Ah yes… the glamorous life! Meeting with new companies and putting capital to work. Investments, press releases and Board meetings. Cigars and Martini’s. The super exciting job of a VC.
Except that… for most successful VCs… this high profile, in the spotlight part, makes up very little of the job. Yes, I imagine there are some folks out there that will write an entrepreneur a check and then leave that person alone. But to proceed this way presumes an awful lot about the skills, experience and connections of folks that are typically on the front end of the youth and experience curves. It is also probably the pathway to mediocre or poor investment returns.
For a good VC, maybe 25% (or maybe less) of the time is spent finding the investments. The rest of the time is spent making them successful.
During this “other 75%” the VCs job is to:
- Hold the CEO accountable for deadlines, plans, and deliverables.
- Block or push for major events in the company’s life (future fundraises, acquisitions, selling the company etc.)
- Provide great strategic advice
- Help with recruiting senior executives or key hires.
- Teach entrepreneurs about the nuts and bolts of the business, or processes as you scale
I often talk about a VC making sure that a company has achieved enough to merit the next funding round. That might be completing a beta release or building customer traction or filling out the team with high quality hires. As a capitalist, the VC wants to make sure that the next round of funding is at a higher value than the last one. A CEO will want to achieve these things, and the VC will try to make sure that nothing slides.
Or what about a $40 million acquisition offer? That might be a lot of money to a young entrepreneur. But what if that is selling the company short of its potential. Putting these types of things into perspective based on experience is of real value to the management team of a portfolio company. At least it should be.
Maybe most important, especially for an early stage investment is the hard work of positioning, messaging and go-to-market. The skill sets of building a tech product and of marketing that product are not the same. A VC, sometime as a function of protecting an investment from failing, or sometimes as a function of fostering growth will spend time with his management teams to make sure they know, who to get to, how to get them and what to say once they get there. For many CEOs, this is the area that guidance is most needed and most welcomed.
This is roll up your sleeves type of work. It’s not particularly glamorous. I don’t expect that anyone is going to feel particularly bad for a VC who does this type of work. So why am I telling you this? Because you need to hold your VC accountable to that “Other 75%”. You need to ask the right questions when you are finding your VC. You need to make sure that you have found a person who cares that your company is going to be successful and does everything in their power to make that so.
At very least, if a VC is going to make you work that hard to get the money, you should make sure that she or he is willing to work that hard once she or he gives it to you. If not, your company is only getting 25% of what it deserves.