Chapter 81 Section 5 The Role of VCs
For venture capitalists, the ideal situation is to be a hands-off shopkeeper: invest money in a company, ignore it, and get back dozens of times the profit after a few years.This situation has indeed happened to angel investment. For example, an angel investor group that raised funds from Los Angeles invested money in early Google. When Google went public, the partners of the investment group, including NBA star O'Neill and California Governor Singer and some Hollywood stars made a lot of money in a daze.For relatively large venture capital, it rarely happens.The experience of most people who run companies is always limited, especially the founders in the IT industry are mostly technical backgrounds, without business experience and "connections" (in the United States, connections are as important as in China).Venture capital firms must help founders run the companies they invest in.After all, they were already in the same boat.
The first role of a venture capital firm after getting involved in a start-up company is to be an advisor.This consultant not only needs to give advice in general directions such as business, but also to help founders avoid detours in many small aspects.As I mentioned in the previous chapter, "The Other Side of Silicon Valley," starting a small company will encounter all kinds of problems, and founders often lack experience in dealing with these problems. the person above) must help.A friend of mine who was formerly the vice president of Apple, a friend of Jobs, and now an active investor, told me the following example.
Readers who pay attention to the logos of major companies may notice that almost all major company logos and name fonts are a simple color design, especially twenty years ago.Few companies have used light and dark color icons like Google so far.My friend told me that there are two main reasons for this: First, color printing is much more expensive than monochrome (and overprint, such as ordinary black letter set blue) printing. It is a principle that if all documents and business cards of a company are printed in color, office costs will increase; secondly, and more importantly, all fax machines and most of the photocopies are black and white, with color icons printed It is not only impossible for your corporate fax to look as good as the original color ones, but some colors may not be printed clearly.This not only confuses business partners, but also makes it difficult to impress customers.He told me that many young founders like to design beautiful colorful icons for their companies, but the actual publicity effect is not good.For example, here is a nice colored icon:
When I copied on different copies, I got two quite different black and white copies.Not only the originally well-designed rich colors cannot be seen in fax documents, but also the black and white copies have different shades every time, which will confuse business partners and customers.
Below are early logos from IBM and AT&T that avoid the confusion that copying and faxing can bring.
Of course, the above is just a small example.After venture capital gets involved in an emerging company, it can help entrepreneurs avoid many detours. Generally speaking, a good venture capital is a partner of entrepreneurs.
Of course, VCs cannot manage day-to-day affairs for companies.This makes it necessary to find a professional manager for the company to be the CEO (of course, if a venture capital firm feels that a founder has the potential to become a CEO, they will generally agree to the position of founder and CEO).Every venture capital fund invests in a dozen to dozens of companies, and it is not easy to find dozens of CEOs.As a result, influential, established VC firms practically always have a handful of CEO candidates on their hands.These people are either experienced professional managers, or founders and executives of companies that the venture capital firm has previously invested in.A big reason venture capitalists invest in capable founders is to lock in a long-term relationship with them.It would be great if the latter venture succeeds, but if it fails, the venture capitalists will send him to the company they invest in at an appropriate time to take charge of the company's daily affairs for themselves.If a venture capital firm wants to be successful, it is not enough to have money and foresight. It also needs to reserve a lot of talents who can go out to manage the company on its own behalf.This is one of the reasons why well-known venture capital companies are more likely to succeed than small investment companies. The former has more and better management talents in their hands.
