A VC in Vacationland

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One promise I made to myself when I became a venture investor was never to become a pr*** like a lot of guys in the VC world.  I have had to live with my share of tough investing partners in this business.  Often, they were right about how deals should go down, how to relentlessly drive the CEO for more growth, how to minimize employee ownership shares to maximize their returns, etc.etc. But do you need to be a pr*** to be create successful businesses? I don't think so…

You clearly have to have tough skin to survive in an early stage investing world that competes for a small number(less than 5% of start-ups are big winners) of worthwhile investments.  Meanwhile, you have to listen to a whole bunch of pitches and perhaps even work with an entrepreneur for a number of months before you know if the idea is feasible.  And even then, the odds of failing are high. As I have said many times before in this Blog, I rarely see a bad idea, but I often see bad business models and poor execution.

But if the team is executing well, meeting plan and creating value, does it make sense to chastise them at the Board and other meetings in an effort to get even more performance out of the team? Some guys seem to think that yelling and screaming is the best way to manage start ups. To me, it makes very little sense, since the team is already working 80 hours a week to make the new enterprise successful.

Wealth can bring out the worst in some people.  Even thought they are very smart, sold their startup for millions (or more) and could pass on their knowledge without being a pr***, they seem to think that it is the only way to get their points across.  I pity the entrepreneurs that have to work in such environments.

I have seen companies where such behavior was rampant and the companies were successful.  But the pr*** behavior did not create any extra value for the team or investors compared to having a supportive group of investors.

The lesson?  Choose your investors carefully.  It may not be worth taking the pr***'s money if you have to put up with bad behavior for years. Remember that, like Atlas above, you have the careers and lives of all your employees on your shoulders. Do not put extra strain on you or them.  It is tough enough getting to be one of the 5% without extra investor baggage.