which follows straight behind can sometimes be enough to make one wish one had never started the equity raising process. The warranties and the investor veto rights can make it feel as if you are being tied up in knots for the foreseeable future. The Chairman has a valuable role to play in telling the entrepreneur not to worry about monsters moving in the shadows if there are none, and in ensuring that the protections sought by the investor are fair and reasonable. The pressure valve starts to operate even before the deal is done.
The key is that a good Chairman can understand the viewpoint both of the entrepreneur, and of the investor, and has the wisdom and experience to judge where the optimum point is between the two. Often venture capital investors are not good at explaining their jargon and the things they need to achieve to the entrepreneurs they back. Often the entrepreneurs are not good at asking the right questions in order to understand their investors’ business and how the pressures on that business will impact on their own. Often it is as if the investor and the entrepreneur are not just saying different things, but gabbling them at each other in different languages.
The Chairman can act as interpreter, umpire, arbitrator, Solomon. Early in my investing career I was lucky enough to work with a couple of wise Chairmen who helped turn me into a better investor by not being afraid to take me to one side and tell me if the demands I had just made of the entrepreneur were not just badly expressed but unreasonable. If the entrepreneur had
said that to me directly I would have probably disagreed, had an argument and soured our relationship. But with the Chairman the same conversation could be non- confrontational and unemotional. But above all the conversation worked because I knew that the following month the Chairman might be taking my side and telling the entrepreneur that the bonus scheme he was thinking of proposing for himself was extravagant and premature, or that the board meeting had been badly prepared, or that my views about the budget were spot on. And this is where the umpiring analogy breaks down, because if there is an umpire there must be two sides. A good Chairman can keep the investor and the entrepreneur on the same side, in the same team, so that their company can take on the world without internal dissension.
So even before you can afford any decent office furniture, splash out on a Chair.
Simon Acland is a veteran investor and entrepreneur, with over 25 years’ experience and 23 board seats under his belt. He has been involved with many successful trade sales, IPOs and flotations; he has also experienced failures and learned from them.
http://www.venture-capital-advice.com/
Buy Angels, Dragons and Vultures from
Amazon.co.uk Website:
www.simonacland.com/
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