Maguire and VC Entitlements

"We are losing our battle with all that is personal and real about our
business."                                                                                                                          — Jerry Maguire

I think that all venture firms should have a Mission Statement a la Jerry Maguire. We don’t have one nor do any firms that I know, but it certainly is worth considering. It would help entrepreneurs better understand the firm while also creating a "northern star" for the firm. A number of you emailed me after my Entrepreneurial Entitlement post. You had questions about what the top VC Entitlements were. Underneath the various comments, I could infer the normal questions about why VC’s have a poor reputation when, in fact, they enable significant value creation. I think part of the issue is that over half of venture deals don’t work out (either partial or complete loss). A lot of finger pointing occurs during these wrecks and, rightly or wrongly, VC’s are implicated by association.

However, I think that there is something else going on. It reminds me of the scene in Jerry Maguire when Jerry finally snaps under the cynicism of his business and he writes the famous Mission Statement that gets him eventually fired. (By the way, I actually chased down the original statement in its entirety for anyone interested…while quite wordy, there are some interesting parallels to the venture business Jerry Maguire Mission Statement).

One of the most difficult things about being a VC is in walking the fine line between being in the creation business and being in the money business. Without providing constraints and structure, a VC guarantees that his/her fund will under-perform. Many times, a company or entrepreneur needs to be saved from him or herself, to have the straw taken out of the proverbial Cool-aid. However, VC’s can often fall on the other side of the line, whereby it becomes purely a money game. It is around this issue that Maguire had an interesting quote:

"We are losing our battle with all that is personal and real about our
business….We are
pushing numbers around, doing our best, but is there any real
satisfaction in success without pride? Is there any real satisfaction
in a success that exists only when we push the messiness of real human
contact from our lives and minds? When we learn not to care enough
about the very guy we promised the world to, just to get him to sign.
Or to let it bother us that a hockey player’s son is worried about his
dad getting that fifth concussion."

So, with that philosophical ranting done, here are my candidates for the top 5 VC Entitlements:

1) Nonconstructive Criticism VC’s often find their portfolio companies not performing as expected or promised. We all have a knee jerk reaction to state the obvious and to apply pressure to the management team to change things. However, it is one thing to point out an issue. It is another to a) frame it within what is realistically doable and b) help think through options and solutions. As my friend and former portfolio CEO, Juergen Stark, used to sarcastically say "Great. I got it. You want me to do more, with less and deliver it on time. Any more helpful suggestions?"

2) Micromanage Following up on #1, VC’s can often begin to micromanage portfolio companies when things are not going well. Maybe it helps us feel like we are managing a situation or maybe we just feel entitled to muck around in the business. In reality, unless a VC has specific domain or managerial expertise that helps the business, this usually results in a frustrated CEO and a lot of wasted time on both the VC and company sides. It also brings into question how much trust exists between the two parties.

3) Introductions I violate this one much too often. VC’s legitimately want to add value to their portfolio companies. One clear way is to make helpful introductions to customers, partners, recruits and such. However, we can also often push introductions that are not relevant but yet take up management time and attention to follow up on. Just because I know someone that seems important or useful doesn’t mean that he/she is an appropriate introduction. The key is thinking about the introduction from the entrepreneurs perspective while taking into consideration their priorities and objectives.

4) Opinion Heard  VC’s are obviously in a position of power because of the capital they can bring (or not bring) to a company. This gives us significant leverage. We also usually have an opinion or position on most areas of the company. These opinions are not always aligned with those of management (or relevant for that matter). Follow-up on #2 above, a VC needs to be careful not micromanage the business nor voice opinion frequently just to be heard. Entrepreneurs also need to realize that sometimes, a VC might actually have something useful or helpful to say!

5) Low Value Add Sometimes, what a company wants is just capital. However, more often, it needs help with strategic decisions, customer introductions, recruiting and such. Some VC’s are very good at rolling up their sleeves or in sharing their relevant contacts. There are other VC’s that see their roll predominantly as providing capital. This can be fine but the VC should at least make the effort to understand the business and industry.   

Should all go well, we hopefully can deliver to our portfolio companies the Maguire utopia:

"I will not rest until I have you holding a coke, wearing your own shoe,
playing a Sega game featuring you, while singing your own song in a new
commercial starring you, broadcast during the super bowl in a game that
you are winning."