Lots of VCs talk about being founder friendly. I’ve noticed that founders often misunderstand how that actually works. What “founder friendly” does and doesn’t mean is important to understand.
Founder friendly doesn’t mean:
- Saying “yes” to every request
- Running your business for you
- Rolling over on every term in negotiations
- Giving you a high valuation
- Fixing your mistakes for you
- Being nice all of the time
Founder friendly does mean:
- Acting in the best interests of the:
Ultimately, even the best VCs can only be founder friendly up to a point. There are situations in which founders start to do things that harm the company. Investors should stop that from happening however they can. Sometimes, that means firing the founders. That’s a tough situation, but is sometimes necessary and not indicative of badness.1
VCs are contractually bound to be LP friendly first – meaning they have to produce returns. That’s often what drives the push for different valuations, various types of control, and a host of other behaviors. In any of these situations, it’s not the outcome that drives “friendliness,” it’s how honestly, consistently, and ethically the investor acts.
1. There are, however, good and bad ways to do this. Surprising a founder with a board coup is generally bad form. Warning the founder ahead of time and taking clear action with explicit reasons is better.↩