In the words of Pitbull, “Ask for money, get advice. Ask for advice, get money twice.” When you’re shopping for a VC, you might want to take Pitbull at least a little seriously, because he seems to know what he’s talking about. If you think VCs are just a source of money, you’re sorely mistaken.
Entrepreneurs looking only for money might get just that — and nothing else. Most startup founders fail to recognize that the best venture capitalists offer so much more.
It has taken me a couple of decades and a dozen positive and negative experiences of working with VCs to realize the full value they can bring to the table. When you start out as an entrepreneur, young and wide-eyed, it’s easy to forfeit all the “extras” when you go with whichever VC will pay the highest price. This chase for preserving dilution overshadows the expertise, passion, connections and candid feedback VCs offer, which hold greater value for the future of your business.
When I think back on my experiences with VCs, there’s a stark contrast between the folks we’re partnering with at BetterWorks and the VCs of my past life. Board meetings take on a new meaning when you’re able to bring a great deal of mindshare together in one room for a couple of hours.
The VCs we’re partnering with today offer advice and connections that move the needle for us. Your VCs should be your greatest allies, and your go-to resources. Here are the three questions you should ask yourself if you’re in the market for a venture capitalist:
Is The VC Passionate About The Problem We’re Solving?
Tapping into that passion matters because your VCs will talk about you. They’ll bring you up at dinners and in completely unrelated conversations. They’ll mention your product as a solution every time the problem comes up in a discussion. They’ll join you in sales meetings because they believe in your solution just as much as you do.
To find this kind of passion, you actually shouldn’t look very far. Rather, you should be looking closely at the conferences you’re going to or find the VCs who are already talking about your industry pain points.
Does The VC Have Resources Outside Of Funding?
We’re a scrappy startup that’s used to maximizing the value of every relationship we have, but our investors mean so much more to us than dollar signs. When we first began working with John Doerr, he sent us a two-page term sheet with all the ways he’d be helping us. Now, John participates in quarterly breakfasts and our annual Goal Summit event. John takes his relationships with companies very seriously — he has remained on Google’s board of directors for 16 years.
Your VCs should be your greatest allies, and your go-to resources.
The connections your VCs can make for you are invaluable. Thanks to our partnership with KPCB, John Doerr introduced us to Shona Brown, former SVP of People Operations at Google, who is now a board member advising our team regularly. Similarly, Andreessen provides portfolio companies with access to its enterprise clients, and Greylock offers staffing resources. Startup founders should look past the size of the check, and seek well-networked VCs. These types of relationships pay for themselves tenfold.
What’s It Like Being A Fly On The Wall During Your Board Meetings?
You shouldn’t have to play defense when it comes to your company. This was an eye-opening discovery for me. Prior to BetterWorks, I used to spend one week of each quarter doing “board management,” where I’d devote hours to worrying about what we were going to present and buffing my slides to make them look perfect. But perhaps even more surprisingly, our board members and investors were doing the same thing.
One in particular was so worried about his organization’s perception of his own work that he’d never offer us real advice. I’ve attended board meetings where the investors forgot the business model of the company, asked the same questions they asked in the previous quarter or beat up on the CEO to maintain their appearance.
As Bing Gordon once told me, “the best CEOs play offense, not defense.” Your board meeting can be a time where the most amazing folks in your industry get together to talk about new ideas and where your company could be in the future. It can be chock-full of honest feedback and dialogue, a refreshing twist to what many founders experience when they’re gearing up for a board meeting.
My newly changed mindset on venture capital has even impacted the way I advise other companies, like Palantir, Entelo and Koality (acquired by Docker in 2014). I go into meetings with their executives playing offense, never defense. We work together to create new ideas and partner to make their organizations better.
I credit much of our recent success to the VCs we work with, but I prefer to not call them that. They’re our partners, and have influenced our company as we’ve grown. And as we look for new investors in the years ahead, we’ll be holding them to the same standards.