Things I’d do if I ran a big VC firm

– lower management fees so that they cover necessary expenses an reasonable salaries (e.g. 200K, not 3M).  basically be like a startup and only make real money when your investors make money.

– keep a database of every employee of every company I invested in.  so for example when a company goes under, you can help their employees and your investments by finding jobs for the best employees.

– negotiate group discounts with the best vendors (lawyers, accountants, cleaning services, SEO services, real estate brokers) and give every company a list of those vendors

– have everyone at the firm blog/tweet and let them do so authentically, even if it means sometimes criticizing the firm.  

– have regular discussion groups where companies discuss very tactical issues and share solutions.

– stop kidding yourself that you add a lot of value beyond recruiting/intros/governance/financing/selling companies.  this let’s you relax your “need to own X% of the company” rule and also lets you focus on things you really help with.

– have offices that look and cost like startup offices.  or better yet, don’t have offices at all – spend your time visiting companies.

– kill the partner presentation.  too much emphasis placed on presentation skills.  instead go spend a day working with the CEO before you invest to get to know them in their real habitat.

– change the accounting so you can start caring about IRR more than just amount of money returned.

– spend lots of time networking with press & potential bizdev partners so you can make valuable intros when needed.

– have far fewer meetings with startups – screen them better beforehand (the “kissing lots of frogs” problem)

– have far fewer meetings in general

– don’t talk/tweet/blog about your vineyard, yachting, golfing etc while you tell your CEOs to work non-stop and be frugal etc. 

– use your brand (and/or join together with other VCs) to recruit top talent (particularly engineers) from top schools.  tell top students they are guaranteed a job in your portfolio even if the one they join goes under. 

– have standardized, simple legal documents to keep seed and Series A financing costs under $10K.

– say no to companies.  saying “come back later” feels like a free option to you but actually hurts you and the startup in the long run.

– never miss a meeting or show up late without apologizing

– no smart phones in meetings.  better to just not take the meeting or make it 15-30 minutes but actually listen.

update:
– i’d hire some female investors (and maybe some male receptionists).
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35 thoughts on “Things I’d do if I ran a big VC firm

  1. tonysphere says:

    Spot On Chris – also, we talk a lot about appropriate structure from the beginning, meaning have Board Coffees instead of Board Meetings (true start-ups don’t need official Board Meetings IMO, they need dialog), simple legal docs that reflect stage (we initiated this 4 years ago).

  2. Tedesign says:

    Open Data on valuations, investments, exits.

  3. sheynkman says:

    I am going to pin this one to the virtual wall. Good stuff.

  4. Michael Duda says:

    Wonderfully articulated.

  5. proales says:

    I like this one the best – “i’d hire some female investors (and maybe some male receptionists).”..I am sure there are thousands of entrepreneurs out there who would love the chance to work the front desk at a VC fund, just to be around it.

  6. reecepacheco says:

    essentially, ‘cut the bullshit.’ i love it.nice job calling out a few firms.

  7. BBillingsley says:

    Love the post – It sounds a lot like Union Square…..

  8. johnmccarthy says:

    Nice list. This one would lead to quicker exits “change the accounting so you can start caring about IRR more than just amount of money returned?

  9. Neil Durbin says:

    In other words: Be more like YC.

  10. CHKurdziel says:

    Chris, Really well articulated. Do you think this translates to small/seed stage VC firms as well, or are they already doing most of this from what you’re seeing? The post title seems to indicate you’re recommending this for big firms, but I’m especially curious about whether the economics and management fees work for smaller firms as well.

  11. startupcfo says:

    Great post Chris. We are doing many of the things on this list at Real Ventures II (new seed fund in Montreal set to close next month). In fact, our salaries are even lower. Fund I operated with no office. Having spent 11 years on the operating side of startups, I plan on doing things differently now that I am also investing. You’ve hit on a few them. Biggest one for me is filtering way better, so I can spend most of my time with my companies or networking on their behalf.Keep pissing mainstream VCs off!

