Life after venture capital funding
Once a VC is on board, you may get more that just funding
After you have received the funding from an investor, the relationship with the venture capital firm has not ended. Venture capital firms can offer fledgling companies much more than funding, and the non-financial input by the venture capital firm is a very important contributor in the growth and success of companies.
Of the venture-backed companies analysed in a survey conducted on behalf of the BVCA and Coopers & Lybrand, 88% said they had benefited from their venture capital backers providing more than just money. Often venture capital executives have a depth of experience and professional contacts that can assist you.
Levels of support from venture capital firms vary from hands-on to hands-off. Hands-on investors will aim to be a business partner, advising on strategy and development as well as offer helpful ideas and discussion. Often hands-on investors will expect to participate through a seat on a company’s board and may be suitable for companies embarking on rapid expansion. Usually, they will leave day-to-day management alone.
Hands-off investors will have a less active role in the business. Essentially, these investors will leave management to run the business until it is time to exit, but they will expect to receive regular financial information. If a company defaults on payments, does not meet agreed targets or runs into other types of difficulties, a hands-off investor is likely to turn into a hands-on one.
In reality, however, most venture capital firms operate somewhere in between the two, and many believe start-ups in particular should use the experience of a venture capital firm.
Levels of support from venture capital firms vary from hands-on to hands-off.