Good VCs, Bad VCs

Inspired by Ben Horowitz’ excellent “Good product managers, bad product managers” post and Stefan Smalla’s “Good innovator, bad leader” masterpiece I’ve attempted to construct my thoughts on what I think makes a great capital raising investor. Thanks go to my co-workers at Point Nine Capital for his or her invaluable feedback, specifically Michael, Rodrigo, and Mathias, who reviewed an early draft of the post and provided plenty of great feedback. This post symbolizes our current thinking, which may develop our time plus some parts remain work happening. Feedback and discussion with other VCs and entrepreneurs are very welcome.

A good VC is available for her stock portfolio companies almost 24/7. If a collection creator needs her, she shall do everything she can – roll up her sleeves, use her sociable capital, get on an aircraft – to help. An excellent VC is sometimes a recruiter, a beta tester sometimes, a personal mentor sometimes, and isn’t scared of getting her hands dirty. Screw scalability. If a stock portfolio founder needs your help in placing out fires, the last thing she or he cares about is how this scales from a VC business model perspective.

A good VC doesn’t only respond to requests from the founders. An excellent VC knows the existing challenges of her profile companies and it is proactively looking for solutions all the time. Good VCs create firms where stock portfolio founders have similar access to all partners and not merely to “their” partner. Realizing that there are limitations to the assistance she can offer to founders herself, a good VC tries to leverage the knowledge and expertise of other people.

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In particular, she facilitates knowledge exchange between your founders of her collection through various forums, online and offline. Negative VC overpromises in the deal-making phase and under-delivers, once the deal is done. “We view ourselves as a services firm. We make an effort to earn our reputation and brand every day.

A good VC is aware that there is an enormous information difference between founders and VCs with respect to the founder’s business. He realizes that the creator has hundreds of hours of experience in his industry and with his customers and intimately knows people on his team, whereas the VC’s knowledge of the startup is much more superficial often.

A good VC understands that managing investors can be time-consuming for founders and tries to get the right balance between being close and providing value on the one hand and getting out of just how on the other hand. A bad VC overestimates his insights, tries to micro-manage, tries to exercise control, and becomes a maintenance burden for the founders.

A good VC doesn’t spend money on several companies that are directly competing against each other. A negative VC, instead of heading all-in into one company and offering his undivided support and attention to her stock portfolio company, tries to hedge her wagers by investing in several companies in the same space.

A good VC tries to maximize how big is the cake vs. If an organization desires to bring on table other traders, whether in the same round in which the VC invests in the business or at a later stage, a good VC helps the founders to appeal to great co-investors.