Finally, a book that covers the ongoing, sometimes friendly (and sometimes not) relationship between a company’s founder and the venture capitalist. Elizabeth Zalman, a two-time founder and CEO of venture-backed companies, goes up against venture capitalist Jerry Neumann in this informative and interesting book.
I have read a lot of business books in my time, but seldom one as valuable as this one. The authors present the reader with a front-row seat to their business relationship, how they’ve sometimes worked well together and sometimes been at odds. They set up a dialogue as they debate ideas and viewpoints that take the reader through the ups and downs of the relationship between the founder and investor.
We are taken on every step of the fundraising journey, from the founding of a new venture to the actual fundraising process and developing the term sheet, negotiating the contract, and constructing the new post VC-funded company. Then there’s the grappling with the composition of the board, the controlling factions, new board of directors, and the eventual exit of the founder and venture capitalist.
One interesting note: The parts written by the founder (Zalman) are caricatured by the outlined figure of Little Red Riding Hood while those of the VC (Neumann) are caricatured by the Big Bad Wolf—that ought to tell you something.
What I particularly enjoyed were the true-life examples of what went right and what sometimes went wrong.
Another thing I liked were these rules described as “Liz’s Absolutes of Fundraising.”
Rule #1: You are more powerful together as co-founders than with a hero CEO. Working together with your partner is the best way to create a united and successful front.
Rule #2: Fundraising is a full-time occupation; nothing matters but raising the funds.
Rule #3: Never talk to associates. Talk to the top dogs, the decision-makers.
Rule #4: Never send a pitch deck over email. Deliver and present in person or not at all.
Rule #5: Always pitch with a deck, which helps to control the conversation and makes the pitch memorable as well.
Rule #6: Never do anything without being on video or in person. Make sure the VCs are present in mind and body, and that they’re paying attention.
Rule #7: Make your appearance a non-issue. Come as you are. Jeans work better than suits. (The author recommends loose-fitting jeans and Doc Martens.)
Rule #8: Investor data requests are dumb. Don’t let the VCs bog you down with information overload requests.
Rule #9: Always answer the question you want to answer. Control the conversation.
Rule #10: Pre-term sheet diligence can drag you down. Just the facts, ma’am, and nothing else.
Rule #11: There is no such thing as getting investor feedback. “The investors are not your friends,” Zalman says. “They care about one thing and one thing only and that is their investment return. There are very few investors that I would call friends.” In my humble opinion, the entire book can be summarized in that one statement.
Rule #12: Disqualify quickly. If it’s not going the way you want, get out fast and move on to another possible VC opportunity.
The book starts out as what appears to be a fairly equal conversation between a VC and a founder, but it very quickly becomes more of a primer on how to handle VCs. I found the book slanted toward the founders and away from VCs. Frankly, I find this a valuable perspective, using this adaptation of the Golden Rule: “He who has the gold makes the rules.” So much of the power is in the hands of the VCs. The book’s true value is when Zalman shares advice on how to handle yourself when you enter the proverbial cage: The VC, a chair, and a whip in hand.
But to give credit where credit is due, Neumann is a perfect foil, characterizing his role with unyielding accuracy and reality.
Look, fundraising is not for sissies, and in too many instances, the VCs are the pros, and the founders are the amateurs. In the end, it’s the founders who need all the help and advice they can get.
It brings to mind the concert of breakfast, where the hen only donates the eggs, but the pig gives up his life for the bacon. You can figure out who is who in this analogy.
Whether you’re a founder of your own new company looking for funds, a VC who wants to see how the other half thinks, or just a businessperson looking for insight into this world, there is something for all of us here. Don’t pass this one up.
Dan Beaulieu is president of D.B. Marketing Group.
Founder vs Investor: The Honest Truth about Venture Capital from Startup to IPO
Authors: Elizabeth Zalman and Jerry Neumann
Copyright: 2023 by HarperCollins Leadership
Pages: 272 with Glossary