Be aware that investors may not be giving you unbiased advice

reid-hoffman-village-global

Village Global is a seed fund, which just raised $100 million. It only represents a new model for VCs it also asserts to have big guns like Abby Johnson, CEO of Fidelity, 23andMe’s, Anne Wojcicki as mentors!

This article in Techcrunch was snagged by my Google alert for “mentor” and reading it made my eyes roll. Yes I’m willing to believe bold-faced names might invest in a new fund that incubates startups, but mentor them too?

In exchange for equity, portfolio companies get investment plus mentorship from Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, Microsoft’s Bill Gates, Google’s Eric Schmidt, LinkedIn’s Reid Hoffman, Disney’s Bob Iger, VMWare’s Diane Green, NYC mayor Mike Bloomberg, and more.

There are at least two problems with this model: one, a key success factor in the 20-year reign of MIT’s Venture Mentoring Fund has been bias-free mentoring – mentors can’t have a personal agenda. This was the primary reason I terminated mentoring at TechStars. I soon learned that TechStars mentors were expected to invest in the companies they mentored. Once you do that you are no longer an unbiased mentor, you have an agenda: make money from this company! I’ve yet to see an article that flagged this important issue for startups. It’s perfectly fine to listen to advice from your investors, especially if they are angel investors with knowledge of your market. And especially if there are limited investors who have succeeded beyond anyone’s wildest dreams and have platinum plated Rolodexes. But be realistic about how much time they will actually give you, whether they will in fact share their contacts with you, and that their agenda may differ from yours.

I share author Josh Constine’s skepticism about mentoring from these moguls:

The question is how much these mentors will actually engage with the portfolio companies instead of just being figureheads. The program reminds me of Jay-Z’s Tidal, which signed artists like Daft Punk and Jack White as owners, but only  a few like Kanye have actually done much for the company. 

However, he goes on to write that Rather than connect them to more tangible services, portfolio companies get access to Village Global’s deep mentor bench.

The real point of the article is a good one: Village Global will actively scout for startup talent unlike most VCs who passively wait for deal flow to come to them. But other big funds have scout programs as well and if you know anything about pro sports you know that scouts play an integral role in finding talented football and baseball players. The same should be true for entrepreneurs.

But if are approached by Village Global or any other scouting fund which professes you’ll get mentoring from their bigwig limited partners be skeptical and if you are fortunate to actually be mentored by a bigwig be aware that he or she may well have a different agenda than you do. In fact as I’ve written previously virtually all investors have different goals than your startup: they are actually financial managers who invest in a portfolio of startups. Their goal is to generate a high IRR from their portfolio, so be aware that unlike MIT’s VMS, they do indeed pick winners and are going to shine their mentorship light on them. Perhaps because they want to acquire your company, which may not be congruent with your goals as an entrepreneur. Your goal maybe to remain independent.

 

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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