Annotating @NRMehta’s Post On Value-Add Tactics For Investors
Earlier this week, serial entrepreneur and CEO Nick Mehta wrote a great post about 10 tactical value-add tips for venture capitalists. Nick knows a thing or two about venture, as well, finishing stints as an EIR at two top VC firms in the Valley. I don’t read content as soon as it hits Twitter, but I was surprised to see Nick post something himself (see original here, on PeHub), so I read it immediately, and I’m glad I did because he succinctly summed up what ever investor should do and, sadly, many are not doing.
Nick is a great entrepreneur and CEO, so when he has a point of view to share, there’s going to be lots of truths inside. I pulled out his Top 10 Tactics and, where appropriate, added my own two cents in bold, see below:
“…here’s what CEOs want from you:
Respond. This first one should be a “gimme,” but it’s not. It’s amazing how many CEOs we know tell us that their board members aren’t always responsive. If a CEO can’t count on her board to be responsive, she won’t reach out to them.
[Ugh. This is sad. There are investors who don’t respond to email. This is just unacceptable. Investors who do this don’t realize that word spreads and when founders diligence the next time around, be sure they will mention this over and over again.]
Push. Contrary to what you may read, we want you to push us. We want you to push us in the important stuff only, but we don’t want you to sit back and let us drive off a cliff. Give us feedback. Do a quarterly review for us. Point us to advisors. Most importantly, help us think even bigger than we already are.
[In an age where many investors are scared into the political-correctness of being “founder-friendly,” smart founders like Nick want investors to smartly challenge them, to provoke debate through intelligent and reasoned persuasion. Usually, this requires actually using the product and knowing at least something about the space.]
Focus. On the flip side, push us only on stuff that matters. Every time you opine on press release wording or ask about some tiny competitor, you’re creating a chain reaction in our company that may not be intended. We have people to help with the minutiae.
Connect. You know a ton of people. We want to meet people, such as other CEOs, potential customers and hires. But please, NO blind intros. Qualify the intent on both sides and make sure there is an interest in meeting.
Organize. To do this, get organized. Some of the best firms out there are investing in CRM, contact management, etc. just like your portfolio companies do. But we still see many VCs who can’t keep track of who’s in their companies and who they’ve met. You wouldn’t want us to run our companies that way, so practice the golden rule.
[This combines the previous two points, as well. A main value-add of a VC is to leverage his/her network and their partners’ network to make warm introductions to founders like Nick for press, BD deals, pilot customers, and everything else that would create real, tangible value for the startup. Of course, it’s up to people like Nick to close the deal, but just “throwing a mixer” and inviting press and other people at companies isn’t the right approach. Founders have limited time and are looking for leverage from their investors’ networks.]
Promote. We love seeing our name mentioned. The best firms are investing in PR strategically. You have a megaphone that many of your portfolio companies don’t have. Use it.
[Firms are now finally getting around to having internal marketing and PR resources, as well as external engagements. On top of this, there is really no excuse for investors not to blog (lightly) about their investments, to use Twitter to gently promote their portfolio, or to use sites like Quora or the like. In an early-stage company, having the signal of a respected investor simply sending a tweet can be valuable, yet many treat their Twitter stream as if they’re celebrities.]
Collaborate. It’s our job to get the board aligned, but you can help. Build consensus outside of the board meeting. If there’s an elephant in the room, step up and call us on it, even if the elephant is us.
Confide. When you tell us the dirty laundry of what’s happening in another investment, we wonder what you’re saying about us. If we can’t trust you, we won’t tell you everything. That’s not good for anyone.
Motivate. Startups are full of ups and down. They are a thrill but we need support during the down times. Piling on with concerns and frustration doesn’t help. If you stop believing, tell us. But until then, stay on our side.
Listen. We don’t expect you to solve all of our problems. If you try to, you minimize the feeling of their complexity. Often, we just want someone to talk to. Don’t always jump to the answer.”
[I have a friend who is the CEO/founder of a startup in a very competitive e-commerce segment. Somehow, he was able to raise a very healthy Series A investment from a reputable firm during a tough investment climate on Sand Hill. I didn’t know who his board member was, so I asked him about the guy, asked him what made him so great. His answer, paraphrased: “He’s actually not that special, from a background point of view. I mean, yeah, he’s really smart and successful, but most people don’t know him. He doesn’t know much about e-commerce to tell you the truth. But, you know…he’s always so genuinely positive about what our business is doing and what it can be. Every single time we meet, it’s the same thing. He’s not faking it. He’s genuinely enthusiastic, and for a founder like me, that energy is infectious. That energy helps the most.”]