Five Reasons Why Venture Capitalists and Founders Struggle to Tune In

June 7th, 2019/ 0 comments/ andreapetrone

Venture Capital isn’t for all new Ventures. Many have already explained the key reasons why Founders should think twice before looking for Venture Capital money (too much dilution and control), however the big upside is scaling, or at least this is what Founders expect, as Venture Capital is meant to fuel growth and scale up a startup.

However, what I have seen is many startups are looking for money before they are ready to scale. This is the beginning of the end. A killer strategy.

But there is more. From my experience working with VCs and Founders, I can say most of the time the honeymoon gets over quickly. Why?

  • The Founders expect more beyond the money
  • The VCs expect to get traction quicker

It’s all about expectations and facing reality.

In this article, I suggest Founders to put themselves in the VCs’ shoes to better understand why things don’t always work out as expected. Venture Capital leaders have a number of pressing issues to think of. Here 5 issues that Founders should be fully aware of:

You think VCs buy only. In reality they sell everyday

No VC fund exists if someone doesn’t invest in it. Simple.

When Venture Capitalists are in the fundraising mode, they are all in. They need to sell to LPs their vision and strategy for the new fund and they know the fund must have a reasonable size to make their goals happen. So, the hunt is an ongoing, and often unease, process. What this really means is VCs need to step out of their comfort zone and become great sales managers to get this done.

Not an easy thing. Sometimes frustrating. Sometimes painful.

Besides, many funds don’t have either a distinctive edge or a niche they target. Why shall LPs put their own money into these funds?

Get it right. There is no way back.

Investing in the right startups is everything for a VC. Not only takes time, but also it requires a strong understanding of the markets, good judgment calls. Just to mention few challenges.

From a practical standpoint though, VCs need to look at hundreds of startups and their decks. They have limited time to review them and make the right call. Pressure goes up.

Although most of the time the investment is well thought and the VCs believe in the market opportunity and the scalability of the project, things sometimes don’t really work as expected.

According to one of the latest analysis of 101 startup post-mortems (Source: CB insights), startups fail primarily because there is no need in the market for what they offer. Equally, they either get outcompeted or they don’t have the right team on board.

How can VCs mitigate the risk of failure? No one has the crystal ball and things sometimes change. In addition to this, the unexpected happens. How are VCs dealing with that? Through a better decision-making process? Better risk management? Better strategic planning?

That deal is mine!

Winning the best deal. That’s it. This is what really counts for a VC.

For the best startup in the market, the competition is fierce. Some of the reasons are:

  • The market size is huge
  • The Founders have successfully built other startups in the past
  • Other top VCs are thinking to invest in the same opportunity

But what if VCs get into the fear of missing out that normally becomes more intense after the market has just experienced an uptick?

Besides being a dangerous emotion, the fear of missing out leads to jealousy, dissatisfaction with the current portfolio companies, and bad decisions.

This clearly increase the risk of bad investing.

Exit, Exit, Exit

The latest researches about VCs in the US have confirmed, for acquisitions, the time to exit has increased across the board, and in particular since 2013. The average time to exit by acquisition is now around 6 years, approx. 2 years more than 2005.

What does this mean for Founders? VCs will triple their efforts to scale their startups so shorten the exit time. This is great as this the value expected by the Founders. But do VCs have the right structure and resources to unlock opportunities for all startups in their portfolio? What if only some startups will get the most out of their VCs?

Is there too much on their plate?

Along with the selling/buying/scaling process, they need also to find time to nurture their existing network and build a new one. Not even thinking about admin, office work or other things that are not essential to their priorities.

For all these reasons, VCs feel often stressed and overwhelmed. I bet they are. They have too much on their plate. They risk of losing focus, energy and vitality. They can get distracted and cannot give Founders full attention. Eventually, they could make poor decisions that cost money.

They are under pressure and time is not negotiable. They just need to do what it takes to build a long-term successful firm, to be effective leaders and to bring value to the both sides of the fence. LPs and Founders.

