Thursday, November 17, 2005

Drake V

This is a short case, but I wonder what the VC’s are up to? What do they expect from the company? How much oversight do they have over the way money is spent? How closely are they breathing down the necks of these new entrepreneurs?

VC’s can be a bloodthirsty band of vampires. They want the first blood of the new company when it starts flowing. They want their blood before even the founders get a deep drink. I would expect these investors to place their man in the company and on the governing board of the company. Bob, Dan, Chet, and David will find that they do not have all of the freedom they had hoped for. When they took the VC’s money they became accountable … controllable. They are going to find that to some degree they cannot call the shots around the office. Good or bad, right or wrong, they are going to have to dance to the tune of the investors. They are going to be forced into decisions and actions that they may not agree with and that they curse themselves for having to make. They will look in the mirror in the mirror some mornings and know deep in their hearts that they are good guys that want to do the right things for the employees … but they can’t … the VC’s won’t let them run free.

The good part about all of this is that the VC’s often have their own contacts that can help with PR, advertising, and manufacturing partnerships. They can bring the company into the limelight in ways that the company founders cannot. The VC’s may take a pint of blood, but they also use some of that for the good of the company. The Dallas VC’s sound benevolent. In the beginning when hopes are high and losses are low, it is easy to coast along and trust the founders. But when problems start to emerge and money disappears, suddenly performance becomes much more important than faith in the founders.

The company may be growing beneath the founders’ feet, but with VC’s it is also growing above their heads. They are back in the middle again.


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