More great tips for entrepreneurs

March 5, 2012

Jeff Richards, partner at GGV Capital, offers 8 tips for entrepreneurs from a founder-turned-VC in VentureBeat.  As with other good advice to which we link – e.g., the 10 Rules of Entrepreneurship, the Top 10 Legal Mistakes of Entrepreneurs – we typically provide a few highlights along with our own brief commentary.  The entire article is well worth your time, but here are three-eighths of Mr. Richard’s tips:

  • Partner with VCs who have built winners in your space and reference well with entrepreneurs and CEOs. They’ll make a difference. (#4)
  • Create a market impression that is greater than reality.  This has to be done carefully – history is littered with companies that failed to live up to the hype. (#5)
  • Be honest and transparent with your team and with your board. (#7)

While on the opposite side of the country from Mr. Richards, investing in different ventures, we’ve dispensed similar advice here at NVSE:

On the entrepreneur-VC partnership in The Fate of Control:

Entrepreneurs who are raising growth capital (i.e. bringing on a long term partner) as opposed to selling their businesses (i.e. get the best valuation) should invest a lot of time conducting due diligence on their prospective financial partner.  A credible partner will let you (indeed, encourage you) to talk to as many of their previous entrepreneur partners as you want to get a feel for what they are like to work with.  Entrepreneurs should ask for references from successful investments, unsuccessful investments and current investments.  Ask for the venture firm’s entire list of previous and current investments and randomly call a number of them.  Find some independent sources on your own who weren’t provided as references but know the venture firm.  Picking a financial partner is as important a decision as any an entrepreneur will make in building his or her company.  Most venture firms will have a good “rap”, but it’s absolutely essential to verify that through due diligence.

On striking the right balance between impressions and reality, in Trust Me:

One particular conclusion resonated strongly with us and is applicable for the duration of any successful Long Term Relationship, whether referencing the product, business, or the little things:  To be effective, each of these actions must be underpinned by authenticity.  In other words, only promise what you can deliver.

On honesty and transparency (1 of 2), in Communicating Good News and Bad:

In our experience, the relationship between entrepreneur and venture partner in private companies is more cooperative, longer-term, and (mercifully) not subject to the quarterly reporting pressures of public companies.  Moreover, venture investors have real “skin in the game” and have the same incentive as the entrepreneur to understand the nuances of the business and focus on long term value creation.  As a result, the communication of good news and bad tends to be more forthright and in real-time, enabling partners (assuming they are good partners!) to understand intuitively the right kind of counsel and support to offer during both the good times and during the inevitable challenges of building a business.

…honest and transparency (2 of 2), in When Business Promotes Honesty:

In our experience, the business case for honesty (the moral case is another discussion) can often be based on the fact that many businesses rely on repeat business.  So although dishonesty may improve the profit or advantage in a single transaction it would result in less success over the long term… BPV often backs the same entrepreneurs in more than one business, and we view honesty and consistency as critical to sustaining long term relationships for long term growth as opposed to trying to squeeze maximum value from a single transaction.  We also put a premium on transparency, as it’s easier to remember the importance of being honest when everyone involved in a business relationship can observe how decisions are being made.

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