Venture Capital is a fascinating industry though. VCs have the unparalleled opportunity to work with like-minded, bright and real passionate Founders and get exposed everyday with amazing ideas, projects and innovation.

Developing the right leadership skill set to cope with these challenges and to build success shall be a key objective and priority of the industry leaders. It is a marathon though. Not a sprint.



Leave a Reply

Your email address will not be published. Required fields are marked *


Five secrets of successful communicators

Words matter. Yet, many communications are broken just because we use the wrong

5 Warning Signs of Unsuccessful Change Initiatives

How many times did you face a change in your organization? I won’t be surprised if you

The dangerous assumptions about energy and pace to get results

What is your tendency towards energy and pace?

Having a high level of energy is

How to launch strategic initiatives online and still get massive results

During the last six months, most of the businesses have learned how to work online on v

Why conflict is vital to build great teams

When we talk about conflict in a team, we immediately think of hate, disrespect, envy.<

The big misconception about the target market

Finding the best target market is often the major stumbling block of my clients. This m

The three things you need to attract clients

What is your ratio between attracting and chasing clients?

Not surprisingly, man

Who said you can’t thrive in the downturn?

It’s a hard time for small-medium businesses right now. We expected that.


Why you need to develop a strong sense of urgency right now

Someone at the webinar last Thursday asked me a great question about a sens

Why consultants don’t like niches

There are few ways to dominate a market. You can go head to head, you can change the ga

Where Are You Heading?

When I ask this question to executives and business owners, their eyes start rolling. M

How To Leverage Media and Public Relations in the Tech Industry. My Interview with Marketing and Communications Specialist Alessandro Magarini

Today, I am happy to welcome Alessandro Magarini. Alessandro has driven public relation

How Much Value Do You Bring to Your Clients?

What is the real value for your clients when they hire you?

I recently spent som

The Adoption of New Technologies in Business: My Interview with Digital Transformation Advisor Antonio Grasso

Today, I am excited to welcome Antonio Grasso. Antonio is a Digital Transformation Advi

How to Develop Talents Without Spending a Fortune and Getting Better Results

January is a critical month for organizations to plan and define a budget for developin

Why a Strong Sense of Urgency Shakes Complacency and Fights Mediocrity

A high sense of urgency is one of the common traits of successful people. When in place

The Oil and Gas Crisis is not a Market Problem. It’s a Leadership Problem.

Fall. Doom. Decline. The words used to describe the current situation of the Oil and Ga

4 Powerful Lessons to Build Influence and Spectacular Results

It’s all about INFLUENCE.

Influence is the real secret to leadership, and yet on

How Executives can start their journey with emerging technologies: My Interview with IoT Business Strategist Dimitrios Spiliopoulos

Today, I welcome Dimitrios who is a passionate IoT business Strategist. He helps compan

Why Executives Are Failing to Reach their Strategic Goals

Strategy is the core of any organization and it’s the driver to a sustainable growth. Y

Talent strategy, the critical success factor for any fast-growth technology organisation: My Interview with Headhunter Daniel Osmer

Today, I welcome Daniel Osmer who founded Spectrum in London in 2001 to provide profess

From Poor to High-Performing Organisations – How to Turn the Tables

In the recent years, the number of articles and insights about company culture has incr

The Warning Signs of Egocentric Leaders

One of my favourite books is “The Five Temptations of a CEO” by Patrick Lencio

Plan Is Nothing, Planning Is Everything: My Interview with Growth Strategy Expert Lucio Furlani

Today, I welcome Lucio Furlani. Lucio has 30 years of experience as an executive for la

Four Effective Strategies to Sell to Large Companies

No matter how good is your product, service or solution, selling to large corporations

What Is Preventing Your Business to Raise and Shine

In their last book “Blitzscaling”, Reid Hoffman and Chris Yeh explain what is