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Your VC Shouldn’t Be a Player Coach

March 23, 2009

vcmike

Brad Feld has a great article in Enterpreneur Magazine entitled “A VCs Biggest Flaw: Arrogance.”

Brad makes a number of great points, my favorite of which is recalling his own transition from entrepreneur to investor and  his difficulty, at first, of constantly crossing the boundary between investor and entrepreneur.

Having entered the VC business from a totally distant career path in DC, I never faced this struggle since it was pretty clear to me that I didn’t know Jack about being an entrepreneur. But I often work with VCs who recently got into the business from prior operating roles, and it is something I see all the time. To use a well worn analogy, entrepreneurs-turned-VC sometimes forget that while they have a front row seat from the bench, their job is confined to the sidelines and does not entitle them to jump onto the court.

While many entrepreneur-turned-VC like to promote their operational experience as a value-add — and it certainly can be — entrepreneurs should make sure these VCs have checked their need to operate at the boardroom door.

In fact, one of my partners who never had operating experience and was a successful VC for about 20 years before recently founding a company, had a somewhat different take on why founding a company was incredibly valuable to his role as an investor: it made him appreciate how it feels for the entrepreneur to have a know-it-all VC telling him what to do.

2 Comments

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  1. March 23, 2009

    Mike,

    Interesting post, and I generally agree with your thoughts.

    There are some funds such as ours (Momentum Venture Management) that take interim operating roles in seed-stage companies that we invest in.

    We have a lot of structure to this approach and our roles are clearly defined (i.e. drive business development, but hands off product), so there’s a lot of clarity around what we touch and don’t touch.

    It ends up working out very well for extremely capital constrained early stage tech companies in LA, but I could see where this would run into issues for later stage/larger startups.

    Keep up the blogging!

    Scott

  2. March 23, 2009

    VC’s frequently have different agendas than the entrepreneurs they invest with. VC’s commonly use arrogance to hide their true agendas, their dishonesty, lack of responsibility, and their incompetence. If VC’s knew how to start and run a business so well, why don’t they do it?

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