VCs and Founders

I found this comment that defined the founder and investor relationship in a very effective (if somewhat unsettling) manner. 

VC’s essentially use founders like race horses. They pump in the steroids, exercise them to the point of optimal performance or death, and then put them out to pasture if they don’t perform. Founders are part of a portfolio plain and simple. They are part of a stable. The VC’s are benevolent trainers but they have one goal: ROI. Their benevolence is in direct correlation to their ROI, which is largely determined by growth. The irony is that Wall Street operates in exactly the same way. The difference is that the relationship between Bank and Borrower or Shareholder and Company is more clearly defined than the relationship between VC and Founder.<br /><br />

There isn’t anything wrong with VC’s. They play a vital role in the financial community. Yet, at the end of the day, a VC is going to look at a startup as a financial product. VC’s are offering their partners a product just like a startup is seeking to offer the market a product. The fortunate part about the rest of the business world, cut-throat though it may be to some, is that no one expects anyone else to be benevolent. They expect people to conduct business.<br /><br />

The better the VC-Startup relationship is defined, the better it will be for the long-term health of founders. On the other hand, VC’s have no incentive to change course because their is still a willing market of young people who want to strike it rich. In some sense, it would be far better for the market and founders if data was more readily available. In fact, it is a jilted environment. It is always in the VC’s favor because they hold the money. However, it doesn’t mean that they hold future value. If it did, they wouldn’t need to go fund startups.<br /><br />

The current VC-Founder relationship is imbalanced compared to other portions of the marketplace. The VC’s hold additional chips because of the allure of a successful exit, the siren of Silicon Valley.

Comment by <a href=”https://news.ycombinator.com/item?id=5941286”>Bradford Arner on Hacker News</a>

Tuesday, June 25, 2013  |  30 notes
  1. biznickman reblogged this from msg
  2. adsahay reblogged this from marksbirch
  3. marksbirch reblogged this from msg and added:
    While maybe an unsettling comparison, this is essentially right. Startups are financial products. As a founder goes from...
  4. hellosprightly reblogged this from om
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  6. msg reblogged this from om and added:
    om found this comment by Bradford Arner on Hacker News that defined the founder and investor relationship in a very...
  7. gkimbwala reblogged this from om
  8. tumblsamg reblogged this from om and added:
    Simple, but apt description…
  9. tilsuchtime reblogged this from om
  10. om posted this