Founder-Venture Capitalist Relationship : A VC’s Perspective

Imagine this: you’re in a crowded room, with hundreds of faces. Amongst them, a handful hold the potential to revolutionize industries, disrupt the status quo, and change the world. — The optimistic view at one side of the table.

Imagine again: you’re in a crowded room, with hundreds of faces. Amongst the ambitious ideas 20% will fail at the end of the first year, 30% will fail by the end of the second year, 50% will fail by the end of the fifth year, and 70% will fail by the end of the tenth year. — The pessimistic view at the other side of the table.

The pick of the above, guides the nature of the relationship shared between founders and Venture Capitalist (VC). The aim remains to forge a synergistic relationship that fuels the visions capitalizing on emerging megatrends.

From the lens of a VC, what are the pillars of string relationships?

The Seed of Trust:

According to a PitchBook report, only 2.3% of startups receive VC funding. So, when VCs invest, it’s a well-researched leap of faith. However, what one misses to capture is beyond research, the seed of the relationship.

While greatest of the businesses might miss to onboard investor money, ordinary ideas become well capable to. The tipping point is the relationship built with the investor, transparency, agility, respect are silent contributors to a possible investment closure.

More Than Just Money:

While capital is one piece to the puzzle, investors bring more. The network, expertise, access all together adds to the venture capital resource.

However, as the landscape is growing, the essence of investors has been reduced to just money. Once the money is received, investors are deemed sleeping stakeholders, occasionally being engaged. A relationship that remains consistent becomes the key, founders tend to underestimate the potential of investors.

If you’re a founder who has raised capital, keep your investors informed about the business , seek support from them , investors sorts of help, and see how many of those times do they fail to …

A Shared Journey:

The relationship is beyond financial transaction. Founders often come face to face with situations where they might have to undermine the stakeholders in interest of the business.

The assumption that it might spoil the relationship with these stakeholders and making biased actions makes the relationship translucent.

The larger picture to keep in mind is that such actions might lead to larger unfavorable situations as realized in the saga of recent growth-first, values later companies.

Investors generate their returns when the businesses grow, is the bottom line. Maintaining transparency ensures multiple validations to the initiated action, all in interest of the business.

It’s a Two-Way Street:

We constantly learn from the founders we support. Regular open communications initiated at both the ends deem necessary for the relationship to grow as a hole.

Analyzing close to 5 businesses every day makes us no short of insights. This archive of insights can be explored via regular communications. Same as we do to understand more about the target space to invest via operators building in the space.

Building for the Future:

The VC-founder relationship is a unique blend of expertise, mentorship, and shared vision.

At Auxano, we aim at supporting shared goals and promote trust, open communication, and mutual learning.

We’re still in contact to the companies we’ve taken exit from, because as mentioned above, these relationships are beyond a mere financial transaction.

Author:
Kanuj Jadwani