Most venture capital investments are made, over time, by syndicates. This means a group of venture capital firms develops around a company, usually built over multiples rounds. Some of the firms in the syndicate agree to (or require) having a partner from their firm join the Board of the company.
If you look at the roughly dozen boards I am on, most of them have multiple venture capitalists on them. Some also have independent directors, something I believe strongly in and have written about frequently.
Not all venture capital firms in your syndicate will be the same. Not all of the VCs on your board will be the same. Some will be challenging to deal with. Some will be unproductive and distracting. Some will be nice to have around but won’t do much. A few will roll up the sleeves and do the “heavy lifting.”
It is this latter group that is super valuable. You saw it in action last week when the partners of Benchmark apparently negotiated a change in leadership at Uber. That is hard, painful work. But someone has to do it. And I have seen the partners at Benchmark do it before. They don’t shy from the tough stuff. Nobody enjoys doing things like that, but they know when it is needed and they step up and do it.
I was talking to another VC I work with yesterday about a completely different situation. The company is doing great. We have some important decisions in front of us, all good choices to have to make, but selecting the right ones will matter a lot. This VC has been deeply engaged in the process, providing a lot of super valuable advice, and saying things that need to be said, even if they are not popular. I feel incredibly lucky to have someone like that in a syndicate with me. And I told him that yesterday.
You can put together a list of the top VCs by returns. That is done annually. It’s all nonsense. There are a ton of shitty VCs on that list. Returns matter, for sure. But what really matters is who shows up when the hard conversation has to be had. What really matters is who provides the right advice at a critical time. What really matters is who puts aside their own personal interests and does what is in the best interests of the company. What really matters is who steps into a vacuum and provides leadership when it is badly needed.
When you are picking investors, you should call around and check references. Ask about this stuff. Find out who does the heavy lifting and who goes along for the ride. Pick the one who does the heavy lifting. Because you will need it, frequently.
