The VC - CEO relationship

Wednesday Jan 22, 2014 by Nabeel Hyatt - Venture Partner, Spark Capital

I’m in the process of closing a new investment right now and getting to know this CEO has been a particular joy. There is a long road ahead, but it’s a great sign when we can start off just being honest with each other.

As an entrepreneur I got terrible advice on how to relate to investors from fellow founders. One CEO described his “attachment method” of overly communicating to create a false sense of attachment. Then another would tell me to never give details of the business because it just gave them the ammo to think they can control the business. The problem with these approaches is that they assume there is some formula for how to win at managing an investor.

A CEO's relationship with an investor is exactly that, a relationship. And just like there is no “paint by numbers” template on how to interact in a marriage there is not a single right way for the CEO - VC relationship.

Many VCs are pretty terrible, but that doesn’t mean the goal should be to cynically “manage them.” Some of the best companies happen to have extremely strong partnerships that form with a board member. There is a reason that so many CEOs and investors reacted so strongly to the photo of David and Bijan after the Tumblr sale. They know how good those relationships can be when they happen. 

I’ve had overly nervous VCs that were regularly disruptive, and I’ve had the benefit of true loyalty from real partners. I’ve had largely passive investors that were there when I needed them, and very involved investors that were a huge help. As a founder I tried to not get cynical about investors, and I fight to have that same approach on the other side now. 

As my friend and entrepreneur turned investor Keith Rabois says, it’s easier to get divorced than get rid of an investor, so you might as well treat this as a relationship worth getting right. There’s a person across the table, they aren’t perfect, but they are family now. 

I’m excited about this new company, but also about the people I’m going to be partnering with. Speaking from experience, when it is right the CEO - investor relationship can be one of the most rewarding relationships in business.

Nabeel Hyatt is a Venture Partner at Spark Capital.  You can find this blog post, as well as additional content on his blog called hypothesis.  You can also follow Nabeel on Twitter (@nabeel) by clicking here.

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