When the VC-Entrepreneur Honeymoon Ends

Eric and I have been on quite a few boards. That’s another way of saying that we’re in our 40s, which qualifies as “old age” in today’s hip and young entrepreneurial world.

But, with age, hopefully, comes self-awareness.

For example, one thing for which we are prepared is when the honeymoon period with a founder ends. Here’s a typical dynamic between a VC and an entrepreneur:

  • Entrepreneur is in “sell mode” and pitches the VC–and, it goes really well
  • VC accelerates his/her diligence process and pushes to a partners’ meeting. They love the company and move to “sell mode”
  • Terms are agreed to and the money is wired. Some good dinners and wine are shared convivially sometime during this process
  • Board meetings start. Over time, the burn rate goes up as new hires are made, offices are furnished and gear is purchased. Over time, progress is slower than promised in the original business plan
  • Over time, tension rises at the board meeting. The VC’s partners are wondering why progress is slow. Does the market suck? Does the entrepreneur suck? Does our fellow VC suck?
  • Over time, stress reveals the entrepreneur’s relative weaknesses. It might be a skill-set gap, or a style quirk. Same for the VC
  • Tensions continue to rise. Trust erodes. Eventually, there’s a sharp exchange of words

In my experience, it is usually the case that the honeymoon ends. The intentions were all good, but because each side was in “sell mode” at the beginning of the partnership, a new reality often sets in, and it isn’t pretty.

That’s why we often talk internally about:

  • Be aware if we’re in a honeymoon period with the entrepreneur. Know when the honeymoon has ended
  • We’ll learn about the entrepreneur’s glaring weaknesses over time
  • An entrepreneur’s greatest strength usually translates to his/her greatest weakness. You have to accept both manifestations, as a VC
  • One of our jobs is to help source recruits who can complement the entrepreneur’s strengths and weaknesses

I’ve found that by being mindful of all this, it really helps immunize me from the ups and downs of our companies’ journeys. Not always, but usually.

And, it helps clarify our role: as I’ve blogged previously (here), our job is to help the entrepreneur succeed. Firing founders never works, IMO. You have to build a team that complements them.

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