I recently read a blog post that really got under my skin and it didn’t take long to realize why it got me so riled up. So many startups today have created ‘governance debt’, and have added more risk as a result. We believe that good governance starts at the Seed stage, and that investors must commit at the same time to prudently serve on behalf of the company. Today’s ‘founder-friendly’ environment certainly exacerbates this issue. What does ‘founder-friendly’ mean anyway? Another blog post to follow…
Sarah Lacy, Founder and Editor in Chief of Pando, published “Get ready: We’re going to see more GigaOms, Quirkys, and Zirtuals. Here’s why…” and described why three well-funded companies went under despite having pedigreed VCs as Investors. Ms. Lacy names three factors as to why these companies failed: a cyclical change in how Boards of Directors act today versus in yesteryear; a change in capital structure; and the ‘social game’ of being a VC.
We all know that being a well funded startup does not necessarily equate to that company being successful. At Bee Partners, we believe we have a responsibility to provide more than money to our portfolio Founders and their Teams. We never write a check and simply walk away. Instead, we serve on the Board / attend as observers / connect bi-weekly to listen when our Founders share both the good and bad. It’s in those struggles that we identify the most productive ways to support, be they introductions to strategic partners and customers or connections to human and financial capital.
We’ve all heard the old adage that VCs should feed the strong and kill the weak in their portfolios. We take exception to this adage, for while it’s certainly easier to focus on the winners, they oftentimes don’t really need us nearly as much. We never write off a Founder – we’ve heard stories of VCs refusing to return Founder phone calls. Tough love is difficult — at Bee Partners we push HARD when we see a company struggling and we CRANK for our most challenged companies! Does that mean that we’ve advocated for Founders to hand over the keys and step aside? Yes. In life, we all have those friends who are brutally honest, and let you know when it’s time to move on. Have we dialed back our time commitment to Founders? Yes, but we do so by sharing why. In time, that honesty benefits both Founder and Investor. Lacy calls this ‘Old School’, we just call it Responsible.
Ms Lacy cautions, “When someone tells you a company in their portfolio is doing great and you should totally invest, they may not be lying, but odds are they also don’t have the information to back that up. They aren’t making a statement as an informed investor. They are cheerleading to look good to the next potential deal.” At Bee Partners, we ONLY advocate on behalf of our companies when they are ready. We make it our business to be informed; with only eight investments per year, we have the capacity to do so, and we do this work on behalf of the company, not for the social game of getting into the next deal. If the Founder wants to jump ahead before being ready, we’ll still support behind the scenes, but we’re not telling the market that the company is crushing it. We’re risk mitigators, not cheerleaders.
We’re here to provide value to our Founders and assist in the challenges of building their companies. Entrepreneurship is HARD; it’s neither easy nor glamorous, despite what might be conveyed by the media. It can be wildly fun and immensely rewarding to convert a passionate vision into reality. Being loose on governance makes it more difficult, so we encourage Founders to seriously consider how to construct an organization where governance is not just window-dressing, but is actually a cultural element. We have our opinions, we we’d love to share them with you – contact us if you want to ‘Bee Partners’.