"Unlike other VCs”, he said, “we've got deep pockets and long arms". We sat opposite one another on a suspended swinging table (Silicon Valley stereotypes abound) and like a couple of kids at the playground, we swung back and forth discussing why I should let this particular venture capitalist invest in my company. I received the platitudes, which would later in my career sound all too familiar; "we partner with founders", "we're contrarians" and my personal favorite, "because we care about our companies". Time was running out for me to raise money and spin my group out from Autodesk. He not only represented a big name firm, but they could close the entire round. To make matters worse, I was being schmoozed...and I loved it.

Three years later, this VC had either put his trousers in the tumble dryer or his arms lost some reach. When we needed it most, the money didn't come and with a significant chunk of the cap table under his control I struggled to comprehend why he wouldn't invest at the 11th hour. We were careering through the first 6 months of the pandemic, fighting for the survival of the company and not only did his apathy leave a massive hole in our round, but the optics of having a large investor and board member forgo their pro-rata was tantamount to a death sentence with the other investors. Where was the care now?

During those early years of Holo, I was inexperienced and painfully naive. I fundamentally misunderstood the nature of the relationship between a founder and their investor. Or rather, I failed to comprehend the evolution of that relationship, which I now look at in three phases:

  • Courtship - otherwise known as fundraising
  • Sobering Up - the post-fundraise come down, where founder and investor determine their long-term compatibility in those early, awkward board meetings
  • Reaching Equilibrium - the majority of time spent managing the balance between the company's frenetic trajectory and the investor's expectations

Most relationships between founders and investors are built during fundraising. It's a heady period fueled by an intoxicating mix of speculative visions of the future met with discussions of large sums of money. Nothing is real at this point, but everything is possible, which makes for a hopeful if not distorting time to construct one of the most consequential business relationships you might have. It also obfuscates the reality of this particular relationship– it's purely transactional. You need money and your investor views your company as an investment vehicle that will hopefully provide a 10-100x return. That's it.

It may sound elementary to state the obvious, but we often lose sight of the simple symbiosis of this relationship. Reminding ourselves of that fact makes it easier to understand that outside of the fundraising courtship, your VC is making decisions based on a set of variables that do not necessarily include what's best for you. In fact, it may be easier for them to eliminate you as a variable entirely. For some, including myself, this sobering transition can be painful and confusing.

I want to be clear, it's highly likely that your VC cares about you. I have had wonderful working relationships and friendships with truly amazing VCs. However, there's a difference between caring about someone and caring for them. One is passive–often achieved with soothing and comforting words–whilst the other requires engagement, action or even choosing to act against one's own self interests in service of another. And that's where this distinction lies. The active care we often need from our investors (i.e., provide money, introductions, etc.) does not come unconditionally as their business is not to act against their own self interest. Therefore, it behooves us to consider what these conditions may be.

The most important, of course, is ensuring you hit your company goals, grow revenue and bring new investors to the table. Without those, as Ben Horowitz infamously put it, "Nobody cares". But outside of the obvious, it's incumbent on you to excavate and understand the world within which your investors are living. Doing so helps you meet your investor where they are and maintain alignment, ultimately avoiding unpleasant surprises like I faced and helps them to take the action you need, as they'll be acting in line with their own self interest.

To make this more actionable, I’ll follow up with a series of posts diving deeper into each phase of the founder-investor relationship and how those conditions arise. I'll do my best to follow a linear path, but we may be bouncing around for a few weeks, after which I'll aim to group these together into a series on the site. The topics we'll explore will cover:

  • The high emotions and irrationality of fundraising, examining how factors such as macro-economic shifts and pre-pitch relationship building influences investor behavior
  • We’ll dive into how to navigate the post-fundraise disquiet, manage those tense first board meetings and prepare yourself and your company to move quickly with effective post-fundraise planning
  • Finally, we’ll look at how to maintain the fragile equilibrium in the founder-investor relationship by understanding your investor’s world while ensuring they fully understand yours, especially from round to round*

*While I get these thoughts together, I highly recommend Venture Deals by Brad Feld and Jason Mendelson. I say this with as little hyperbole as possible - it is singularly the most important book anyone trying to raise venture capital should read.