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How much say do VCs get?

PostPosted: Sun May 23, 2010 5:49 pm
by akw
Is this the proper place for this topic?

More of a curiosity question than anything. I was wondering how much say VCs get in the day-to-day operations of the company. On financial manners/overall direction I can understand hands-on involvement.

What about other areas of the business like sales, marketing, development. Example - does the VC get to say what development strategy the company should use (Agile vs waterfall)? Do they get a say in the marketing strategy? Do they even care about these topics?

Re: How much say do VCs get?

PostPosted: Wed Jun 02, 2010 7:23 am
by InsideSpin
I'm not sure the question is formed the way you mean -- the role of the VC (assuming they are a Board member) is to provide governance for shareholders for which they are presumably a large one. As a result, they have the right to have input into any aspect of the company operation no different than any employee should be able to have an opinion on things as well -- the challenge is how the management team or CEO responds to the input.

In many situations, the Board ends up overpowering a young CEO exerting influence over many aspects of the business the Board should not normally participate in. In other cases, the CEO is meeting commitments related to revenues and overall company strategy, so the Board is much more separated from the day to day operations of the Company. Board members sometimes look to provide input based on what they see working in other companies and so expect the Company to take a look as appropriate. This is fair and the CEO should respond appropriately.

At a formal level, VCs and Boards only have the rights granted to them as part of the share agreements in place -- they include certain voting rights over finance management, share management and overall Company health (example -- force a sale of the Company if things are not going well or force an IPO if they are). In the example cited, the Board would not normally determine the development strategy of the Company but if they do not like what is being achieved, they would have the authority to replace the CEO and bring in someone who would favor their opinion.

The question you raise really goes to the heart of how well the company strategy is laid out, how well the management team is handling its execution and what level of experience (credibility) the team has a whole. When things are going well, the Board/VCs tend to have little to say or do aside from looking for acceleration opportunities, when things are not going well, the Board/VCs tend to get more involved looking to influence areas where things are not going well.

Perhaps if you expand your example, more could be said.


Re: How much say do VCs get?

PostPosted: Thu Jun 03, 2010 10:15 pm
by akw
You answered my question ! Thanks