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June 26, 2009

Do VCs Take The Summer Off? Entrepreneurs Say Yes. The Data Says No.

With the 4th of July approaching, the unofficial summer is about to begin.  In almost every board meeting with portfolio companies and other entrepreneurs who are raising money, I'm hearing the same refrain:  "The VCs are about to shut down for the summer".  Phone calls and emails won't get returned, partners meetings won't be held, and you might as well put your head down and build your company as best you can and then show up after Labor Day rather than wasting time knocking on VC doors.

I admit this is only my 7th summer as a VC, so I'm still new to this thing, but I just don't get it.  I still work during the summer.  My partners work all summer.  My co-investors and their firms seem to be working all summer.  And even when I'm on vacation at the end of August, if there's a board meeting, a financing, or a crisis, I'm available to my CEOs.  So are all the other VCs I know in the industry.  When I switched from being an entrepreneur to becoming a VC, I remember my friend and mentor Ted Dintersmith telling me:  "Jeff, take as much time off as you can in before you start off, because when you're a VC, you're never really 'off'.  There's always some crisis in the portfolio, a transaction that needs to get done, a personnel issue that needs attention."

it got me wondering what the data showed on this topic.  If the urban legend was true that VCs took the summer off, you would expect Q3 deals to be meaningfully lower than other quarters in the year.  So I looked at the NVCA funding data by quarter (www.nvca.org).  The quarterly chart was revealing - I saw no discernable quarterly pattern.  In fact, in each of the four years betwen 2005-2008, an eerily precise 25% of deals were closed in Q3 (25.0%, 24.6%, 25.1% and 25.0%, respectively)!

Some may argue that the quarterly data is misleading because Q3 covers September and many of these deals get closed after Labor Day.  But this argument seems specious given that all the hard work on both sides happens 30-60 days before a deal is closed, when the VC does their due diligence and term sheets are negotiated.  Rather than rejecting this counter argument prima facie, I decided to dig deeper.  So I looked at our own data at Flybridge Capital Partners and did a more micro seasonality analysis.

We have closed 42 new deals since we started the firm 7+ years ago.  Guess which month was our largest in terms of number and capital?  August, with 9 new deals closed!  December was second and July was third.  So much for taking the summer off.  Looking at the follow-on investments and new deals in aggregate (nearly 120 transactions), our data shows that December was the most active month and August second.  So much for that theory.

I'd be curious to hear what other VCs and entrepreneurs experience on this dimension, but I have to say that the data suggests the urban legend is false.  VCs simply do not take the summer off and aspiring entrepreneurs can get plenty of deals done, all else being equal.


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My direct experience contradicts yours a bit. In fact, here's an email I just received regarding scheduling a meeting (names and details removed to protect the guilty):

[Partner] is available to speak [date in September] – please let me know if that works for you. He is actually on vacation for a good part of August and then will be traveling a bit when he returns.

Ouch! I just hope that's not from a Flybridge partner, jon!! :-)

Scary stuff here people,
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It is universally known that business people are never off, nor the VCs, especially not in the summer. There are some chances that they are simply not willing to take. Still some of the exceptions are there to strengthen the rule. Even so, if you are looking for VCs (even for statistics purposes), check out www.vcgate.com ; out of 4500 investors I bet that 90% of them are doing their job all around the year.

If data say no, say no to data.

Good post! I find that some VCs are simply better prepared (and have an advantage compared to their peers) over the summer months - the ones whose partners are simply unavailable during vacation can lose time, while those who have colleagues pick up and advance their deals do far better. In my mind, the summer delay reveals quite a bit about the coherence of the VC firm...

I had kind of written off making progress in August but I have been pleasantly surprised that most of the VCs I have been working with have been available and engaged for the last four weeks.

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