Entrepreneur Bill of Rights – Article 6: The right to make decisions and run your business February 15, 2010Posted by Lawrence Lenihan in Uncategorized.
A company can’t be run by committee and it can be run by its board. I cannot think of a successful company that was run by its board. When a company is in that position, it is already in a death spiral and it is really hard to pull the nose up on the plane and save the passengers on board.
After 13 years of being a venture capitalist, my conclusion on what separates a good VC from a bad VC is that good VC knows when NOT to touch. Anyone can touch and by touch I mean interject an opinion/action or interfere in the functioning of a company. VC’s do it all the time. In fact, it is the dark side of taking a VC partner – we interfere in your business! But a good, experienced VC knows that touching (i.e. interfering) is easy; it’s much harder not to touch!
Why is it hard not to touch? Because we have to sit back and trust our entrepreneur and his/her team. As a novice VC back in the day working nervously to ensure that my companies hit their plans, I would constantly check and double check management, sit in on meetings, talk to the management team and other activities like that. Managing my portfolio companies would always remind me of how my parents must have felt the first time they let me drive their car when I was 16. How they must have wished for one of those cars with an extra steering wheel and set of brakes! In fact, I think my parents still feel that way when they drive with me, but that’s another story…
But cars with two steering wheels don’t work very well. In fact, if there were more of them on the road, there would be many, many more accidents. Why? Because you can only have one person steering the car at a time and a business is no different! If you have two or more people steering, you will be amazed at how many brick walls you will hit head on!
But, its scary not being able to steer. VC’s are Type A personalities who like to be in control. But to be a successful VC, you have to embrace the lack of control and trust the confidence you have put in the entrepreneur who is running the business. After all, if you don’t trust him/her, you already screwed-up by writing the check in the first place.
However, to be clear, not touching does not mean abdication. Equally bad would be a VC who did not engage, was uninformed and out-of-date, and was removed from the operations of the company. This is simply irresponsible to both your entrepreneur and your investors. By not touching I mean working with your team, understanding the business, contributing through customer contacts, recruiting employees and providing advice and insight based on tangible (not theoretical!) and practical experience. But stand back when you have delivered on what you promised. It is then up to the team. A good entrepreneur listens and has an active dialog and, in the end, makes his/her decision and implements his/her strategy. Our role as VC is to offer insight and to hold management accountable. The more you, the entrepreneur, succeed and deliver, the more we will trust.
Of course, the opposite is true as well. If you don’t succeed and you don’t deliver, you will lose our trust and confidence. In these cases we will touch more and more and make the changes to team and strategy needed to deliver a return to the company’s shareholders and our investors. Not a pleasant truth, but it does happen as an action of last resort.
But given successful results, you have the right to make decisions and run your business. We VC’s should presume this from the start of our relationship and as you deliver, so will we in the form of trust and freedom. Who knows, we might even feel so comfortable that we take a little nap in the back seat on one of those wide open stretches, something my parents still won’t do with me to this day!