Denis Shafranik for Sifted

Many founders have what you could describe as a love-hate relationship with VCs. They may spend months pitching their ideas and persuading us to invest, but there is always a healthy dose of suspicion when it comes to bringing us on board.

One of our founders took close to a year to feel comfortable talking to us about issues in the business, while another is still very guarded, despite working with us on a weekly basis. Founders are protective of their ideas, equity and hard work; they often worry about our motives or see the relationship as purely transactional. But the danger is that this can lead to a ‘them and us’ situation, which is a recipe for disaster in the long run.

It’s important to remember that VCs aren’t the bad guys, and we are as committed to and invested in the business as anybody. Having us on board takes a bit of getting used to but invest in the relationship, and you’ll get a whole lot more back.

Discuss expectations

It hasn’t been the norm in British startup culture to discuss expectations and values upfront, but this is a big mistake that can lead to misunderstandings and friction in the future. You need to be on the same page in terms of the societal impact you want to make, growth ambitions and even how you want to exit, while also being honest about any concerns or misgivings you might have.

It is entirely legitimate to be concerned about a loss of operational control or of VCs meddling in things they don’t understand, which is why you should discuss where a VC can best add value. A couple of our founders — both repeat entrepreneurs — were very upfront about what we should and shouldn’t get involved in.

Take us on the journey

Good VCs can add a lot of value, bringing their vast networks to help with hiring, access to markets, business development opportunities and follow-on funding, as well as experience in dealing with issues. But to ensure we can help, we need to know what is going on.

The strongest founders are nearly always the strongest communicators, who are able to take their investors on a journey, tap into their networks and expertise and make sure everyone is on board for major decisions. When this ongoing communication is there, we can help with everything from bringing in key senior hires, to identifying mentors and opening up new markets. In a number of cases, we’ve even helped startups to escape bankruptcy.

Drop the ego

A lot of founders put up a façade and pretend they know everything, or keep potential issues or weaknesses under wraps, particularly post-investment. But if we are left feeling like junior partners and called upon only when the sh*t hits the fan, then we will not be as effective in helping the business.

We’ve come close to cutting our support for a business on two occasions because we were not treated as an equal partner. VCs understand that running a startup is a massive undertaking, and hugely unpredictable, and we definitely don’t expect founders to be superhuman or have all the answers. So be open about your concerns, weaknesses and don’t be afraid to say you don’t know, particularly as the business grows. Not all great founders make great CEOs, and that’s okay. But the best thing for the business is to know where the gaps are, so we can help plug them.

Disagree with us

That’s not to say we want to work with ‘yes’ men and women. 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.

A two-way street

Of course, VCs have their part to play too and they often don’t help themselves by resorting to complex restructuring of their deals and relationships with founders. Some VCs make the mistake of putting themselves above the founders in the capital structure, charging fees for being available, or not being there during a business setback, which all create misalignment. And while some of it may be justified, the relationship has to be balanced if it is going to work.

VCs have to try not to be judgmental and make the effort to put themselves in the shoes of the founder — particularly when the going gets tough. We can never replace a cofounder role, but the best VCs strive to get as close to that as possible, in order to offer effective support.

Building startups can be messy and hiccups are inevitable. But remember we’re on the same team, so both sides have to try to avoid criticising and playing the blame game, as this seriously undermines the long-term relationship. We don’t have to be friends — although if that develops then great — but having mutual respect and openness is non-negotiable.

Original Sifted article