Full disclosure – I’m a venture capitalist so I know there are mixed feelings about VCs. On the one hand, venture capital is an important piece of the broader startup puzzle. Done right, venture capital can be a wonderful, positive force for startups and the innovation economy alike.
On the other hand venture capital can also, at times, be really messed up. Done wrong, it can be a negative, destructive toxin.
There’s plenty of advice out there (books, articles, etc.) telling startups how to engage with VCs in the hopes of raising money. The world usually sees venture capital from the perspective of empowered givers and hopeful receivers (think ‘Shark Tank’). How about looking at things from the opposite perspective? What advice do startups have for VCs? What do startups wish VCs knew?
Some examples people have shared in the past:
VCs need to give startups definitive answers, even if it’s a “no.” A lot of entrepreneurs feel they get the run-around from VCs who can lead them on for months with the bait of possible funding. Meanwhile they suspect the VCs are just waiting to see if the business gets more traction or if other investors jump on board. As one founder put it “I wish they’d just say yes or no. We can always leave the door open in case the VC changes its mind later, but as CEO I need to know what I can count on right now and what’s really just a waste of my time.”
VCs are sheep pretending to be shepherds. VCs can act as if they have magic powers to judge your business, but in reality they mostly care about who the founders are and who else is investing. To quote another entrepreneur “if your startup has a CEO with a big enough resume, plus some big name investors at the table, it’s pretty easy to get 80% of the other VCs to scurry in like rats.”
I want to build a long-term business, but VCs want a short-term flip. Founders can feel trapped because, in order to get funded, they have to promise an “exit.” With 90% of exits happening through acquisitions, this means they inevitably have to promise VCs they’ll get bought – soon – even if it isn’t what they really want. Most founders start companies because they’re passionate and want to change the world, not because they want to lay off 80% of their team in a few years after getting bought and shoved into a big corporate box somewhere. There’s often inherent tension and a conflict of interests between the long-term needs of a business and the short-term demands of a VC.
Of course, these aren’t all the issues between entrepreneurs and VCs. Rather, I’m hoping they’re decent seeds for a broader conversation. If you’re an innovator or entrepreneur, what do you wish VCs knew? I welcome your comments – good, bad or ugly.
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