Startup Lessons: Could He Be a Co-Founder?


In the great sport of venture fundraising, entrepreneurs are typically the underdog to VCs who run the game.   This imbalance of power in the fund-raising stage can set the stage for a lopsided relationships as founder and VC attempt to build the business together.  For all the happy talk about alignment of interests, it’s too easy for the VC the boss to the founder who slips into the role of employee even while trying to hang onto the handle of entrepreneur.

The best VCs will tell you that they don’t see it that way.  They partner with their founders for their mutual success.  Emphasis on partner. 

Often, I remind entrepreneurs that raising money is a lot like dating, and taking investment is a lot like getting married.  Indeed, many VC-startup relationships last longer than the average marriage.  Just as you wouldn’t jump into marriage without getting to know someone, you ought not to enter the bonds of an equity partnership without a little diligence.

Oddly enough, most entrepreneurs think due diligence is the province of the VC.  Happy to have reasonable terms, many founders make a more binary assessment: Is the VC’s money green?

I was reminded of this first-timer mistake this afternoon when one of the seasoned entrepreneurs in my advisory portfolio shot me a note after meeting with George Zachary, a general partner at Charles River Ventures.  George told this founder that the #1 question he asks himself, when considering an investment is whether he would want to be a co-founder of the company.   It’s a great question.  It’s the question of an investor that wants to be all in with the companies he backs.

It’s also the question founders should ask when they finish a meeting with a potential investor.  Is this someone you who you want to be a co-founder in your business?  After all, he’s likely to end up with a bigger stake in your company than you and any other co-founder will have.  Does he fit with your culture and style?  Will he work shoulder-to-shoulder on the tough problems of the business?  Will he be a partner that you can live with until that future day when you set the business free?

Or will he be the boss?

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