Venture capital firms first help investee companies start their businesses.Anyone who has started their own company knows that a small, obscure company may not know the right way when it comes to selling products to large customers.At this time, venture capital firms with extensive "connections" will help match the small companies they invest in.The bigger the venture capital firm, the easier it is to do this.VCs also bring in highly successful salespeople for small companies that the nameless founders of small companies would not be able to hire.The greater help of the extensive network of venture capitalists to small companies is that they will also help small companies find buyers (next homes).This is especially important for companies that are unlikely to go public.For example, after KPCB successfully invested in Sun Company in the early stage, it has been on the board of Sun Company. Taking advantage of this convenience, KPCB sold many small companies it later invested in to Sun Company. Whether these small companies are useful to Sun Company is irrelevant. Cicada, but the investor’s money has been recovered, and the efforts of the entrepreneur have also been objectively rewarded.In this type of acquisition of private companies, the most famous is Google's acquisition of YouTube.Both companies are invested by Sequoia Ventures, and the famous investor Moritz also serves as the director of the two companies. Sequoia Ventures played a big role in the successful sale of YouTube to Google.After decades of development, the venture capital industry has formed a Matthew effect.The more successful venture capital firms are, the more their investments are successfully listed, and the companies they invest in in the future are relatively easier to be listed, and no matter how bad they are, they are easier to be acquired.Therefore, for most people who want to make a fortune in a small company, one of the most important principles in choosing a company is to look at the popularity of the venture capital firm behind it. Google has been a popular company in the eyes of job seekers from a very early time. Although it has many successes, attractive methods, and the charm of the founder, there is another very important one that is that it is the first KPCB A company that invested in the same round with Sequoia Ventures. Before that, the two venture capitals had never invested in a company at the same time.
VCs are friends and helpers of startups because they have the same basic interests as the founders.But there are often times when there are conflicts of interest.The establishment of any company is not smooth sailing. When the prospect of a invested company may not be good, if the investor has a controlling stake in it, they may choose to close the company immediately or sell it at a low price to avoid losing all their money.In this way, the founder has been busy for nothing, so the founder will definitely be inclined to continue to support it. At this time, it depends on who controls the equity, more precisely, the voting power (Voting Power).When a company starts to turn profitable, venture capitalists will tend to go public immediately to recover their investment, while some founders hope to make the company bigger before going public.There are also frequent examples of investors and founders breaking up, and investors even threaten to drive the founders away.
The entrepreneur-investor relationship is critical to a successful startup.First, founders always play the leading role in the front office, and VCs are facilitators behind the scenes.If investors stand at the foreground, either it means that the founders are too incompetent, or that the investors' hands are too long. In either case, the company will not be able to run well; secondly, the relationship between entrepreneurs and investors is long-term, and even is for a lifetime.For investors, another purpose of investment is to discover and recruit talents.For investors, it is of course best for an entrepreneur to succeed once. However, a very capable founder will also fail due to bad luck. His other project investment, or send him to a new company to take the helm.Therefore, for entrepreneurs, although the venture capital money does not need to be repaid, they must use all their strength to do their best to make the company a good company in order to win the favor of investors.Some short-sighted entrepreneurs regard venture capital companies as a one-time free cash machine, only taking money without undertaking due obligations, and in fact cut off their own way forever.Different from many industries, investors in different venture companies generally communicate with each other frequently. Once a person loses credibility in the venture capital circle, he basically loses the possibility of obtaining venture capital funds to start a business again for the rest of his life.
When I copied on different copies, I got two quite different black and white copies.Not only the originally well-designed rich colors cannot be seen in fax documents, but also the black and white copies have different shades every time, which will confuse business partners and customers.
Below are early logos from IBM and AT&T that avoid the confusion that copying and faxing can bring.
Of course, the above is just a small example.After venture capital gets involved in an emerging company, it can help entrepreneurs avoid many detours. Generally speaking, a good venture capital is a partner of entrepreneurs.
Of course, VCs cannot manage day-to-day affairs for companies.This makes it necessary to find a professional manager for the company to be the CEO (of course, if a venture capital firm feels that a founder has the potential to become a CEO, they will generally agree to the position of founder and CEO).Every venture capital fund invests in a dozen to dozens of companies, and it is not easy to find dozens of CEOs.As a result, influential, established VC firms practically always have a handful of CEO candidates on their hands.These people are either experienced professional managers, or founders and executives of companies that the venture capital firm has previously invested in.A big reason venture capitalists invest in capable founders is to lock in a long-term relationship with them.It would be great if the latter venture succeeds, but if it fails, the venture capitalists will send him to the company they invest in at an appropriate time to take charge of the company's daily affairs for themselves.If a venture capital firm wants to be successful, it is not enough to have money and foresight. It also needs to reserve a lot of talents who can go out to manage the company on its own behalf.This is one of the reasons why well-known venture capital companies are more likely to succeed than small investment companies. The former has more and better management talents in their hands.
