What is founder-friendly?
Sanjay shared this article over WhatsApp last night, How venture capitalists are deforming capitalism. I guessed that it was probably a regular VC bashing op-ed, pointing out how VCs are the root of evil. The article did do that (a lot!), but it was something else that stood out and it resonates with me.
What is founder-friendly?
It is an obsession for VCs to get termed as being founder-friendly. It makes perfect sense because we make our bread and butter by attracting the top founders. Therefore, if any of us are browbeating our founders into submission – it would make the founders flee.
However, as this piece points out, many VCs have decided that they are themselves the biggest obstacles in the founder’s path. Therefore, to move out of the founder’s way and allow them a free run with their resources is the best service a VC provides- besides (of course) investing in their company.
I strongly beg to differ.
Founders have a tough job. They must build a product/service, attract customers, sell them at a price point where the startup makes a profit and at which the customer derives value, do it at a frenetic pace and ensure that they stay two steps ahead of their competition.
Oh yeah, they must do all of this while recruiting a team, building a solid team culture, raising successive rounds of capital, building/promoting their company’s brand, and (most importantly) preparing the company for scale.
Offering researched, well thought out, constructive and continuous feedback to founders is the investor’s expected role. Therefore, playing the devil’s advocate and debating out decisions is essential.
Founders are prone to tunnel vision fighting in the trenches, and when a founder loses sight of where the war is getting fought, it is our duty as investors to get them focused on winning the long game. Many times, that means I must debate decisions with the founder, get them to think from different vantage points, and sometimes if I strongly feel so – oppose their decision.
To rubber stamp, every founder diktat is a disservice to the company and, as the WeWork fiasco taught us – to society as a whole!
Does this process take a bit longer?
Yes.
Do founders love it?
Not all of them.
Do they appreciate it in the long run?
Every single time.
I have numerous messages from founders/employees/family members that I have disagreed with in the past but realized the value of the opposing view later. On many of these occasions, I was wrong in my suggestion/opinion. Still, I get emails an opposing view sharpened their strategy, i.e., it got them to think critically. I am often not an investor in their business, but that is the habit I want the founders I invest in to incubate.
Vinay Mehta
Hi Anirudh, you have hit the nail on its head! A startup team (with or without an investor) should freely brainstorm and question ideas and proposed actions at every step. Unless they do so, they can not grow their business.
RKGoel
Hi Anirudh,
Thank you for sharing very thought provoking post and the enlightening article. I took time and reflected upon.
I have a limited experience as I am running my first startup; that too after 24 years of extensive corporate experience. My reflection will be limited to the Incubator and Angel’s stages only but I will say that these two reads are ends of extremes.
Unfortunately, the Investors believe they know more than the founders and they intervene far too much. I got this feedback from many other founders.
Investors have to realise that for the founder, this is his life while for investor this is an another earning opportunity; so stakes due to failure are much higher for the founder.
If Investors can work as a team and take risk on the founders without pushing like the two extremes, the chances of startup surviving and making money for every stakeholder are much higher. If investors force the founders not to even take salary or just a token which cannot even feed his family for years; then there is fundamental flaw in approach. I am on founder’s side on the table but the investors have to be reasonable in their approach and expectations. They have also to understand that they themselves as businessmen had mixed share of successes and failures. They cannot just expect founders only to succeed and blame / name calling in case of failures.
Unfortunately, that is not easy!
Pls keep sharing such thought provoking stuff…
Best regards
RK