The post was originally published in Polish on on Szymon’s LinkedIn profile. Szymon kindly agreed to republish what we think is of great value to our readers.
The best fund for an investor can be the worst for a start-up and vice versa. Only a few people think about the fact that these interests can differ dramatically. Limited Partner wants the highest possible return. He does not care about the investment process, the famous smart money or even the sector. Very often, from a formal perspective, he cannot interfere in the VC’s operational activities, because it would be a conflict of interests. He is therefore passive and the start-up will never see him or even know who he is. So when choosing a fund he looks very simply – how much have they returned to investors or if they haven’t yet, what financial ratios do they currently have (mainly TVPI, MOICC, IRR). These are the main criteria and the rest is just verifying what is the chance that they will deliver on their promise.
For a start-up, this process looks completely different. Of course, reputation and companies in the portfolio are one thing, but the human factor plays a huge role here. I have repeatedly seen situations in which a start-up chooses the “worse” fund in terms of performance, and deliberately so. The reason? Because, for example, from the very beginning the partners were arrogant and patronized him. Because they imposed their vision too much. Because they heard from other founders that they will now make them a work camp, which will be oriented only to increase the value of the company. Because for the sake of it, they will have no qualms about saying goodbye to founders from their positions and replacing them with better people. And so on.
At the end of the day, it’s a question of whether the founder cares only about building as much value as possible in the company no matter how and at what cost? Or does he have his own plan and care about growing the company his way with the support of people who understand him and will support him in his growth. In practice, surprisingly many people choose the latter route. And very well.
#VC #venturecapital #startups
Translation: Krzysztof Kowalski
Szymon Janiak is an investor and a business-driven Managing Director at czysta3.vc, a Venture Capital fund located in Poland. He has over 10 years of experience in the technology sector. Szymon is also a Member of the Supervisory Board at stockbroker Grupa Trinity S.A.
