What founders really want from VCs
We all know that VC “value add” is an elusive notion and that venture, from the outside, looks like a completely undifferentiated product. If you’ve been in the game long enough you know that’s not true, that solid investors can make a huge difference whilst bad investors can destroy companies.
I was taking some time to reflect on my experience and I think I’d boil down what founders really want from an engaged investor to four key things:
- Does my investor have my back ?
This is not about being founder friendly at all costs (read Fred Wilson) but about having respect for the entrepreneurial journey, having empathy and knowing how to listen; knowing when to help or step in. When founders know in their heart you are putting the company first, they can relax into doing the best they can without concern for undue turbulence at the board, and have a chance to really shine and come into their own as leaders.
2. Does my investor have unique, transformational insights ?
Founders know way more about their business than investors will ever do, but distance provide some benefits in terms of clarity of thinking. Often we can help focus and, as we know, radical focus drives success. Other times we can simply see the company running into a wall and perhaps reframe the path to success. These insights may be rare and hard to come by, but they can change the fate of a company.
3. Can my investor help me recruit stars ?
Young startups often don’t realize how attractive they are, and what calibre of people they are able to attract. This is one area where a passionate investor can really make a difference in closing amazing candidates. Getting great talent early is priceless.
4. Can my investor help me get funded ?
For startups, survival often depends on sustained access to capital markets. Investors know how to talk to other investors and can help shape both the milestones that need to be hit and the valuation creation and derisking path that a company is taking. And by putting their name and reputation on the line they can make a real difference and instill confidence in the later stage investors. Entrepreneurs, ultimately, want to know you can help them get through the journey.
I think the rest is pretty much in the nice-to-have category. Great venture brands, deep sector expertise, extensive networks are all valuable … and secondary.
The usual cliche that I have used too often is “first do no harm”. But really, that’s just a cop out. A great relationship between a founder and venture investor can yield great results, and it should.
Steve Schlafman wrote a great post about the qualities that make a great venture investor. Curiosity, Expertise, Passion, Focus, Network, Sales, Emotional intelligence, Conviction. All these are spot on.
I’d like to add my own favorites : patience, consistency and courage. No startup follows a smooth path to success. There are defining moments that make all the difference. For Zoopla, it was bridging the company when an investor pulled a few days from closing. For Deliveroo, it was supporting early global expansion with Will and Martin when we all knew what that meant in terms of short-term capital needs. For Integral Ad Science, it was keeping cool heads and trusting the younger members of our team when our senior management team blew up in one go, whilst we went out to find Scott Knoll. Whenever the moment is, it can define who you are as an investor and can help move your company from good to great. Bearing in mind of course that never truly own that success, which always rests with the team you backed, you can, as an investor, make a difference.
I will leave you with this graph from DeSantis Breindel which highlights an interesting disconnect between what founders care about and what VCs think founders care about. Food for thought.
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