Why VC’s Have Blown It

I remember one of my venture investors, from the Valley, telling me ‘Phil, remember, a VC only ever has to do one thing for you. Write a cheque!’ He went on to add: ‘To get the deal they will promise you everything else under the sun and deliver none of it. So all that matters is can they write cheques – cos that’s the only truly tangible thing you’ll ever get out of them.’ The advice came from one of Silicon Valley’s most experienced and successful investors. He was right. Writing cheques is the most important thing that an investor should do for you – but if that’s all why have VC’s grown so large. Why should they layer cost on cost to their limited partners and provide so little value to their portfolio companies. Ask any portfolio company. Bill, thanks for the observation but I believe that in the 21st Century VC’s will no longer be able to provide such ‘thin’ value. The new breed, next generation VC will figure out how to provide ‘thick’ value. They will learn how to treat their investee companies and their founders like customers, not employees. Partners not underlings. They will have deep experience of the sectors that they play in and will possibly have run a successful company from that sector. They will be passionate about the companies and people that they invest in and they will work hard, harder than anyone to help that company develop. They will roll their sleeves up and ‘add value’ as an extra pair of hands helping with business development, partnerships, the press, key customers and strategy. They will become a trusted partner and advisor for the CEO – not their annoying pedant. They will understand how to crunch customers and not just numbers. They will help raise money if it is needed – not hinder it. They’ll pound the street alongside the companies they invest in and not remain hidden in their ivory towers. They will be an active, constructive member of the founding team – not a Machiavellian threat. That would be a venture partner worth working with – and investing in. Until you find one (and there are a few) stick with angel investors.