Regardless of where you stand in the debate between venture capitalists versus super angels, regardless of your stance once which “species” of investor will thrive in the near future and which may be dinosaurs poised for extinction – the discussion has served to highlight to the evolution of tech funding, as well as the variety of financing options that now entrepreneurs have.
“Whatever,” says VC Fred Destin in a blog post on the subject, arguing that the important thing for both investors and entrepreneurs to keep in mind – regardless of the size or source of the funding is “the social contract.” It’s that relationship between investor and entrepreneur that matters, he contends, noting that “this ‘species’ debate is not the right debate. VC versus not VC, who really cares.” The right focus should be on whether investors are a good fit for a company (and visa versa).
Destin points to several really important questions that both investors and entrepreneurs should ask about this social contract:
- Do we have DNA match? Can I survive an eight hour car drive with this guy or girl?
- Is this a partnership? Is there mutual respect, alignment, understanding? Do we agree on strategy (or how we discover it)?
- Does this partner really get my market? Does he work and play with other people who get it?
- If it matters to you (I think it always does), does this person deeply understand what we do?
- Do I want and need a lead? Do I want social proof or a guy who is going to sit on my board and actually have some hours in the day to help me out?
- Is this person accountable? Do they care if I go under? Who owns my demise? Who is willing to support me no matter what?
- If I need them, are there reserves lined up to support me ? How much ? When does this financier want to exit and does this match my own expectation?
As we’ve written about before, the relationship between any investor and entrepreneur is crucial, whether it’s a VC, first-time entrepreneur, super angel, or serial startup founder. As Destin argues, “each investor needs to find out what works for him” and each entrepreneur needs to “find investors that match.
