Fourth post in the series of blogs about what entrepreneurs should look for in a VC (besides the money). This post is focused on the post funding interaction that a company’s management team has with its VCs/Board.
In general, early-stage CEOs tend to think of VCs/Board members as “pigeons” because they fly in, shit all over everything, and fly back out. They focus on what is at hand. They don’t give too much advice on how to:
- Strengthen an internal weakness.
- Step by step fix what is wrong.
- Position the company better than competitors.
- Plan ahead both 30 days and 6 months.
- Get ready to raise the next round until there are 4 months of cash left.
I’ve heard the complaint that, VCs are not as long on process as they should be. And they are not as hands on outside of board meeting as some would like.
So let’s break that down. How much should you expect of your VC if he is sitting on between 15 and 20 boards? Did you ask about her/his process in guiding companies when you were considering signing the term sheet? Did you talk about the VC process with other entrepreneurs that this VC has mentored? Hmmm… maybe you’ve gotten what you deserve?
They way it should be…
- A VC, for an early stage company, should be like another team member. By signing the term sheet the VC is committing to having the time to devote
- Expect to talk via Skype or face-to-face for 40 minutes weekly.
- Expect to be trading emails constantly on every aspect of your business.
- Expect your VC to know your business thoroughly without a slide deck in from of her/him.
- Expect to schedule all day strategy sessions with your VC where you can discuss 1) go-to-market 2) competitive positioning 3) technology/architecture 4) product development schedules 5) hiring 6) cash burn 7) etc.
- Expect hands on involvement in the next fund raising round including pitch decks, mock sessions, pitching strategy, deeply personal intros ordered in a thoughtful way.
- Expect someone who will tell you when they think you are doing something wrong or executing poorly.
- Expect someone who will want to interview your key hires.
- Expect more.
Of course this changes as a company grows and matures and needs less hands on. But if you are not getting this type of service out of the gate from your VC, you are at a disadvantage versus other companies in your space.
The interesting thing is it is so obvious. If a VC gets in the trenches and brings his/her experience to bear, then the chance of being successful rise. And makes everyone a lot of money. But… it’s not always happening. And it’s your job as CEO to make sure it does!