How can venture capitalists provide value beyond asking how they can provide value? We’ve all seen the twitter memes (honorable @litquidity mention) about VCs being better at asking to provide value than asking it. It is a standard assumption that guidance and support will continue long after a check is written. Startups don’t have the seasoned perspective, the industry connections, and haven’t had the pricing, product, or user testing that the venture funds have helped execute upon ten times over. Having this expertise is key, and that is exactly why after writing a check, there is board seat with an investor’s name on it, keeping a watchful, parental eye on things and course correcting if necessary.
After speaking with hundreds of venture capitalists in our space as not only clients but potential investors, we’ve come up with four lessons to be cognizant of when investing with startups that have everything they need to be great besides a seasoned perspective. (Not in order of importance, hence all being number one).
- Maintain alignment. Financial alignment is an obvious element, as there wouldn't be board seats involved otherwise (beyond a mentor-type relationship). So assuming everyone’s best interest is the growth of the startup, each member must be aligned on the frequency of communication, monthly marching orders, and the preferred medium of communication. Delivering the necessary information and speaking regularly for product, growth, or personal advice is essential to building trust and relationships for years to come.
- Preparation is essential. Attending board meetings with questions on your mind, ready to attack the macro barriers that the project is currently facing. All too often we see board meetings as reading the month-over-month user growth and other facts that could be briefed pre-meeting. Everybody’s time is limited, so use it to solve needle-moving issues and continue the momentum gained from the past quarter.
- Have experience. A common issue seen is board members that don’t have true experience in a specific industry, and are only there for face time, or thinking there is a level of qualification after doing a deal or two within the respective industry. Board members have the potential to accelerate the trajectory of the startup, so don’t take a board seat for vanity or because it is customary to do so - in other VC words, “provide value.”
- Use the hive to your advantage. Board members are all there for a specific purpose, as each will bring their own unique set of skills, insights, and connections to the table. Not only is the networking effect extremely strong, but helping mold a diverse board will accelerate the startup and your investment much more rapidly.
By design, these cues are short and sweet, intended to help all venture capitalists in their board presence and founders when accepting money and beginning the important and necessary creation of their board. It is apparent when saying, every board, project, investor, and founder is different and will require vastly different things to ensure success, these are crafted with that in mind, and will ensure success well beyond any investment hold period that is intended, as will the relationships formed with the board members.