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Over the weekend, Mark Suster wrote a great post titled How To Communicate with your Investors between Board Meetings. Mark continues to just tear it up with great advice for entrepreneurs. However, he left out one thing from the post – which is one of my favorite pieces of advice for entrepreneurs.
Give your venture capitalists (and board members) assignments
Mark alludes to this in many of his suggestions but he never comes out and says it. And, amazingly to me, many entrepreneurs either don’t ever think of this or don’t feel comfortable doing it. They should.
Most VCs will quickly say that they want to help the companies they invest in to success. Some will go further and say things like “I’ll do anything I can to help my companies.” Rarely have I heard a VC say something like “My plan is to just hang around, go to board meetings, ask a few nonsensical, low insight, rhetorical questions, eat the crummy food, and then disappear until the next board meeting.” However, as any entrepreneur who has ever worked with multiple VCs knows, the statements a VC makes (or doesn’t make) doesn’t necessarily correspond to his behavior.
I think you can break this cycle early in the life of your relationship with your VCs by giving them assignments. At the end of the first board meeting, spend some time talking about your expectations for your board members (including your VCs), ask if they are reasonable, and then go around the table and ask each board member what they’d like to specifically help with between now and the next board meeting. Explain that you want to develop a cycle of accountability for each board member to the company and use this to (a) develop deep engagement from each board member between meetings, (b) benefit from the experience and wisdom of each board member on a continual basis, and (c) set a strong tone for the leadership team (and the company) that everyone has functional responsibilities that they are held accountable to. Acknowledge that it will take a few board meetings to get into a good rhythm with this, but be clear that you’ll spend a little time at the next board meeting going through individual assignments, what was done, and what the new assignments are until the next board meeting.
The assignments should be specific – if they are general (such as “help with strategy” or “help with the financing”) they will be useless. Make sure the assignments play to the individual board members strengths and interests. They should provide leverage for the leadership team; not create make work. They should be impactful, but not mission critical.
In companies where the CEO hands out regular assignments, I’ve experienced an awesome tempo after about six months. The board members begin holding themselves accountable and the management team is much more comfortable working directly with the individual board members. Over time assignments become less “stiff” and the regimen of passing them out and reviewing them at the board meeting will fade away over time as everyone gets used to being held responsible for what they sign up for.
Over the years, I’ve occasionally thought about writing a book about how venture capital actually works. I no longer have to contemplate doing this as Jeff Bussgang has nailed it with his book Mastering the VC Game: A Venture Capital Insider Reveals How to Get from Start-up to IPO on YOUR Terms.
If you are an entrepreneur who wants to understand how venture capital works, how VC’s think, and read some great stories about entrepreneurial arcs, this book is for you. When Jeff told me about this project a year or so ago, I gave him lots of encouragement, made a few introductions, and offered to do anything I could to be helpful. I did two meaningful proofreading cycles so I’ve effectively read this book twice – it’s just spectacular.
Jeff has a particularly deft touch on the balance between entrepreneur and VC. Some of this comes from him previously being a successful entrepreneur, but some of it comes from his effort in striking a balance between writing a VC-oriented book and an entrepreneur-oriented book. The result is a much better book than the other “how VC works” type books.
Jeff also does something important – he uses long stories to frame his points. Rather than little sound bites, he actually tells great entrepreneurial stories, in real detail, that I hadn’t heard before to underscore what he is trying to get across. For an example, take a look at the book except of When Jack Dorsey Met Fred Wilson, And Other Twitter Tales.
If there is one book about entrepreneurship and venture capital that you buy this year, make it Mastering the VC Game.
Jon Hansen has started interviewing me periodically on his show on BlogTalkRadio as part of his Thought Leaders Series. Yesterday’s interview focused on my experience of investing in Rally Software and included short discussions on how Rally got started, how and why I decided to invest, and the role various factors play in my decision making process. Jon does a nice interview.
I’m very proud of my friends at Rally – they’ve created a company that is well on its way to being one of – if not the – most significant software company in Boulder.
Over the years my partner Jason Mendelson and I have heard from numerous people that they’ve been exposed to our Venture Capital Term Sheet Series as reference material in a college course. We are delighted by this and whenever we’ve been asked, we’ve always said (and will continue to always say) “with our blessing.” However, we haven’t kept track of any of this over the year and have a few ideas for things we can do to update the material now that five years have passed.
So – I’m writing with a simple request. If you’ve used, or encountered, our Term Sheet series in a college (undergraduate or graduate) course or any other teaching / seminar environment, can you leave a comment below with the information (school / program / year / professor) or email me the information?
For those of you concerned about nefarious plots on our part, I assure you that we are delighted this material is out there in the public and are happy to have it freely used and passed around for all eternity. I promise we won’t send Jack Bauer your way.
My partner Jason Mendelson – who is also my co-conspirator in writing the blog AsktheVC – is having an open session called Crash Course – Raising Venture Capital. It’s part of the Silicon Flatirons program and is happening on February 24th from 5:15pm to 6:45pm in Room 204 at the Wolf Law Building. Jason says he’s going to cover:
Everything from what makes VCs tick, who are our bosses, what are things that you can do to improve your chances of receiving funding and things that many VCs don’t want to talk about. No question is off limits and I hope that it will be a very interactive forum. Consider this to be a live version of Ask The VC.
Of course, beer goes really well with stuff like this. So BioBeers is hosting a Startup Drinks event at The Foundry starting at 6:30. This isn’t at our office, although we are always amused when “The Foundry” gets confused with “Foundry Group”. Rather, it’s across the street at The Foundry, 1109 Walnut Street. Hoist a few for me as I’ll be in Seattle (more on that in a minute.)