In the new age of VC, transparency is the name of the game
"The new age of VC’s candor may have been brought on by a market shift and a need for VCs to focus on value add. But what it has created is a far healthier, far more beneficial framework for our founders and companies," writes Noa Matz of F2 Venture Capital
Not all that long ago, the communication within the VC business was somewhat of a black box for all parties.
Founders had no choice but to prioritize looking flawless to their investors and practice the ‘everything is great’ mantra. Investors prioritized privacy- in goes the company, and out comes the cap table- the dialogue led by the VC behind closed doors. The founder/investor relationship itself was often distant and straightforward, consisting mainly of board meetings and formal email threads.
Over the past decade, a lot has changed for the better. The relationship between investors and founders has drastically evolved from the black box, to a new framework- one of candor and transparency.
Noa Matz, F2 Venture Capital Operating Partner. Photo: F2 Venture Capital
What has caused this rapid transformation? And why is it so much healthier not only for founders, but for the startup ecosystem as a whole?
Firstly, the funding market has turned into a “founder’s market”. Gone are the days where entrepreneurs had to fight tooth and nail to score a modest investment. With more than enough capital and VCs floating around, it is now up to investors to prove themselves as the best choice to those talented entrepreneurs. The inflation in the market triggered a power shift, and as a result, investors have become more accessible.
Additionally, this generation of entrepreneurs has grown up with overwhelming access to information. Kleiner Perkins Managing Partner Ted Schlein believes that the more-informed entrepreneur is a sign of the times. “Consumers are better educated about almost everything they do today, such as buying a car now vs. buying a car ten years ago. There’s an enormous amount of information for the consumer, and the consumer in this case is the entrepreneur.” This generation of well-versed founders has resulted in the somewhat standardization of deal terms, which are largely founder friendly.
These shifts and others in the paradigm of founder/investor dynamics have brought everyone to the table, hopefully with new attitudes, and a healthier outcome.
For VCs, this means that value is the new currency needed to win a startup over. Value comes in many forms, be it operational experience, or specific expertise like product and networking. At F2 Venture Capital, one of the value-adds we prioritize is founder mental fitness and startup team cohesiveness. As a Startup Psychologist, my number one goal is to maintain our founders and founding teams at peak performance through mental and psychological work and serve as a sounding board to our early-stage founders with the unavoidable stress that comes with founding a startup. These value-adds demand a strong level of founder/investor confidentiality, a commitment to support founders with as little judgement as possible, and ultimately to prove ourselves worthy of founders’ trust.
For founders, this means that openness and honesty are needed to take advantage of what their investor has to offer. Rather than showing us a mask that all is smooth-sailing, we WANT to hear your struggles, your challenges, and concerns- not to judge you, but to support you. Pre-seed/seed stage startups are not expected to have the bandwidth to navigate their countless challenges and uncertainties without guidance or support. This would be both unrealistic, and frankly, damaging to their mental health as well as to their company.
The new age of VC’s candor may have been brought on by a market shift and a need for VCs to focus on value add. But what it has created is a far healthier, far more beneficial framework for our founders- who no longer have to hide their anxieties, and their companies- who benefit from the guidance of experienced investors. For many founders today, their investors and board members serve as a main source of consulting, brainstorming and solving crises in real-time.
At the end of the day, the founder/investor relationship is just that: a relationship. And a wholesome, long-term relationship revolves around one thing: Healthy communication. We are privileged to be part of the transparency revolution, a revolution that has created a safer, stronger, and better startup ecosystem.
Noa Matz is an Operating Partner at F2 Venture Capital