1.
5 Things to Remember in
the Changing Landscape
of VC
by Brady Bohrmann
Partner at Avalon Ventures

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.
The VC landscape has changed
more in the past 3 years than in
my 20 years as a VC.

4.
It is truly an exciting
time.

5.
For entrepreneurs, there’s
never been a better time to
start something.

6.
For early stage VCs, the investing
space is becoming more
competitive, which is healthy and
good for the startup ecosystem.

7.
VCs who see themselves
as stewards, or coaches
of their founder’s
creativity and talent, will
retain their value.

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.
The 5 Things VCs Need to
Remember in the Changing
Landscape of VC:

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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Learn more!
Visit http://avalon-ventures.com/blog for more actionable advice
on early stage startups, VC funding and other entrepreneurial tips.