For years, the relationship dynamic between Venture Capitalists (VCs) and burgeoning startups has paralleled the beginning stages of a new romantic relationship. Like many couples, VCs and companies are often brought together through friends and acquaintances, and the first several weeks or months are dedicated to simultaneously putting on a front to impress one another and peeling back the layers of the other side to better understand who they are and where their overall objectives lie.
Despite all of the helpful articles, there’s no concrete roadmap that details how both sides can build successful, working relationships with one another. The truth is that both startup founders and investors can do everything right, hit every advisable milestone, and still find themselves in a broken relationship.
For too long, entrepreneurs have entered into investor relationships feeling powerless. They know that they need cash in order to bring their product to life or keep their company afloat, and as a result, they are often tempted to accept any offer that is thrown at them, even if the dynamic is off. Finding an investor should resemble the process of finding a co-founder or hiring those first integral team members. From asking the right questions to vetting their experiences, a certain amount of due diligence must be executed in order to find the right match.
Anthony Zhang knows first-hand how tricky the task of finding the right investor is. As a former Thiel Fellow, an alumnus of 500 Startups, and the founder of EnvoyNow, a food delivery startup, Zhang has had to navigate the tricky territory of cultivating investor relationships while also scaling a burgeoning startup. Throughout the course of his career, Zhang realized that entrepreneurs were at a disadvantage because there was no real way to vet and understand the personalities and motivations of investors prior to making a deal. To combat this problem, Zhang established Know Your VC, an anonymous review site where entrepreneurs can rate and discuss their experiences with investors.
Know Your Venture Capitalist
It’s hard to know exactly how a relationship between startup and investor will play out. But if there are certain patterns threaded throughout an investor’s previous experience in working with new startups, it paints a more telling portrait of what entrepreneurs can expect from the alliance.
The purpose of Know Your VC is not to point fingers at relationships that have gone sour, or even to laud relationships that have resulted in successful ventures. Instead, it attempts to strip away filters in the startup world and prioritize transparency.
There have been too many instances over the course of the past decade where investors have abused their power within their startup relationships, many of which have even resulted in sexual harassment. Additionally, the platform also serves as a place where all founders, especially those who have dealt with or are in the throes of dealing with harassment can feel comfortable stepping forward and reporting on their experiences.
In every review submission, the platform asks point-blank whether the entrepreneur was ever the victim of inappropriate conduct. Additionally, the entrepreneur submitting the review has the power to choose whether or not to keep that aspect of the review confidential or public. Even though the platform is anonymous, many entrepreneurs choose not to publish until they’ve seen a pattern of similar behavior emerge in others’ reviews of investors. Startups associated with investors who behave badly are not only relegated to suffering through this behavior themselves but also have to answer to audiences demanding how and why they could work with individuals with a track record of poor ethics.
The Importance of VC-Entrepreneur Relationships
Too often startup entrepreneurs are portrayed as money-hungry individuals who will do anything to make a dollar. This is not a fair depiction. Many hopeful entrepreneurs want to create products and solutions that offer real value to people, and, subsequently, establish workplace environments that allow individuals to grow and develop their skillsets. When entrepreneurs are blinded by an investor’s track record, it jeopardizes their ability to implement progress for both customers and employees.
Zhang’s growing platform serves every potential entrepreneur, regardless of industry or experience. It also has the potential to affect real and positive change in the investment world. Accountability and transparency are always good things, and a database that encourages individuals to share their experiences creates a system of checks and balances that ultimately lead to healthier working dynamics.
Additionally, investors with stellar records, who genuinely care about the entrepreneurs and companies they work with don’t want to be lumped into the same categories as investors who abuse their powers. Incendiary and untrue reviews happen. Know Your VC is committed to protecting people from that backlash. The platform operates with flags and filters that scan for abusive behavior and fake content, and the team manually approves all submissions before they go public.
The VC world is changing, and as new technologies and payment structures transform protocol, transparency will prove to be more important than ever. A new age of investment, where respect is valued and communications are prioritized will not only help individuals achieve success, but will also facilitate the emergence of new products and trends that will serve everyone. Opinions expressed here by Contributors are their own.