“Oh, Great God of Venture Capital,” I said, “Can you help me find a good VC or two for my new venture? I won’t even ask for a great VC, just a good VC will do.
“Are you taking notes, oh Great God of Venture Capital? Here’s my list. It’s just five items, and one of them is a reprise of an item, so it’s really only four items.”
A. Show me the money.
Thinking about Venture Capital is like Maslow’s hierarchy of needs, there is no greater need than your need for money.
If a VC can’t be a reliable source of funding, assuming you do your job reasonably well, then what good are they? ‘Nuff said.
Let’s assume you find a VC that can do that. You could argue that’s enough for a VC to be defined as a good VC. However, there are a few more things that are reasonable to expect from a good VC.
B. Don’t make our board meetings a painful experience.
One of our investors, the notorious “Raul,” ran hot and cold. When he positive about our company, our board meetings were a breeze.
However, when Raul wanted to be disruptive, he made our board meetings a nightmare for everyone involved. And, in doing so, he created a bunch of unnecessary work, not to mention angst, for the team.
I’ve seen other “Rauls” in other companies I’ve worked with. The effect on the CEO is debilitating.
C. Work well with other investors.
The polar opposite of Raul was our other investor, Gill. Gill was no drama.
The thing I appreciated about working with Gill was, even when he disagreed with me, he was supportive. Gill recognized that the management had to run the company, not the investors.
Gill also went out of his way to work well with Raul and the other investors we brought on as the company grew. It really, really helped.
D. Work well with your partners. In other words, please don’t get fired.
Would it come as much of a surprise if I told you that Raul, as disruptive as he was with us, eventually ran afoul of his partners at “Donald Ventures,” and was fired?
The partner you’re working with getting fired is not something you think about when you raise money, but it should be. You’re like an orphan looking for a foster parent when the partner you’re working with gets fired.
You’ve likely lost your support inside the VC partnership if the partner that led your investment isn’t there any more. It’s a killer.
E. Mostly, just show me the money.
Repeat after me, The primary purpose of working with a Venture Capital firm is as a source of funding. They can’t be a good investor if they aren’t a reliable source of funding. End of story.
That’s not too much to ask, is it, Great God of Venture Capital. You can do that for me, can’t you, oh Great God of Venture Capital?
Thanks, oh Great God of Venture Capital. Now that we’ve covered the basics, can you find a me great VC?
Now, here’s how a VC can become a great VC:
F. Make meaningful introductions for me.
Whether you’re looking for that next round of funding, an expert marketer, an a really good executive recruiter, a banker, a great VC will likely know someone that can help you. This is truly value added that is really useful.
G. Give me expert advice.
I talked about your board meetings being no drama. However, it’s great when you get truly useful advice, not crazy suggestions, from your investors.
Again, a good VC is someone that provides you funding and stays out of your way. A great VC gives you advice that helps move your company forward.
H. Lead an inside round if I need more funding, and the market isn’t agreeable.
There may come a time when, because of reasons out of your control, when you can’t raise that next round of funding. Assuming you’re executing well, a great VC steps up and leads the next round of funding themselves.
Don’t count on your investors doing this, but, having been in this situation, it’s a relief when your investors step up.
I. Support when you don’t agree with me.
Gill and I were pretty much in synch on how to grow the company throughout our journey. However, there were a few times that we weren’t.
Each and every time, Gill gave me his opinion of why he disagreed with me, then he said, “But I’ll support your decision.” Oh, what a relief it is when you you work with someone like that.
J. Show me the money.
I started this article with the importance of funding, and I’m ending with the importance of funding. Great VCs will help you get funded.
A great VC may have another VC in their network that “follows” their investments. In other words, if VC “X” invests in a company, then VC “Y” will likely invest too. That’s one way a great VC will help you raise money.
Another way is by reputation. If a great fund, with a great partner leading the deal, invests, then this may make it easier for you to close your next round of funding.
There you have it, Great God of Venture Capital. Now you know what makes a good VC and a great VC.
I’ll settle for a good VC, but if you found me a great VC, I’d be eternally grateful.
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