Venture Capital: A Means to an End or an Essential Partner?

🌈 Abstract

The article discusses the role and value of venture capitalists (VCs) for founders, exploring the competing narratives around VCs and providing a balanced perspective.

🙋 Q&A

[01] What can a VC really do for you?

1. What are the two main competing narratives about a VC's value that founders struggle to reconcile?

• The first narrative is that VCs are "blood-sucking, self-serving parasites" that don't provide much value beyond the money they provide. Founders should limit their engagement and expectations to avoid falling prey to VCs with more experience and negotiation power.
• The second narrative underscores the significance of choosing the perfect-fit VC, as this choice can massively influence the trajectory and ultimate success of a startup. This narrative portrays the VC as a strategic partner rather than a necessary evil.

2. What are the author's perspectives on these competing narratives?

• The author acknowledges that VCs can be easy "punching bags" due to their tendency to say "cringe-worthy things" and dress "funny," as well as the worst-case scenarios where they underdeliver and take more value from founders than they should.
• However, the author argues that the reality is more nuanced - VCs don't have easy jobs, as the majority don't make money for their investors and are out of jobs after a few years due to the high-risk nature of their investments.
• The author also notes that while the second narrative about the importance of choosing the perfect-fit VC is accurate in spirit, the reality is that very few founders have the luxury of choosing which investors they get to work with.

3. What is the author's balanced perspective on the value VCs can provide?

• VCs are neither the "valueless parasites" depicted in one narrative nor the exclusive "difference-makers" portrayed in the other, especially for the majority of founders who don't have the luxury of choice.
• The right VC can have a major impact on the ease of future fundraising, the achievement of milestones, and business deals and transactions, as their relationships and networks can make a critical difference in delicate situations.
• However, VCs alone are not "kingmakers" and do not drive companies to product-market fit or create flywheels that spin.

[02] Leveraging the Value of Investors

The author mentions that in the next week's article, they will dive into the best practices for leveraging the value of your investors.