How a VC thinks (3/3)

Our company – not just yours anymore

By accepting a VC, you are accepting to be under the constant scrutiny of your board.

A VC is ready to take a lot of risk (compared to a banker) if he’s able to constantly monitor his investment and react. In general a VC has adequate rights in the shareholder agreement to do so. In a partnership with a VC, an entrepreneur will not only find cash, but also someone alongside to at least monitor him.

The entrepreneur should accept that or just find another type of funding. No, the board is not there to question a CEO or his relevance. But yes, if a CEO does not provide visibility to the board, at some point, the board will question the CEO’s relevance.

Do not antagonize your board – manage it, get the best from it.

Metrics – we are driven, give us a map, please

VCs are reporting internally and to their own shareholders (“Welcome the layer cake, baby”). We need figures to report. We are reporting on 15 to 40 companies, so figures are key and remain stronger at the end in internal discussion with senior partners. Figures speak always louder than words.

A never ending story

Existing VCs are crucial to raise funds. Choose well your VC to prepare next steps in order to have follow-on investment. It’s very difficult to raise funds from a new VC if your existing VC is not following. You can’t change a lead VC to another so easily and a bad experience with a VC will be known in the market.

Conclusion

As an entrepreneur, you have to know you shareholders (and beloved VCs) as well as your own customers. VCs are not particularly difficult partners but, in Europe, very few entrepreneurs spend time to understand them and manage the relationship. Every entrepreneur who does that properly will be able to create a strong competitive gap compared to its competitors in the financing path.

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