Venture capital firms first help investee companies start their businesses.Anyone who has started their own company knows that a small, obscure company may not know the right way when it comes to selling products to large customers.At this time, venture capital firms with extensive "connections" will help match the small companies they invest in.The bigger the venture capital firm, the easier it is to do this.VCs also bring in highly successful salespeople for small companies that the nameless founders of small companies would not be able to hire.The greater help of the extensive network of venture capitalists to small companies is that they will also help small companies find buyers (next homes).This is especially important for companies that are unlikely to go public.For example, after KPCB successfully invested in Sun Company in the early stage, it has been on the board of Sun Company. Taking advantage of this convenience, KPCB sold many small companies it later invested in to Sun Company. Whether these small companies are useful to Sun Company is irrelevant. Cicada, but the investor’s money has been recovered, and the efforts of the entrepreneur have also been objectively rewarded.In this type of acquisition of private companies, the most famous is Google's acquisition of YouTube.Both companies are invested by Sequoia Ventures, and the famous investor Moritz also serves as the director of the two companies. Sequoia Ventures played a big role in the successful sale of YouTube to Google.After decades of development, the venture capital industry has formed a Matthew effect.The more successful venture capital firms are, the more their investments are successfully listed, and the companies they invest in in the future are relatively easier to be listed, and no matter how bad they are, they are easier to be acquired.Therefore, for most people who want to make a fortune in a small company, one of the most important principles in choosing a company is to look at the popularity of the venture capital firm behind it. Google has been a popular company in the eyes of job seekers from a very early time. Although it has many successes, attractive methods, and the charm of the founder, there is another very important one that is that it is the first KPCB A company that invested in the same round with Sequoia Ventures. Before that, the two venture capitals had never invested in a company at the same time.
VCs are friends and helpers of startups because they have the same basic interests as the founders.But there are often times when there are conflicts of interest.The establishment of any company is not smooth sailing. When the prospect of a invested company may not be good, if the investor has a controlling stake in it, they may choose to close the company immediately or sell it at a low price to avoid losing all their money.In this way, the founder has been busy for nothing, so the founder will definitely be inclined to continue to support it. At this time, it depends on who controls the equity, more precisely, the voting power (Voting Power).When a company starts to turn profitable, venture capitalists will tend to go public immediately to recover their investment, while some founders hope to make the company bigger before going public.There are also frequent examples of investors and founders breaking up, and investors even threaten to drive the founders away.
The entrepreneur-investor relationship is critical to a successful startup.First, founders always play the leading role in the front office, and VCs are facilitators behind the scenes.If investors stand at the foreground, either it means that the founders are too incompetent, or that the investors' hands are too long. In either case, the company will not be able to run well; secondly, the relationship between entrepreneurs and investors is long-term, and even is for a lifetime.For investors, another purpose of investment is to discover and recruit talents.For investors, it is of course best for an entrepreneur to succeed once. However, a very capable founder will also fail due to bad luck. His other project investment, or send him to a new company to take the helm.Therefore, for entrepreneurs, although the venture capital money does not need to be repaid, they must use all their strength to do their best to make the company a good company in order to win the favor of investors.Some short-sighted entrepreneurs regard venture capital companies as a one-time free cash machine, only taking money without undertaking due obligations, and in fact cut off their own way forever.Different from many industries, investors in different venture companies generally communicate with each other frequently. Once a person loses credibility in the venture capital circle, he basically loses the possibility of obtaining venture capital funds to start a business again for the rest of his life.