lead investor, he would invest directly in the company, which was highly unusual for MIT, as the Institute only made one or two direct investments in startups a year at that time. All other investments were made through venture capital firms, like Greylock. To make a very long story quite short, we had been introduced to Greylock in their San Francisco office and brought Alan Bufferd to our first meeting in the Boston office with Bill Kaiser, way back then a young partner being mentored under senior partner Henry McCance.
It didn’t take long for us to understand that Greylock brought a lot more to its portfolio companies than capital, for one thing about half a dozen of the country’s top universities and colleges were limited partners in their fund. Greylock also had a very long track record as one of the most successful VC firms in the country.
So we decided to accept the term sheet from Greylock, the only VC firm we talked with, which brought along the direct investment from MIT, shepherded by Alan Bufferd.
When Course Technology was purchased by Thomson, now Thomson Reuters, both Greylock and I’m glad to say, MIT, got good returns on their investments.
So keep the “everybody’ money is green” saying front and center when you are raising capital. Interview potential investors to find out how they will help you succeed. Do they have great contacts in your market? Can they help recruit world class CXOs to the company? Can they syndicate the investment with another blue chip VC firm (as Greylock did)? Get beyond the platitudes on their web site and dig for specific examples of how the VC firm has helped companies like yours succeed. Green money is necessary, but far from sufficient for startup success.