This is the final Part of my Six Part Series, How to Beat Venture Capitalists at their own Game.
We have covered Fund Profile, Investment Style, Deal Flow, Deal Process, Deal Structure and in this post I am going to discuss the Value Added by the Venture Capitalist.
Value Added
Why is this important ?- Bringing new (financial) investors into your company is an opportunity to leverage considerable experience and expertise. You should make sure that your VC investor is not just bringing money to the table.
Its not all about the Money
The VCs will appoint at least one board member and possibly two. You want these individuals to bring relevant experience and energy to the business and apply these to help the whole board grow the business.
Minimalist Approach
VCs can be lazy – turn up once a month for the board meeting, check the KPIs, ensure the business plan is on track and have lunch. This is not good enough and you should expect them to have read the board papers and contribute meaningfully to the board discussion.
Board Responsibility
They have a board seat and often the right of appointment of the Chairman – these must be put to good use. If the VC has the right to appoint the Chairman, make sure that you have some right to vet potential candidates and work hard to try to get an appointee with relevant experience.
Leverage
You should push your VCs to leverage their network to help you grow the business. One way they can do this is to enable you to network with their other existing investee companies. You may be able to provide products and services to these companies or simply be able to tap into the experience of the senior management in these companies.
Experience
Experienced VCs have been involved in a series of companies and have valuable insights to share on management strategies and decisions. This represents a source of good advice. If you are facing some difficult decisions or having a management offsite to discuss strategy, don’t miss the opportunity to invite your VCs to these events so that you can pick their brains.
Again – Its not just about the money!
You should ensure that your potential investors understand that this is your expectation and you will expect them to contribute more than just cash to the growth of the business. If they are not up for this, they may not be the best investor for your company.
Thank you for coming over and joining the Conversation. I hope you found this series of interest and it has helped you with your understanding of how Venture Capitalists think. Please do leave some comments or if you have topics relating to this or anything else to do with the Corporate LifeCycle, please drop me an email – jbdcolley[at]aol[dot]com.
