A great VC will do so much more than write a cheque. As a founder, you want a VC with a high degree of empathy and curiosity. It’s a relationship that’s based on trust and partnership; it is nonjudgmental, supportive and constructive.
In many ways, it’s like finding the right spouse!
But I heard a different perspective from Chetan Saiyya. He thinks VCs tend to interfere.
Chetan exited a digital asset management startup that he built, which had just raised USD 8 million.
He took the call because the VCs weren’t onboard with this vision and strategy. They weren’t able to see the market shifting from client-server based solutions to cloud-based solutions. And they weren’t allowing the major architecture rehaul that was required.
Chetan bootstrapped his second company, AssetLink, to a profitable operation and had a very successful exit through acquisition by SAS.
This might be an extreme example of the VC-founder dynamic.
However, in my own experience, there’s a fine line between micromanaging and being disengaged. Most VCs want to help. But how much ‘hands-on’ is too much?
I think the intervention of the VC has to be on a ‘pull’ basis. Don’t interfere unless asked or if there is something seriously amiss. Here are some more thoughts:
1. Implement universal learnings: When investing at the seedstage, you come across many founders who aren’t aware of basic processes. Here, founders can trust the experience of VCs to avoid reinventing the wheel.
Bookkeeping is one example. At Pentathlon, we’ve arrived at a standardised format of reporting numbers that gives us ready insights into your organisation. There are other best practices in Go To Market, Fundraising etc. that make things easier.
2. Cultivate humility: Personally, I tell myself to bring some humility to an interaction with founders. We shouldn’t push our views too hard. Don’t assume you know everything.
Even if VCs have had successful exits, I like to remind myself that startups are dealing with newer problem statements and new approaches — so our past experiences might not be applicable today.
3. Ask a lot of questions: I ask a lot of questions, even if that means I risk coming across as foolish. I’ve found repositioning meetings as constructive discussions rather than prescriptive interviews is more helpful. Asking and answering questions clarifies the problems at hand.
I learn something new, and the founders become clear about what options they want to pick!
What other positive and negative traits do you appreciate in the VC-founder dynamic?