Here’s How Working With VCs Can Make You More Than Just Money
By Alex Mann
Even though it might seem biased — coming from a VC — I genuinely believe that for ambitious founders looking to grow fast, VCs are a necessary step on the road to world domination.
Unless you’ve got bundles of cash to self-fund, VC investment gives you the resources to get your product to market, scale your operations significantly faster than you could otherwise, and avoid many of the common pitfalls that early startups face. Yet, despite the central role that VCs play in driving startup growth, many founders still have a healthy dose of suspicion when it comes to bringing us onboard.
Protective of their ideas, equity, and hard work, it’s only natural for founders to be worried about VCs’ motives, or to see the relationship as hands-off and purely a transactional. But the downside of entering the relationship with this mindset is that it can lead founders to put barriers up, or develop a ‘them and us’ attitude, which ultimately means the partnership isn’t as successful as it could be.
Remember that VCs and founders are in it for the long-haul, and we’re going to face numerous crisis situations during our time working together. For it to work, we need to be able to operate as a team, get along and fundamentally like and trust each other. Otherwise we’ll struggle when it comes to having those difficult conversations and giving each other the benefit of the doubt when we need to.
Want to get maximum value out of your VCs? Then this is my advice:
Right from the pitch stage, have open and honest conversations about what both parties expect from the relationship. Make sure you have a good understanding of the VC’s philosophy and approach and be honest about any concerns or misgivings you might have about how the relationship will work and what role they will play in the business.
The sooner you understand where each other are coming from, and how each side likes to operate, what their communication styles are etc., the easier it will be to bond as a team going forward.
VCs’ success depends entirely on the success of the businesses they invest in, so most smart investors want to be hands-on, and are eager to help their founders in any way they can. What’s more, most of us have been around the block a few times, investing in numerous other startups, past and present. And while no two businesses are the same, we see many of the same challenges again and again – so, make the most of it.
Keep us up to speed
For VCs to add the most value possible, we need to know what is going on, so we can help develop solutions as early as possible. Yes, we’ll have formal update meetings booked in, but what we really appreciate is when founders reach out to us proactively to let us know how a project is going, update us about successes, learnings, or challenges they’re facing.
It means we’re able to offer informed input and suggestions, adding much greater value than during a superficial update every couple of months, or via the occasional message asking us for help with something two weeks after it’s happened.
Don’t think you have to have all the answers
A lot of founders put up a façade and pretend they know everything, or keep potential issues under wraps, particularly post-investment. This makes it extremely hard to get the truth, limits our ability to add value, and means we’re less sympathetic if and when things do come to a head.
VCs understand that running a startup is a massive undertaking and hugely unpredictable, and we definitely don’t expect founders to have all the answers. So don’t be afraid to ask questions, or say you ‘don’t know’, while always staying open-minded to new ideas and external advice.
Disagree with us
While VCs want to offer advice and solutions, we also appreciate founders who stick to their guns. After all, that clarity of vision is one of the reasons we invested in you in the first place. So, don’t worry about opposing our thinking, and telling us you don’t agree with us.
Similarly, if you’re not happy about something we did, or how things are going with the relationship, feed that back to us, so we can change how we approach things in the future.
Stand up for one another – even when the going gets tough
There are bound to be hiccups in any startup and VC team, but always remember that we’re in this together, so try to avoid criticizing and playing the blame game, as this seriously undermines the long-term relationship. Even when you’re under a lot of pressure, try to always keep in your mind that we’re all working towards the same goal, so have mutual respect for one another and what you’re trying to build.
Unlike private equity, VCs and startups are highly co-dependent – we simply can’t survive without each other. We’re together so long that we almost become like family, so it’s only natural that it takes effort to make it work. But get it right and both sides will get much more out of the relationship – both personally and professionally.