I gave up making New Year’s resolutions a long time ago. The cold dark days of early January are the worst time of the year to give up whisky. I give up whisky in the early summer, when it is safe to swap a warming drink for a cooling one and I start drinking beer instead. So that’s not much of a resolution.
I also gave up being a venture capitalist a long time ago, so I must be the worst person to provide a list of ten New Year’s resolutions for venture capitalists. But somebody has got to do it, so here goes:
1: Think like an entrepreneur, not a bank manager. Put yourself in the shoes of the teams you are backing. Understand their way of looking at the world and act in a way that harnesses their energy without sapping their strength.
2: Stop worrying about losing money and concentrate on making it. All the downside protection in the world is not going to enable you to raise that next fund.
3: Give up the false safety of your preferred participating shares and get yourself some ordinaries like the teams you back. You are more likely to make money shoulder to shoulder with your teams than if they are demotivated and resentful, or motivated in a different way to you.
4: Make your chief executives feel that their company is still their company after your investment. Don’t even think about your veto rights except when there is an issue which really affects the value of your investment. Blocking a £50,000 piece of capex or a salary increase for an employee earning more than £65,000 will not make you money, but it may make your chief executives feel like employees.
5: Don’t give underperforming management teams the benefit of the doubt. Take firm action quickly to get the necessary management skills into your portfolio companies (you weren’t expecting that one, were you – you thought I was going to go on being rude about VCs).
6: Help your chief executives to temper their entrepreneurial optimism with realism. Without deflating them, help them to understand that things always take longer to happen than they expect and persuade them to set budgets that they can beat.
7: Encourage each of your entrepreneurs to spend every penny of your money as if it was his. Help them to understand that being profligate with your cash will cost them a great deal of money – and maybe their company – in the end.
8: Make sure your chief executive always has a Plan B in place which does not involve you investing any more money.
9: Don’t invite your portfolio companies to hold board meetings in your offices. Go to theirs and sniff the air to get a real feel for what is going on.
10: Stop using your Blackberry in board meetings.
Simon Acland worked in the venture capital industry for more than 20 years, most notably as managing director of Quester. He is the author of “Angels, Dragons and Vultures – How to tame your investors… and not lose your company”.
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