What makes some VCs more "entrepreneur-friendly" or "founder-friendly"?
Answers
One should always do a due-diligence on the VC's they intend to enter into business arrangements.
Just because they are a VC doesn't diminish the fact that both parties are selling each to the other. The VC may have money, but if they are not the type of people you want to do business with, maybe you shouldn't.
Check with their other clients. Try to check their reputation. VC's who come from entrepreneurial backgrounds at least understand where you are, while those who came out of B-school and Investment Banking have never been in your shoes.
Alas, being the former or latter may not foretell their "friendliness" toward you.
Good comments Wayne. I'd follow that up with the idea that some investors seem to understand what is important to entrepreneurs/founders better than others do and it shows in the terms that they offer (e.g., non-participating preferred stock, more reasonable control / veto provisions, etc.) and in the way that they support the founders and the company post investment. The best of breed have experience and contacts (potential partnerships, customers, suppliers, etc.) and advice to help the founders be successful without trying to control or run the business. In the end, they understand that founders and investors do better when their interests are consistently aligned and they work together for a successful outcome. This obviously requires the founders to likewise be more investor respectful/friendly in their actions and intentions as well.
Bringing in a VC to your business is like a marriage, you are embarking on a relatively long term relationship and you dont do it very often, therefore the ability to compare the quality of different "wives" is rather limited.
VCs all have the same objective, to make an investment and maximise the return with the least
I would say that VCs are founder friendly when things are on track, and less founder friendly when they are not!
Whether the VC firm is "founder-friendly" or not is less important than making sure that the terms of their investment are reasonable and appropriate for your company, your situation and you personally as the founder. Don't sign on to a bad deal because you like the firm or think that they are nice guys - make sure you get a good deal, or at least one you can live with.
Beyond the deal terms, the best way to ensure a "friendly" relationship with your VC is to make your numbers. When things aren't going well, even the most "founder-friendly" VC will be pretty unpleasant to deal with!
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I appreciate that you brought the "post-deal" relationship as well. Your comments are spot-on.
If the term sheet offered by the VC is not "friendly" enough, then negotiate it. If you don't get what you want/need to make it work for your situation, turn it down and find someone else.
I agree with Simon, choose your investor(s) wisely as they will be there just as long as you will. Having funded many companies as well as being an investor myself I think the chemistry has to be right and an open honest relationship is critical. I've witnessed too many situations where founders feel they have to temper what they say or disclose to their investors. I think this breeds mistrust and ultimately a bad relationship. Speaking as an investor, I think the people and team are what drives a good company to be successful. So if I don't beleive we can "work together" then I will pass on what may be a million dollar idea.