VC Cliché of the Week

The Gotham Gal gets credit for this one. We were at dinner last night (amazing place called Little Owl – the Gotham Gal blogged it) and she blurts out, "I baked the cake, you can ice it, but don’t screw it up"

It made me think of entrepreneurs who hand over their companies to others to run them.

It’s a handoff fraught with risk and often forced by the VC.

I have two good friends, Gordon and Mark, who did just that with their companies only to watch the hired CEO screw it up.

But there’s a good way to do this and a bad way. The bad way is to do a search, find someone you don’t know, immediately hand over the keys to the car, and step aside.

The good way is to recruit one or more people to the company early on, spend time with them infusing them with your passion and vision, getting them familiar with the technology and culture, and gradually giving them the keys to the car.

The handoff of power should be so incremental that nobody can point to a date at which it happened.

There will always be an official date when someone takes the CEO title, but it should happen when its already a defacto title.

Baking the cake can also refer to the work an early stage VC does. There comes a time for me when I start to get bored with a company. When the discussions in board meetings turn to detailed budget reviews, lots of financial analysis, heavy audit committee work, S1 filings, bankers showing up to talk business, I know my work is done.

That doesn’t mean I will get off the board then, but sometimes I will. It largely depends on the managment’s preference and whether or not I’m comfortable with letting others ice the cake.