Venture Capitalist At Your Service

When I first became a Venture Capitalist, I had been a practicing attorney and my partner Dave passed on the somber news that he believed there was a good chance that I would fail at the venture business. He explained to me that lawyers were "agents" and Venture Capitalists were "principals" and that being good at one was no indicator of being good at the other -- in fact, Dave felt that being a good agent suggested you would not likely make the leap to being a good principal (but, hey, he liked me so we'd give it a go). Dave's assessment wasn't without historical support. If you look at the venture business, service providers (lawyers, accountants, etc.) don't have a great track record of making the transition from agent to investor. But, despite that fact, I think that being a service provider was excellent training for the venture business.

I got to thinking about this question earlier in the week when I was asked by a friend to discuss "brand" and "brand building" with his team of service professionals. He suggested that it might be interesting for me to talk about how I approached building brand as a lawyer vs. building brand as a VC. And as I pondered that question, I realized that I thought about it exactly the same way.

I should start with my definition of brand. In the venture business (or legal business, for that matter), I don't think of brand as some abstract piece of intellectual property acquired through countless millions of dollars in advertising, sponsorships and the like. Rather, for individuals and firms of individuals, brand is acquired through countless interactions with your customers and the relationships you build from those interactions. In other words, brand is a reflection of how you are perceived on a personal level by your customers.

So who are my customers? One might argue that my customers as a VC are the Limited Partners who invest in my fund. And, to a certain extent, that is true. Without my LPs, I would have no money to invest. But, to my mind, the best way that I can serve my LPs is to appropriately view entrepreneurs as my primary customers. Without entrepreneurs, I will have nowhere to invest my LP's money. And without great entrepreneurs, I will have no economic returns to distribute to my Limited Partners. In fact, without entrepreneurs, the VC business would be a bit like "Waiting for Godot."

Given all that, the conclusion that I have come to is that the best way to be a successful VC -- and maintain a positive brand in a business so fraught with detractors -- is to act like a service provider. The executives of my portfolio companies are my clients. But all entrepreneurs are potential clients. And I need to behave accordingly.

When I was a service provider, I built a reputation on sound advice, responsiveness, attention to detail, ethical behavior, loyalty, tenacity . . . all of which, I believe, are valuable traits for a Venture Capitalist. In the past, I have been asked by entrepreneurs "what will you do for us if you are our investor?" My answer is always the same -- "what do you want?" It is my job as a VC to serve my entrepreneurs (and, in so doing, serve my Limited Partners). Whatever I can do, I will. And I believe that is the right way of thinking of it. Entrepreneurs are not here to serve VCs. VCs are here to serve entrepreneurs. What can I do for you?

Comments

[peter.cranstone.myopenid.com]

Bravo... finally (well maybe that's a little extreme) a VC who gets it. We understand that you have LP's who you are accountable to, however with us your model doesn't work. All too often I've been in front of VC's who are busy checking their Blackberry's during the second or third slide. It's sad that they would pay so little attention when investing someone else's money. It tells our side of the table a lot about them as partners.

Please let me know if you are interested in Mobile as that's our current focus (reducing the cost and risk of deploying Mobile SaaS solutions)

Peter
5o9inc.com

[https://me.yahoo.com/a/p021gvc7hvpOuluNh0Q.B1WTC46bJQ--#ea536]

Amen.

[https://me.yahoo.com/a/AJPFHmpmrsQpmQcNmVK5OpLD9Lo-#7d259]

Brilliant - very refreshing change! As an entrepreneur I appreciate your focus on us and how we play a very large part in branding. It's shocking to see the terms laid out for most venture backed entrepreneurs - reason I stay clear of VCs. Thank you!

[https://me.yahoo.com/a/TnFiQMg6huz0f28PUMZmY_UKd9_s#d2aa6]

David Hornik is already a brand in the VC industry.

As an entrepreneur I disagree with him that his customer is the entrepreneur. His customer is the LP. Without the funds, no project moves forward (i.e. mine).

There are far more projects than funds. The industry needs more funds not projects.

To attract more funds, the LP's need to have the confidence that there is a payoff at the end. More confidence means more funds means more projects that can get off the ground.

I think the size of the VC industry should be ten times what it is now! But it is shrinking. So who IS really the customer here?

[Dave]

guess i missed seeing this earlier... great topic & post :)

i'm also surprised to see an attorney cross over to VC and do it as successfully as you have mr. hornik, but kudos you rock the house!

completely agree that while you have to deliver ROI/IRR to your LPs, for the most part your customers are the entrepreneurs (you're selling them money, you get their equity in return).

other piece of that were i feel most VCs fail however, is that in order to do a good job selling to entrepreneurs, i believe you need to earn their trust through support & education. and unfortunately, many VCs fail to provide [domain-specific] education.

in particular, i just don't think most internet-focused VCs have the operational background and expertise building internet businesses to do a good job on education (in engineering, product development, marketing, design, customer service, etc). and the few that do stand out.

perhaps the reason you've been successful moreso than the average VC is that you've also been a teacher / educator at Stanford, and you write quite a bit (another form of education is blogging ;)

in any case, keep it up!

- dmc

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