"THE TOP TEN LIES OF VENTURE CAPITALISTS"
Guy Kawasaki has a decent and amusing list here. Check it out if you're an entrepreneur or thinking about starting something that needs outside investors.
The second one on his list is one that sticks out for me.
2. "If you get a lead, we will follow." In other words, "no." As the old Japanese say, "If your aunt had balls, she'd be your uncle." Well, she doesn't have balls, so it doesn't matter. The venture capitalist is saying, "We don't really believe, but if you can get Sequoia to lead, we'll jump on the pile." In other words, once the entrepreneur doesn't need the money, the venture capitalist would be happy to give him some more--this is like saying, "Once you've stopped Larry Csonka cold, we'll help you tackle him." What entrepreneurs want to hear is, "If you can't get a lead, we will." That's a believer.
This isn't actually "no." Some firms actually are complete followers, which is weak but a reality, and will only participate when a top-tier firm invests. These are typically second or third-tier firms, which I know of a few in Asia and the U.S., but sometimes beggars can't be choosers.
During our second round of financing at HeyAnita Korea, we started our fundraising process outside of our first-round investors. It was during the market crash so our choices were limited since many funds were pulling back from early-stage deals. A few large second-tier funds were interested, but only if there was a lead or only if they knew for certain that Softbank was investing. Part of this was because they wanted to see confidence from our first-round investor, but these firms were more focused on the idea of "Softbank" or a brand-name investor leading our round. I believe it could have been The Carlyle Group's venture fund and they would have jumped in.
We circled back with Softbank, they agreed to participate, we went back on fundraising trail and eventually closed that round for $7.5 million. Some firms are just followers, but I assume most of these types died off during the bust times.