VC Cliche of the Week

Have you ever heard someone say, we "roll up our sleeves and help the entrepreneur build the business"?

If you are an entrepreneur who has raised venture money or if you are an LP who invests in venture funds, I am certain you’ve heard this cliche.

It’s in the same category as "value added investor".  It sounds really good coming out of your mouth.  But its not what you say, its what you do.

And how many VCs really do this?

In my experience, not enough.

Rolling up your sleeves means getting your hands dirty. 

It means making a conscious decision that you are going to focus a significant amount of time and energy away from finding deals and raising funds and actually work on portfolio companies.

That’s not always something many VCs want to do when they really think about the opportunity costs.

My favorite story about this goes back to the early 90s when I was a wet behind the ears VC who had just taken his first board seat.

I went to the first board meeting. It was in Buffalo, NY and the two entrepreneurs were Ron Schreiber and Jordan Levy, both of whom have become good friends and great VCs.

After the meeting, Jordan took me aside and said "Freddy (he still calls me that), if you want us to listen to anything you say in these meetings, you are going to have to spend some serious time getting to know our business".

I guess Jordan and Ron didn’t like the idea of some wet behind the ear VC trying to tell them how to run their business.

I quickly recognized that I had to earn the right to tell them what I thought they should do.

So a couple weeks later, I cleared my calendar for 2-3 days and flew to Buffalo.

Jordan had arranged for me to spend time in every part of the business, from help desk to finance to sales and everything else.

I rolled up my sleeves and got my hands dirty.

I met almost every employee and learned what each job entailed. I even did some of the jobs.

By the end of my stay in Buffalo that week, I had a much better idea of what the business was all about.

And it made me a much better Board member.

I am glad I learned that lesson so early in my career as a Board member and I have Jordan to thank for it.

It’s a lesson that has stuck with me.  My first instinct after I make an investment is to jump in with both feet and get wet.

Use the product/service. Talk to customers.  Sell the product/service. Get feedback. Recruit management. Generate PR.  Whatever it takes as long as its legal and ethical.

It makes me a better investor and a better Board member.

And if you think about it like you are working for the CEO, not the other way around, it generally is appreciated.

Then when things aren’t going so well, you can start making suggestions and you’ll be heard.  And the suggestions you make wil be good ones.

So I think rolling up your sleeves is the best thing you can do as a VC, but its work and it requires a committment that not all VCs have.