The common adage goes, a banker provides money, but a VC (supposedly) provides smart money. Venture capitalists shouldn’t just pony up cash, in other words, but should also dive in head-first to help build companies from the ground up. Investors often have past operating experience at large companies or as entrepreneurs themselves, and they leverage this expertise to offer advice and guidance to the startups in their portfolios.
While this seems like a win-win situation, some entrepreneurs wonder whether this guidance is a help or a hindrance. After all, many entrepreneurs are driven, passionate individuals with clear ideas on how they want to create, run and grow their businesses.
Their concerns are understandable. But there are ways that a VC can really help.
A VC with operating or entrepreneurial experience is a valuable strategic partner. VC operators have “been there and done that,” and have learned a lot along the way. Maybe a VC grew a company from startup through a big exit, or maybe he or she managed a large team and P&L at a large corporation. As an entrepreneur trying to build the most successful business possible, in the shortest amount of time, is it not helpful to take advantage of this expertise?
There are many ways a VC can help an entrepreneur strategically ramp up growth. Every entrepreneur should feel free to ask their investor for guidance in the following areas:
• An outside perspective on—and often personal experience with—management issues that can prove especially useful in the complex relationships between founders and CEOs;
• Operational experience in scaling a business, managing people and building infrastructure—and an understanding of what it’s like to be in the trenches and what it takes to move forward;
• Understanding of competitive markets to give an operational assessment on whether the business model is sustainable and how the company can rise above competitors;
• Experience running all the ecosystems in a company (finance, marketing, recruiting, sales, etc.)
• A strong referral network of contacts in many areas who can add value to the startup to help with recruiting key personnel, meeting strategic partners and potential customers, and forging alliances in market channels.
This all sounds good … so what’s the problem?
A long-term strategic relationship between a VC and an entrepreneur will never work without “alignment.” At Maveron, we don’t ask ourselves “What advice can I offer this entrepreneur?” but rather “How can we align our goals to work together to build a great company?” Clear communication, a commitment to joint success, authenticity and trust, and an ongoing open dialogue are the cornerstones of a solid VC-entrepreneur team. As the startup grows, the entrepreneur and VC must continually realign their mutual goals, adapting to changing markets and business milestones to continue to generate the best business outcomes.
Only when the entrepreneur and VC are aligned can they work together to build and scale a great company.
The truth is that great VC’s want their companies to succeed as much as the founders do. So why not align our goals to increase the probability of a fantastic outcome?