whattheydontteachyouatstanfordbusinessschool.com

9 VCs and Their Secret Credit Scores

by Larry Chiang on December 13, 2009

arry Chiang offers up a behind-the-scenes look into how business really works. If you liked “10 Things They Don’t Teach You at Business School “, “The Art of Being a Booth Babe” and “How to Work a Cocktail Party“, you’ll like his newest submission: “9 VCs and Their Secret FICO Scores”.

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Larry’s book releases 09-09-09 and he is very worried that it will not sell well.

Before he’s done, you will happily embrace your MBA debt, set aside your entrepreneurial inhibitons and have a PDA packed with mentors secret email addresses.


By Larry Chiang

Next month is Financial Literacy Month and a venture capitalist is the last person you would think would worry about their FICO score.

You’d think with those millions under management that they would be pillars of great credit, financially savvy and able to manipulate Fair Isaac’s scoring model in their favor.

Nothing can be further from the truth… here are 9 VCs and their secret FICO Scores

-1-  Mr 15 Hour Work Week.

Travels so often for boondoggles that his mail weighs 25lbs by the time he checks it.  Went to college in the early 80′s and does not know you can get credit card bills emailed to you.  Pays about $200/year in late fees that he has his WSGR.com attorney litigate/berate/dispute away his late fees. FICO = 678.

-2-  Mr Socialite VC.

Sits on about ten boards and can fundraise $30mm from a payphone with phone numbers memorized under his perfectly groomed head of hair.  He has a house in Woodside, California but also an apartment ‘crashpad’ in SF.  Gets sms bill reminders from duck9 that he forwards to a male assistant to pay for him on-time out of the expense account kept separate from “The Fund”. FICO = 805.

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I cut and paste my mentor, Mark McCormack, who wrote the book, “What They Don’t Teach You At Harvard Business School“.

-3-  Mr Dual Home Owner.

By dual I mean has four homes in two cities. Two in the US and two cities abroad.  Hates real estate as a ‘fools investment’ and shorts real estate derivatives (whatever that means).  Amount of mortgage(s) = $0, but has a managing partner living in the servant quarters of two homes.  Prepays his power bill but comes “home” to a powerless place 1x/yr due to non payment.

Owns no car and thus has no car loan, MINUS 45 FICO points.  Too bad paying on time to your limo service builds no credit-sorry.  FICO = 710

-4- Mr South Africa.

From one of those countries that speaks English, but isn’t American.  His freshness of citizenship coupled with his affinity to use US cash (currency that is ALL the same color and size- so weird!) gives him a FICO of 520.

-5- The VC turned Private Equity Fund Manager.

She made her exits in the 90s with a slew of IPOs. For those of you that have only been working since Sarbanes Oxley locked down the US economy, an IPO is a sale of stock to the public versus sale of stock to private VCs.

Ms Fund Manager cosigned her daughters 3 series (+40 FICO points) and has a home equity line still open from ’97 (+55 points).  FICO = 815.
–6- Mr “I Sold My Company”.

Is it possible to be worth north of $100mm yet have a FICO under 600?? Yes!  He has wife with a FICO GREATER THAN 800 (that’s why he married her–cuz girls with $20k in credit card debt do not character compass right).  Good news is that his FICO’s rising because I just mentored him. He just borrowed $270k against the $3mm Oakland Hills house he used to own outright.

-7-  The Associate.

How do you go to UT on an athletic scholarship and still come out with school loan debt?! Yup, he creatively funded entrepreneurial projects with loans backed by the full faith and credit of the US government. Those deals went south in 2002, but he will bounce back.

He has perfect credit:
1) Has a Visa credit card he treats as a debit card because he logs in every Tuesday and pays it off in full
2) Drives a VW he leased
3) Owns a home because he liquidated a trust fund and bought a

-8- Angel Investor that Deal Flows in China/India/Isreal/UK.

Has no FICO.  His fund is Caymen / BVI (British Virgin Isles) based with LPs making up only 10% of his fund.  Takes advantage of the $10,000 currency limit by carrying in $12k/ in-bound per US trip.  His over-the-hill travel companion with more legitimacy than him, mules in another $12k.

-9-  Mr DDSS VC.

DDSS is “dumb it down, sandbags for success”.  Lives with three roomates and denies ever having started AND sold Zip9 for $380mm while holding 80% equity himself.  Lives spending less than $80k/year but spends $2mm on a 6 week of vacation.  FICO = 794.

Conclusion: The average VC FICO = 610.

The national US average is 585.

So although VCs manage millions, rest knowing that when it comes to FICO, they are neck-and-neck with the general public.

Do not laugh.

Here is You: The Future VC.

Right now you are dabbling and moonlighting. You and your co-founders are gonna kill Duck9 by building a better mousetrap. The time from ‘start’ to “sell” has never been shorter and never been cheaper. Your FICO stays over 750 because it is one smooth ride from zero to hero (your $100mm exit).  Your 750 FICO lands you in the 90th percentile, but according to Fair Isaac, it is only in the 50th percential.

** Fico Credit Tips  **
1- NEVER EVER KEEP DEBT TO BOOST FICO
2- Take two credit cards and charge $20 / month. Reporting makes little distinction between $20.00 or 20k paid on time
3- Dispute things in writing using snail mail
4- Duck 9s (9s are charge-off, where bank gives up trying to collect on your dead-beat ass) on your credit report.  I know an Indian VC who refuses to pay a AT&T bill for $400.  Most charge-offs in America are for under $200
5- Don’t close an account
6- Effen download the form and physically see your credit report… did you graduate without ever seeing your college transcript?  Get a physical copy. AnnualCreditReport.com not Free CreditReport dot con.  It’s like Iceland Greenland where one really is green.
7- Meet me at 6th and Colorado in Austin with your Experian /Equifax/Trans Union and $9.00 (no I don’t have more than $20 in change) and we’ll voodoo your score a few points higher.

If you’re from the industry and hate that I bring light to credit truth, flame and troll me in the comments… I won’t even delete it no matter how wrong.


No one works a VC like me, so ping me and lets meet up. At SXSW, my VC Secrets Panel is Sunday March 15th at 10:00a.m at the Austin Convention Center, Room #9.



Larry Chiang is the founder of Duck9, which educates college students on how to establish and maintain a FICO score over 750. He has testified before Congress and World Bank on credit.

He is a frequent contributor to Business Week’s blog on “What They Don’t Teach You at Business School”. His earlier posts at GigaOm: How to Work The Room; 8 Tips On How to Get Mentored ; and 9 VCs You’re Gonna Want To Avoid. You can read more equally funny, founder-focused-lessons on Larry’s Amazon blog.

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