The Ideal VC
What makes a great VC? What IS a Great VC? What are VC roles? How do they embody success in their jobs, tasks, and what is the difference between a good one and a mediocre or bad one?
The VC's job is to earn a great return for investors according to the fund's mandates.
How they achieve this is according to their own internal strategies, investment parameters, business acumen and networks, sales and marketing skills, and expertise in helping other companies grow. From seed to IPO, there is much to be done, and some VC's have it and some do not. A good VC earns a nice return for investors, but a great VC can help the startup thrive, which in turn will not only earn a greater return for investors, but will improve the success/fail rate as well, which not only amplifies returns but enhances security and prevents many of those big losses. A great VC is also one that can attract many founders due to their fair to very positive valuations, founder friendly terms and conditions,
Funding
Great VC = Overfunds the Startup for less shares
Destructive VC =
Underfunds the Startup for more shares
Firstly, AOE believes that Investors should get 100% of shares (with limited control) until the investor can be paid back in which the investor returns to a fair share (depending on the x rate, model and performance) Investor's money should be secured not gambled with. With that being said, the evil shark wants to bite off as much as he can for pennies on the dollar with no criterion of performance on him but no dilution for him either. The good shark wants to value the company high to leave room for other investors can come in with even more capital, a higher valuation of "his Startup", and the founder and his team isn't being gutted in the process leading him to want to bail and restart or this harming the investor-founder relationship. Many a success story has been created by investors overfunding for less shares than the founder was asking because they wanted to create the best advantages for the Startup to success VS competitors. VC who don't recognize this advantage and don't want to engage in such really should be stayed away from completely unless there are other considerations that add to their counter-offer on your price.
Great VC = Will have a solid plan for bringing in more investment and investors, juice your valuation, and improving your valuation and funding, flexible on values and %s and deal structures.
Destructive VC =
Want lowest valuation and highest share bite with no further plan to help you and with vision of you need to qualify for any more value not them trying to pump/juice it.
Good VC will want to crank your valuation and will sell your company and sell a higher valuation to other investors, and not just try to get you on the cheap and turn/flip you to another higher and that's their play. Good VC are in it together with you on the financial side in every last aspect, not trying to rip as much as they can possibly advantage from you as you are vulnerable financially in the beginning stages. Bad sharks burn and churn and they won't be there for you either after this deal and if they can make more money gutting you on a flip or label change, they will do so without hesitation, as many founders have been subject to, even years invested and they are out with nothing at all while the VC still returns multiples. Human beings are but a stepping stone to some VC, their funding flexibility attitude will go a long way in revealing this. Protecting them multiple ways and they are still hard-nosed inflexible trying to bite a mass chunk off instead of being happy with an in-out and gain some great x on a few triple digits? And then they call you stubborn? Wow run for the hills from this greedy pig shark, they are going to gut you dead. Forget it. NEXT VC!
Cap Tables
Great VC = Doesn't need to stick to pre-boxed cap tables, terms and conditions.
Destructive VC =
Insists on sticking to pre-boxed cap tables, and anti-founder terms and conditions.
Every tool, technology, innovation and advantage should be employed in business and startup success where can be done, and VC who don't want to do that but merely stick to what puts the VC's foot on the neck of the founder (often for years) should be steered clear of. Those not being flexible on valuations both pre and post money with strategy, agreeing to "outs" where they are paid back, fully exited at strong returns, and insisting on hard one size fits all terms are not fit for the innovation and technology era on an investment perspective. Their one-way methods will not just be in the initial funding but usually in many or all the decisions they are involved in. They will often constantly fight against founders in board meetings or other decisions and have low "financial creativity" that works for the founder, and what works for the founder works for the investor. After all, without the success of the founder the VC can't truely achieve great investment success. The #1 reason for Startup failure is the original founder quit. Founder's Institute states that the ONLY reason Startups fail is the original founder quit. When VC are talking "it's too founder friendly" things need to be carefully re-examined with this VC. The investor needs to be protected, paid back with great return, but there is no reason for them to go about that in a way that rips more than their fair share.
Great VC = Has no problems whatsoever with dilution and it's strategies
Destructive VC =
Requires no dilution for him
Firstly, AOE believes that Investors should get 100% of shares (with limited control) until the investor can be paid back in which the investor returns to a fair share (depending on the x rate, model and performance) Investor's money should be secured not gambled with. With that being said, the evil shark wants to bite off as much as he can for pennies on the dollar with no criterion of performance on him but no dilution for him either. The good shark wants to value the company high to leave room for other investors can come in with even more capital, a higher valuation of "his Startup", and the founder and his team isn't being gutted in the process leading him to want to bail and restart or this harming the investor-founder relationship. Many a success story has been created by investors overfunding for less shares than the founder was asking because they wanted to create the best advantages for the Startup to success VS competitors. VC who don't recognize this advantage and don't want to engage in such really should be stayed away from completely unless there are other considerations that add to their counter-offer on your price.
Values
Great VC = Has a Values Basis for Investing
Destructive VC =
Just Invests for money. (money-worshipper)
Good investors are good people too. Today is a world of anything goes people and where everyone is a "good person" according to themselves. But what is this person's charitable or philanthropic interests and works? Where do their faiths lie? Will they sell their soul to satan for an extra %? Do they invest in arms sales and business expansions to terrorism supporting states or would they? Do they support family and societally destructive cultures, behaviors, and attitudes? Is it only about the money? Or are they really wanting to make the world a more harmonious peaceful wonderful place for children and families? (who become big children)
Building
Great VC = They will do whatever they can to improve your marketing exposure, branding footprint, will cross-sell you to all their other business lines and contacts, and do an immediate subsequent funding and financing round at very favorable conditions to your startup to juice your success. They will go get contracts. OR they invest passively enough money for you to get it all done and they stay the hell out of your way.
Destructive VC =
They invest and then are not proactively juicing/selling/marketing, but they also want the huge bite for pennies valuation....
Founders should have clauses that protect them from these deadbeat VC's types that just want to invest/control and do nothing real of value to boost the value of the Startup while trying to rip more than their fair share while the founder is vulnerable.
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BUilding
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