How VC Associates Can Be Good “Partners” to Start-up Founders
When I posted on Twitter about the end of my call with a repeat founder, I genuinely didn’t think it would touch such a third rail about VC titles and warm introductions.
Having started my own VC career as an Associate, I was quite accustomed to founders asking “So will your Partner be joining us in this meeting?” and learned not to take it personally. As one reply from Cluster CEO Kim Taylor pointed out: “We have limited time. I have nothing against associates but generally not a good use of my time when I’m busy.” Fair enough. In fact, I can’t imagine a time when an early-stage CEO wouldn’t be busy, much less during active fundraising.
It’s also no secret that as the number of funds doing seed and early-stage has grown exponentially in the last decade, too often they have taken to title obfuscation as a way to give their junior team face-time with Founders. And in my particular instance, the introduction I could offer was not the intro the Founder wanted.
But the debate in my mentions, lively and rancorous as it became, highlighted a massive distrust and power imbalance between founders & VCs that has many, deeper roots worth unpacking.
VC Title Inflation and Where it Got Us
Whereas standard hierarchy just a few years ago would be Associate, (occasionally) Principal, and Partner, many firms now bifurcate to Partners and General Partners. Functionally, the work doesn’t change for individuals at the bottom but they are empowered with a title that used to previously connote independent check-writing power.
I was taken aback by the exchange I had above, as I had never heard a Founder call it out so directly. But I can’t begrudge the CEO for qualifying an offered intro, just as I can’t begrudge firms for using Associates to qualify Founders before raising the highest conviction ones to a decision making GP. I’ve seen both sides of it, having worked with plenty of Founders who didn’t care about titles before taking the first meeting.
In fact, the latter was all I did when screening companies as an Associate at Techstars, while in the past two years with LaunchCapital, initially as a Sr. Associate, I sourced four of the ten completed investments I worked on. The larger problem as Uncork Capital Partner Andy McLoughlin wisely elucidates is that “So many founders have been burnt by time-wasting VCs they are all laser-focused on getting to a decision as quick as possible, by getting straight to a check writer, as quickly as possible.”
On the whole, VC title inflation has made it so Founders aren’t sure if an Associate, Partner, or even legacy GP, actually has check-writing power or any influence on decision making. This creates confusion, lots of wasted time, and distrust of an entire asset class because of a growing number of bad actors.
While I can’t personally change the culture of these title-inflating funds, with so many new seed funds popping up and hiring Associates, I can offer some words of caution and advice to these new hires and would-be VCs alike to hopefully change a culture trending in the wrong direction.
Respecting the Long Game of Founder NPS
One of the things that my Managing Partner, Cliff Sirlin, reminded me often in my first days working with him at LaunchCapital was that “Venture capital is a ‘get rich slow’ business” and not a transactional one. The importance of developing relationships with founders for the long term, whether or not you end up investing in them, could not be overstated.
But because too many Associate programs are seen as merely two-years pre-MBA roles, or treated as a rest stop for top-tier startup operators on their way to founding their next companies, not enough VC Associates think about their long term NPS with Founders. This is shortsighted and dangerous.
I can share from experience that founders often backchannel with each other and with other VCs, not just about Partners and Firms, but about Associates and whether they are worth spending time with. Even though I was “just an Associate” our portfolio founders have vouched for and introduced me to other great founders they’ve gotten to know. I even received intros to founders from their friends at companies we had already passed on. Sourcing deals as an Associate can feel like a “random walk” but each interaction you have with a Founder potentially leads to another Founder who you actually would eagerly take to your Partner and Investment Committee.
Statistically speaking, you will not make Partner at the firm you currently work at so be mindful of your personal brand with founders vs. your firm’s brand. When you keep your personal Founder NPS top of mind, each of these positive interactions compounds towards the next winning opportunity for both you and the fund.
Founders Have a Burn Rate, You Do Not
The function of an Associate at every VC fund is different but the one constant is that you’re collecting a steady paycheck, while most founders are not. With every founder I speak to, remembering that they have a burn rate while I do not, helps me focus on getting to a quick No. After all, for founders in today’s market, a quick No is the next best thing to Yes.
Some firms have well-defined conditions to help get to a quick “No”. Others, especially newer or generalist funds, often do not. As an Associate, you should design your own conditions for the companies you source. Of course, this requires diligence prior to getting on a call. VC Associates so often get collectively maligned for ‘kicking the tires’ without having done any diligence, that clearly this lack of preparation has become pervasive.
The first call with a Founder is not an opportunity for you to start your research into a market. It should help you understand where they fit into a broader market landscape and on what variables their offering differs from incumbents and competitors.
Likewise, in a time of obfuscation by VCs representing your process honestly is a competitive advantage. I’ve found it really useful to tell a founder on the call exactly what the next steps are i.e. “I need to see [X], [Y ]& [Z] data from you, after which I’ll share a summary with my Partners on the Monday after next and get a go/no-go. Let’s plan to check in on a quick call after that meeting once I know where we go from here. If questions come up during my diligence, I’ll touch base sooner.” If it’s not right for your fund, then say it’s not right, on the call.
New Associates often think that by saying “No” directly, they will alienate a founder. When in fact, dragging out a process, leading Founders on, asking for more diligence materials that you never care look at, and ultimately ghosting on a reply is way more damaging to the Founder’s time and your own NPS.
High-Quality Associate’s Worth More than a Low-Quality Partner
Success in Venture Capital, like in most investment asset classes, comes down to a combination of luck and skill. Unfortunately, 11-years into a bull run, there are more than a few VC Partners conflating their good luck with clairvoyance. Do everything you can to not be this individual. Inevitably when the rising tide crashes, the frauds and tourists always wash up on shore.
Being a high-quality associate doesn’t mean you source the most deals. Your job isn’t to do the most deals, it’s to produce returns on the deals that you do. This comes from being a true partner to founders — even if you are just an Associate. You can start by recognizing that at the earliest stage that you need to provide more than just capital to Founders. You can’t make their decisions nor build their business for them, nor should you try to. But you have other value you can provide.
Being a good partner means understanding what a Founder needs and being introspective enough to know whether you can provide this. In diligence, this should help you qualify pretty quickly whether you are the right investor for this Founder. If you can help them, being a good partner means removing obstacles in their way so they can continue running in their chosen direction, at top speed.
Follow through on that promise and very quickly, founders stop caring if you’re a “Partner”-Partner because, in the end, it’s you they’ll want on their cap table anyway.
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