I met my first VC, David Strohm at that time the sole West Coast partner in Greylock, in 1989. After dealing with many VCs through four venture-backed startups and a number of ideas that never gelled into ventures , I felt I had a pretty good grip on the way VCs think and act. But since I’ve been off the startup playing field for the best part of a decade it was beginning to concern me: is my advice to founders about VCs getting stale?
So it was reassuring to read the interview with veteran venture capitalist Rebecca Lynn of Canvas Ventures in The New York Times Corner Office Column Rebecca Lynn of Canvas Ventures on Nuclear Reactors, Failure and Asking Questions. The article’s sub-title captures the difference between being an entrepreneur and becoming a VC: The venture capitalist talks about going from “being a player on the field to being a coach” and what it’s like to see your company lose 98 percent of its value in one day.
While much of the interview will only be of marginal interest to founders – you do budget the amount of time you spend reading and focus that time on content with a high return on your time invested, right? – there are a few comments by Ms. Lynn that reinforce the advice I’ve been handing out and are well worth reiterating here.
One of them is where do VCs place their money: on the founder, the idea, the market opportunity or what? From my experience virtually all VCs place their bets, and bets they are, as these are very high risk investments, on the founder.
Do you ever invest in a founder rather than invest in an idea?
There are times when we just see a phenomenal C.E.O. and we think, “Wow, no matter what this person does, they’re going to figure it out.” It’s like, do you bet on the jockey or the horse? You always bet on the jockey, because good jockeys won’t ride bad horses.
Another area I emphasize with founders is the importance of company culture – I devote an entire category on the blog to it. Ms. Lynn reinforces that advice in her interview with Corner Office columnist David Gelles:
At the board level, a lot of what I push on very early in a company’s life is, “What’s your culture, what is it you guys are about?” It’s helpful for recruiting, it’s helpful for your product direction, it’s helpful for your company decision-making. As my old C.O.O. said, “There’s only one person you have to sleep with every night, and that’s yourself.”
Probably the most important factor I emphasize when mentoring founders is focus. And focus is just as important to Ms. Lynn, the venture capitalist:
But then you eventually went on to become a venture capitalist.
It was a big transition. You go from kind of being a player on the field to being a coach. It is really hard, and there’s certain rules you kind of learn over time. One of them is: only pick one thing to really focus on. Not 50. Pick one and be very thoughtful and deliberate about what that one thing is because it’s like Whac-a-Mole otherwise.
Finally I teach, and try hard to practice as a mentor, the art of asking questions, not simply telling founders what to do. Ms. Lynn agrees:
Also, just keep asking questions; not directing, but asking questions and just trying to be helpful overall.
Of course VCs, like founders will differ, as will the strategy and focus of their firms. So your one takeaway from this post should be: get to know your investors! The best way to do that is before you ask them for money. Bring them deals – that the best way to a VC’s heart, and wallet. Or just being them news of breakthroughs in the areas they in invest in. Introduce yourself at demo days and other VC networking events. And before you start approaching a VC and their firm for an investment, get to know both. That investment of time and effort will have a high rate of return when you start raising money.