Picking a VC is About More Than Just Money
When you hear “venture capital,” you think “money.” But when VCs invest in a company, they’re bringing more than financial backing to the table. They’re bringing business and industry experience, too – at least if you’ve done the right deal with the right investors. Indeed, venture capitalists themselves urge entrepreneurs to not be totally focused on the, but the expertise they can take advantage of along with the check.
“The money’s a commodity piece,” says Ashish Mistry, a founder of Atlanta-based BLH Venture Partners, an early-stage investment firm that focuses on e-commerce, information security and SaaS. “My dollar’s no different than anybody else’s. It’s what we do after we put that money in” that’s important. “I spend half of my day opening up doors for my CEOs, trying to find salespeople and technical resources and really opening up my network to the companies,” he explains.
Most of Mistry’s experience comes from being an entrepreneur himself. He’s also president and CEO of KontrolFreek, which designs and sells video gaming accessories, and served two stints as an entrepreneur-in-residence at Georgia Tech’s Advanced Technology Development Center. The assistance he provides to his portfolio companies is much like what he did in his EIR role.
“As an entrepreneur, you’re a really good generalist in most cases. If you’re starting your business, you’re washing dishes and doing whatever it is,” he says. “A lot of [entrepreneurs’ needs are] ‘How do I validate my product?’ or ‘How do I talk to customers and determine what my sales methodology might be?’ ‘How do I hire the right people beyond just the founding team that I’ve got around me?’ It’s those kinds of things that you get to a SWAT team around.”
Geoff Entress, venture partner at the Seattle early-stage firm Voyager Capital in, also puts together investor syndicates for young companies.
“As much as the entrepreneur wants me to be involved, as much help as I can give them, I will try to give them,” Entress says. “Different investors will bring different things to the table. When I create a syndicate [of investors], I’m not trying to create people like me, but I’m trying grab people who will be most valuable to the entrepreneur as advisers. Generally, my co-investors tend to be former CEOs of other technology companies. I’ll select people who have been in the same space.”
Entress is on the board of 11 companies in which he has invested. The boards of larger companies may meet quarterly. Early stage firms meet every month, some even more frequently than that.
“My expertise tends to be in fund-raising, making sure everybody gets along and finding great team members,” Entress says. “So I spend at least a third – maybe half – of my time meeting with people who are looking for jobs. I’m trying to help them find the right fit.” He says he’s introduced many senior team members to companies he’s invested in. “They often have two or three team members, but as the company grows there are other roles they have to fill,” he explains. “I’m going to make sure they get the best people on the bus.”
Indranil Guha, principal at Bain Capital Ventures’ Palo Alto office, laughs at the idea of VCs just writing checks. “You only write 15 checks a year,” he observes. In a hands-on partnership model, the investors become an extended part of the management team.
“That where the real work starts, after the check goes in,” he says. “If you’re going to get involved in the early days, you have to be willing to ride the ups and downs. That means helping with hiring, customer intros, potential channel partnership conversations, just being there at 10 at night when the CEO is trying to deal with a big question and just needs a sounding board.”