  12. msksboyd says:

    Nice. The “birthrate of startups” post by Fred Wilson is great pre-game for this conversation. I don’t know much about what VC’s are doing for companies now but I know of many companies who died an unnecessary death due to negligence at their hands. This seems like a pretty good model for offloading and/or streamlining operations type stuff, thereby empowering start-ups to focus on core competencies, like product and customer development.

  13. portman_wills says:

    *”have offices that look and cost like startup offices. or better yet, don’t have offices at all – spend your time visiting companies.”*Not sure about this one. A VC firm’s customers are its Limited Partners, NOT its portfolio companies. And it seems like having big, attractive offices is a requirement for attracting LPs.A venture capital firm is competing not only against other VC firms, but also against hedge funds, REITs, and lots of other investment institutions. Those firms ALL have really nice offices.

  14. Anonymous says:

    Chris – great post. Just an FYI that when we started the GP best practices at Parish one of our goals was the shared expense reduction / group purchasing power point that you raised for our portfolio then (both GPs and their underlying companies). Maybe it was a different time / different group, but we couldn’t ever get the kinds of savings we’d hoped for (5 – 10% target), we maybe got to 1% and that was with a lot of effort.

  15. Valto Loikkanen says:

    Thanks Chris – A great recipe for “lean VC”

  16. SpeakerText says:

    I mean, if I was a big VC, I’d be really tempted to rake in the mgt fees and live it up. #moneyfight #fucklean #fattestofthefat

  17. Tim Lind says:

    You’ve got one point that is really something the industry could do well with: “tell top students they are guaranteed a job in your portfolio”. This would help so much to motivate people to join a company that is doing something new. It would also make getting investment from a vc worthwhile…I don’t see much reason to do so now without this sort of thing.

  18. chris ff says:

    Venrock has a good track record for backing women entrepreneurs (SlideShare, BlogHer, CrossLoop).

  19. scottannan says:

    Great post! Thanks Chris.

  20. chrisyeh says:

    Totally agree. Why do VCs need expensive offices? Go drive to the startup–you’ll learn more from meeting them there than by having them don khakis and come to your office.

  21. GaryMTerry says:

    WOOHOO! Chris im with sheynkman this is going on my wall cheers…

  22. Roberto Valerio says:

    Great list. Fully agreed on.

  23. TektonikShift says:

    Love it, Love it, Love it !!

  24. alanjpatricof says:

    agree with most except for one specific comment.Focusing on IRR results in selling companies far too soon! It encourages turnover.

  25. Anonymous says:

    This is pretty much exactly how I feel VCs/Angel Funds in general should be run. Awesome post. One thing I would add to the IRR point is that, while this is a natural focus, there are also a ton of other positive aspects to making a deal you should focus on to hedge against the possibility IRR or ROI isn’t a factor. Maybe something you’ve written about before, but I’d love to hear 5 reasons why you invest aside from deals with good ROI potential.

  26. Danny Robinson says:

    Awesome! Hoping that firms do more than just ‘read’ this post.

  27. Anonymous says:

    Expensive offices are not necessary of meeting entrepreneur, but more importantly meeting with people who choose which fund to invest in.

  28. Harald Katzenschläger says:

    THANKS from DREAMICON VALLEYPS: Things I’d do if I ran a big VC firm: provide open space & a “playground” for the dreams of my network

  29. matt winkler says:
  30. ainsleyoc says:

    Those team pages are pretty depressing. On the upside, if in 40 years Matthew Weiner’s heir apparent wants to make a kick-ass TV show, he’ll have some excellent source material.

  31. bramcohen says:

    But Chris, all those things are actual work! How could you ever recruit top talent to be VCs if you required them to do actual work? Better to hire them like CEOs, and worry about getting top talent first, and worry about their job responsibilities second.

  32. ikunaltandon says:
  33. jenkoenig1 says:

    Love this post! Hope your thoughts are embraced

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