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The Funding Bill of Rights November 16, 2009

Posted by Lawrence Lenihan in Uncategorized.
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Tomorrow I am the keynote speaker for opening day of New York Entrepreneur Week here in NYC, where the theme of the event is “Stand-up and Come Together”.  I think it will be a wonderful week for entrepreneurs to meet and discuss challenges and ideas in what is an unprecedented time in history for innovation and change.

Of course, there will be venture capitalists like me as well.  When Gary Whitehill, the founder of NYEW contacted me about speaking, it created a catalyst to put together some thoughts I had on the dynamics in the relationship between entrepreneurs and venture capitalists.  We do come together and, often, create something incredible.  At other times, this relationship is more strained.  We have all heard the stories of “idiot VC’s” and “incompetent entrepreneurs”, but how many times are these horror stories simply the result of misaligned objectives and misunderstood points of view?

So, with this theme of coming together as the catalyst, I created what I call the “Funding Bill of Rights”.  I guess I was feeling patriotic when I started thinking about the subject.  But the idea of creating a set of “rights” which helps clarify the mutual expectations between entrepreneurs and venture capitalists seemed to make sense.  There are actually two versions – one for entrepreneurs and one for venture capitalists because, like Ying and Yang, these two (sometimes) opposing forces are interconnected and interdependent.  In reality, there is a lot more ground in common than in opposition.    But, to get to this common ground, each side needs to gain a better understanding of the motives and motivations of the other side.

So, here is my shot at the first few articles.  Each week or so, I will go into detail on one or two of the articles.

The Entrepreneur’s Bill of Rights The Venture Capitalist’s Bill of Rights
Article 1 The right to own 50% or more of his/her company The right to make large returns
Article 2 The right to take only as much money as needed The right to allocate our time to where we can generate the largest returns for our customers
Article 3 The right to get something in addition to money from your investors The right to be engaged with your portfolio company to understand and  be consulted on strategic issues and options
Article 4 The right to insist that your investors stand behind you in later rounds The right not to have your money pissed away
Article 5 The right of the founder to remain CEO The right to replace the CEO for not getting the job done
Article 6 The right to make decisions and run your business The right to hold management accountable for building value in a timely and measurable manner
Article 7 The right to a two-way dialogue The right to hear the truth as soon as it becomes known – clearly, directly and without spin.
Article 8 The right to say when you exit The right to achieve a timely exit
Article 9 The right to protect your investment The right to protect your investment
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Comments»

1. Bertolt Sobolik - November 25, 2009

Great stuff! I learned a lot from your keynote and look forward to future articles here.

2. Caroline - December 1, 2009

Professor Lenihan, always offering awesome advice (you get what you pay for, right? hah)! It is always hard to see eye to eye when the two sides have completely different incentives and points of view. I look forward to being enlightened as the articles come.

-Caroline


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