1 min read

The transactionality of VC-founder relationships

The transactionality of VC-founder relationships
Photo by Shannon Rowies / Unsplash

I will keep this as anonymous as possible.

I had lunch with a founder today. We don't know each other well, but I really like and respect him. We were thinking about where we had both made mistakes in the last few years.

One thing that struck me in particular was his description of how transactional the VC-founder relationship has become. It rang true, maybe because I've seen my share of bad behavior over the years. Lots of fear and greed. Hard selling from both sides. Lots of fake smiles and charisma. And then the reverse when things go south: lies and legal threats and banging on the board room table.

Maybe it has been the fact that volumes are just so high. Maybe that VCs were desperate to get into hot deals. Many had and have way too many boards. And many founders also raised much more money that they needed. And at valuations which were clearly disconnected from reality.

Part of the reason I got into this business is because venture is an investive, not a speculative business. Because a good VC-founder relationship is a supportive partnership that can last a decade or more. Because it is a multi-stage reputational game where neither party gains from playing hard ball.

He told me that from his point of view this was pretty outdated. That e.g. YC coaches founders into treating their investors in a certain way. That he had personally been sued by one of his early investors. That the playbook post-2015 was definitely much more transactional.

I hope that the current correction provides an opportunity to reconsider this relationship. I think a true founder-VC partnership is possible.

What do you think?