Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

5 Things to Remember In the Changing Landscape of VC

The VC landscape has changed more in the past three years than in my almost 20 years as a VC. For entrepreneurs, there’s never been a better time to start something. For early stage VCs, the investing space is becoming more competitive, which is healthy and good for the startup ecosystem. VCs who see themselves as stewards, or coaches of their founder’s creativity and talent, will retain their value. By contrast, VCs who seek to control companies, slavishly adhering to a numbers game, may very soon find themselves replaced by other sources of investing that allow them to retain more ownership of their idea. Here are five things VCs need to remember in the changing landscape.

  • Login to see the comments

  • Be the first to like this

5 Things to Remember In the Changing Landscape of VC

  1. 1. 5 Things to Remember in the Changing Landscape of VC by Brady Bohrmann Partner at Avalon Ventures
  2. 2. About Brady Bohrmann Brady has over 20 years of experience as a venture capitalist and operating executive in both information technology and biotech. His focus is on early-stage investments and backing talented entrepreneurs. Throughout his venture capital career, he has worked with over 75 companies. He currently is a director or observer of many Avalon portfolio companies, including Backupify, Chart.io, Cloudant, Inc., Conjur, Indix, Juliet Marine Systems, Kaltura, Kinvey, Memrise, Nanigans, Pingup, Redbooth, Selectable Media, Simulmedia, The Happy Cloud, Twinstrata and Vook.
  3. 3. The VC landscape has changed more in the past 3 years than in my 20 years as a VC.
  4. 4. It is truly an exciting time.
  5. 5. For entrepreneurs, there’s never been a better time to start something.
  6. 6. For early stage VCs, the investing space is becoming more competitive, which is healthy and good for the startup ecosystem.
  7. 7. VCs who see themselves as stewards, or coaches of their founder’s creativity and talent, will retain their value.
  8. 8. By contrast, VCs who seek to control companies, slavishly adhering to a numbers game, may very soon find themselves replaced by other sources of investing that allow them to retain more ownership of their idea.
  9. 9. The 5 Things VCs Need to Remember in the Changing Landscape of VC:
  10. 10. 1. There are two kinds of VCs In my experience, I’ve encountered two main types of venture capitalists: • VCs who think that the entrepreneur works for them • VCs who think they work for the entrepreneur
  11. 11. Avalon Ventures believes that as a VC, we work for the entrepreneur. We take a “hands in, eyes in” approach and let the founding team lead the company. We see our role as one of coach and mentor, engaging at strategic points, rather than at every opportunity. Two Kinds of VC
  12. 12. 2. People are the most important part of the equation Not surprisingly, we put an emphasis on the quality of the people we are investing in over the product itself.
  13. 13. Great entrepreneurs are hard to find. Not everyone is cut out for the journey. We need to be able to: • Trust the founder • Understand where this venture fits into their life’s story arc • Know if they are in it for the long haul People are the most important part of the equation
  14. 14. The same goes with our co-investors. We need to know they’re not going to run at the first sight of blood. People are the most important part of the equation
  15. 15. We’ve co-invested with over 80 different firms and place tremendous value on the relationships we’ve built — some going on 25 years.
  16. 16. 3. Your reputation matters now more than ever Whether you’re a first time entrepreneur or a veteran VC, reputations are earned on a daily basis.
  17. 17. In today’s salient, interconnected world, your reputation matters more than ever. Every interaction of every day is an opportunity to either build up or tear down your integrity. Your reputation matters now more than ever
  18. 18. Shortcuts — on either side of the table — are always costly, and the true costs are only known too far down the road. Your reputation matters now more than ever
  19. 19. People of integrity are rare because it is easy to compromise values to get ahead. If you are true to who you are, especially when tough decisions come around, you will be well served. Your reputation matters now more than ever
  20. 20. 4. Base executive compensation upon company needs There is a delicate balance between providing incentives to make the company succeed for the long term and ensuring that leadership feels valued in the present.
  21. 21. People rarely feel adequately compensated. Strategies like requiring founders to re-vest ownership have proven effective for the long-term health of the founder and the company. It assures both partiers are continually invested in the company for the long haul. Base executive compensation upon company needs
  22. 22. The bottom line: Do what the company needs to grow to the next stage and recognize that those needs change over time. Especially in the early stages, it’s best to spend more time on growth metrics and less time on financial metrics to determine compensation. Base executive compensation upon company needs
  23. 23. 5. Retail the covenants that you will use, lose the others Many VCs stress the importance of protective provisions and subsequently control over the companies they back.
  24. 24. Instead of overloading young companies with options you will likely not employ, remove traditional provisions and only keep ones you will actually use. Retain the covenants that you will use, lose the others
  25. 25. VCs should look to the ways they can be most productive and offer help as the company grows without making the entrepreneur feel too controlled. Retain the covenants that you will use, lose the others
  26. 26. While protective provisions are standard features of venture capital agreements, entrepreneurs should be wary of VC firms that pile them on. As one writer puts it, “Working for an investor-backed company isn’t indentured servitude.” Retain the covenants that you will use, lose the others
  27. 27. The Takeaway • With the emergence of new funding platforms, we don’t know what corporate governance will look like 3, 5, 10 years from now. • VCs who realize their job is to coach their founders to success, value relationships, are full of integrity, and cut traditional deadweight will retain their value. • At its best, this relationship comes down to entrepreneurs and their mentors, which is why it’s always better to have someone with you in the foxhole.
  28. 28. Learn more! Visit http://avalon-ventures.com/blog for more actionable advice on early stage startups, VC funding and other entrepreneurial tips.

×