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February 21, 2005

Top 5 Reasons Entrepreneurs Dislike VCs

When I first jumped into the VC business and hung up my entpreneurial spikes, I was teased by friends that I had gone over to "the Dark Side".  As the saying goes, there's truth in jest.  I've been surprised at the negative reputation the VC business has.  In analyzing why that might be, I have been struck by a few common themes.  With half apologies to David Letterman, here are the top 5 reasons my entrepreneur friends harp on as to why they dislike VCs:

5) You know the farm story about the commitment levels of the chicken and the pig towards breakfast?  Guess who's the VC and who's the entrepreneur?

4) Work ethic.  CEO:  "I need to have a BOD call next week to drive to a decision on this."  VC:  "I'm in the Himalayas for the next 3 weeks and then at a week-long offsite with my partners in Aspen, so let's just cover this at the next quarterly BOD meeting."

3) Varying defintions of value-add.  Entrepreneur:  "I need strategic insight, business development contacts, recruiting assistance, M&A and financing introductions."  VC:  "We need to work on stronger revenue growth, gross margins, and our competitive position.  See you at the next Board meeting."

2) Take credit for successes, abandon failures.  VC:  "I was like a co-founder there."  Entrepreneur:  "Funny, I didn't see you at my 7am weekly staff meetings."

1) Board room M.O.:  show up late, pound on the Blackberry, look up and ask a question that was answered 2 hours ago.

Next time, I'll even the score!

Comments

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Hilarious and apt...now waiting for you to "even the score"...welcome to Blogging mania.

You missed the most important two: (1) terrible usurious deal terms that enrich VCs and rip-off entrepreneurs; and (2) endless interference by VCs in the management of the company (shareholders are shareholders, and management is management, and never the twain should meet). Most VC firms have zero "value" to "add".

I think that comment by Whippet is a little backwards, in that he/she forgets the golden rule, "He who has the gold, makes the rules!".

If you don't like the rules, dont play the game. But as someone who has put his own money into play, you don't have a clue what is involved until a deal goes sideway on you.

Hello Jeff,
I liked your 5 reasons entrepreneurs dislike VC's and added a new post on my blog www.boardroomdialogue.typepad.com. A lot of the views come down to a faulty picture of what a board is supposed to do, but each board member should be present, alert and paying attention. If they can't, they should get someone else who can.

These 5 reasons are funny and true same time. Respect!

Josh -

The post in one the top reasons why entrepreneurs hate VCs. I guarantee the two I listed are in that list.

You are correct that people should not play the game if they don't like the VC rules. The trouble is that many first-time entrepreneurs do NOT understand the reality of taking VC money. I have done VC, CEO and EIR and I know what I am talking about.

I want to see entrepreneurs make decisions with a good understanding of the game they are in. VCs play the money game every day, and they know all the way it gets played, from seed rounds, to anti-dilution, to squeezing out management, to inside rounds, and on and on.

+1 to the original post from the blogger, and to the response from "whippet" above. One always imagines VCs would get a clue and try to build companies, but it's a very, very, very rare thing to meet those that don't first and foremost want to gouge in their own favor.

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