| What Do VCs Do All Day? |
| Written by Gerry Langeler | |
| Thursday, May 13, 2010 | |
|
A couple of weeks ago, I was a guest lecturer at an
entrepreneurship class at one of our major state universities. I
covered the usual topics (the four risks of a startup and how VCs evaluate against those
criteria), etc. But at the end of class, a student came up to me and
asked an unusual question. He said, "So, now I know more about how you
decide on which startups to back. But, more generally, what do you do?
What does a typical day or week look like?"
It struck me that he probably isn't the only person with that
question, as VC-land is a foggy land to many folks. In addition, I
think those that love to bash VCs (OK, sometimes we deserve it) or
minimize the value of taking VC money, might curb their enthusiasm if
they knew what we actually did all day. Or maybe not, but I'll let you
make the call.
So, let's run through the first couple days of this week:
Monday:
We start every Monday with a partners meeting. Over the course
of three to five hours we go through our existing portfolio of
companies, review new potential deals, and take care of other internal
business. What might be interesting to you is exactly what we discuss
during that period.
We review the existing portfolio in reverse order of "time to
cash hitting zero", starting with those in the red zone (weeks left to
six months), then the yellow zone (6-12 months) and then the green zone
(more than a year). For each one, but particularly those approaching
the cash-out wall at high speed, the lead partner / board member talks
about what the issues are at the company where we might have an impact.
Help with finding new outside investors? Introduction to potential key
partners and/or customers? Key personnel hires? If no new investor
shows up, are we ready to write a check by ourselves? Given the level of
the discussion, and the fact that we have about 30 companies to
discuss, this usually takes a few hours.
This week, our partners meeting happened to fall directly after
our annual Technology Summit, the gathering of our OVP Technology
Advisory Group (OTAG), so a number of times we agreed that an
introduction to one of those folks would be useful to some portfolio
company. In addition, we reviewed the folks who comprise our OTAG and
decided we were delighted with the IT and Biotech folks, but needed to
beef up the Cleantech representation a bit. As the cleantech lead for
the partnership, I came away with the action item to go make that
happen.
Then, we spent an hour or so looking over the list of startups on
our "potential deal" log, with discussions about which ones looked most
promising, which ones we wanted to follow closely, which ones we could
dispense with easily, which few we wanted to invite in to present in the
near term.
After lunch, we had a presentation from a potential new
investment where I would be the lead partner - so I was listening to
them - but as importantly listening to the questions my partners raised,
as a guide to where I should focus my attention - assuming I got the
green light to proceed with due diligence. (I did, so the work
begins....). Here endeth the partners meeting.
Now it's 2PM, and it was onto a call for one portfolio company
where I am the Board member shepherding the process of hiring a CEO
(with the founder's full support) - and we spent some time with the
executive search firm trying to figure out how to land the big fish we
think we've hooked.
Now, about 3PM I've moved into a temporary unofficial role as "VP
Marketing" for one of my companies as they are about to look for an
outside VC for their Series B round. I spent about an hour roughing out
my suggestions for the pitch deck, and sent them off to the CEO of the
company.
The rest of the day was mostly catching up on calls and emails -
with one notable one where a portfolio company (I am the backup to my
partner Mark Ashida) has just landed a new VP of Sales after a long
search. I sent off a sassy email to the CEO congratulating her, but
also asking if this meant the forecast for the year is going up. She
responded in kind, with words not appropriate for this blog. Those who
think we don't have some fun amongst the serious tasks at hand are
misguided.
Tuesday:
The day started with an email from another portfolio CEO with a
draft business update for a potential strategic investor that I recently
introduced to the company. Said CEO wanted my input on the draft,
particularly because I know the potential new investor and have at least
some clues about her "care abouts." The goal is to get a relatively
non-dilutive chunk of cash to fund R&D on some exciting areas we
just can't support out of operating cash flow right now. The draft got
some editing from me, and was on its way back to the CEO. We set up a
meeting for early on Thursday to review it, and also deal with some
major people issues on his plate. It wasn't the first time I've had a
CEO say as he did, very directly, "It's lonely at the top, and I
appreciate you being willing to be a sounding board on this."
At 10AM, I'm visited by someone representing a local university.
They are trying to figure out how to align their curriculum to better
serve the community by preparing graduates to create or join start-up
companies. We have an active discussion about what we think they can do
better, and what models there are for doing this well. I mention that
UW does a very nice job, in our estimation, and encourage them to tap
that group - particularly our partner Rick LeFaivre who now works
half-time at the U.
Then it was off to lunch with an entrepreneur who we had turned
down six months ago. He had reached back out to us to indicate he had
made significant progress along some dimensions that troubled us back
then - and wanted to see if we would be open a fresh look. Our answer
was, "Of course!" He indeed has made good progress, and so he's back on
the deal log list. So, all you entrepreneurs who hear "no" from a VC,
do not despair. We do react to new data. In addition, it became clear
that this startup, and the one I'm just starting diligence on up above,
have some good reasons to work together. So, I engineered a mutual
introduction and got out of the way.
Then, back to the office to meet with two investment bankers from
one of the three largest financial services firms in the US. They
wanted to learn more about our portfolio, with this particular team
focused on software and digital media. While they were pumping me for
info, I returned the favor and probed on their quarterly session at
which they expose relevant startups to their IT department (with a
budget that ends in $B). We're now on that list to tee up the companies
we have, when they are ready. In addition, this firm has an annual
beauty show with a private company track that could be ideal for late
venture / mezzanine rounds for our firms. We'll now get the chance to
propose a select company or two this fall.
During a quick review of the email that had piled up I found one
portfolio company who had been trying to work out a deal with another
one, had gotten at loggerheads with that other firm. I tried an
ego-diffusing "let's all play nicely" request to the CEO where I'm on
the Board.
Finally, I was part of an ad hoc portfolio Board call late in the
day where the CEO asked us to wrestle with the issue of a customer who
is very late in payment. We have to decide how hard to push, and whether
to actually cut off that customer from product delivery and maybe lose
them forever. Trying to do this firmly but carefully, and maybe retain
the relationship, demanded all our collective experience. Time will
tell whether we got it right.
So - that's two days in the life of a VC. They are typical in
the degree of variability and the number of events that are ad hoc, time
sensitive, and yet fairly business critical. Some deal with the
immediate term, some long term. Some are portfolio specific, some are
community service, some are OVP internal. You can see all the business
risks and challenges on display.
For those who aspire (if that is the right term) to be a VC
someday, decide if this kind of life sounds fun. It can be certainly
stressful. For those who think all VCs bring to the table is money, I'd
offer this up as counter evidence. Whether my counsel across these
various scenarios was useful is another topic, of course. But there is
no question that as an active VC, we are called early and often to be
supportive and to contribute well beyond the dollars invested.
Comments (1)
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I think the quote by "Sir Ernest Shackleton" fits for VCs as well as those aspiring to be successful entrepreneurs.
"Men wanted: For hazardous journey, small wages, bitter cold, long months of complete darkness, constant danger, safe return doubtful. Honor and recognition in case of success."
Thank you Gerry Langeler of OVP for the inside look at a VCs day to day. I am grateful that you posted this article and see the potential for more to come. Those of us aspiring to become VCs and Entrepreneurs could really benefit from more of these article's.
Thanks again and Cheers to you and your partners @ OVP. Keep funding our future.
-SM