The Three “T”s of Selecting the Right VC for Your Company: “Touch”

While there are many playbooks devoted to the qualities VC’s should look for in a startup’s leadership, relatively few advise Startup Founders on what to look for in a VC. Founders need to know not just the investment numbers, but what their relationship with their VC will look like. As promised in our previous blog, here we introduce the first of three such factors: “touch.”

Some VC’s operate a low-touch model, where they provide the capital investment and are less engaged in operational decisions of the company. They may stay up to date through company newsletters and field a call from the founder if there is a specific challenge that the investor has experience with.  This model makes sense in situations when the VC has a large portfolio with small allocations in each company. In these situations, that investor often doesn’t have major investor rights and isn’t the first call when it comes to key decisions. But for founders of Silicon Road companies, we aim to build a relationship around trust and accessibility. Due to our background as former operators turned investors, we often have a different take on challenges than other investors.

Our model is with two goals in mind. First, we want to earn the right to be a founder’s first phone call, in good times and in bad. We don’t pretend to have all the answers, but we often help reframe a problem based on a similar experience we’ve had before. Second, we want every founder to eventually become a limited partner or investor in a future Silicon Road Ventures fund. This may sound self-serving, but it is actually an act of mutual good faith. When we trust our founders with our investment, we hope they come to trust us in return. 

The high-touch model is more laborious in the short term, but it leads to long-term advantages. As an investor, it makes sense to be closer to your investments. VCs can protect their capital by spotting pitfalls and getting ahead of challenges. They can provide not just capital, but provide valuable coaching at strategic times when the founders really need it. If a VC is not involved, someone else may claim the “first-call” position with the founder and then benefit from being the preferred source of capital in future funding rounds. For the founder, they can look to their VC as a partner who is helping the company grow, an extension of their own team. 

Some ways VCs might assist founders are in communication with employees and managing high and low performers. If a company is growing fast, how can founders hire ahead of the growth? If they have a bad quarter, how can they message that to the organization so that people still remain engaged? As an example, we worked with a founder who had to let go of his head of sales right after Liberation Day because he wasn’t performing. The situation could have become problematic if employees thought their jobs were at risk because of uncertainty around the supply chain. We were able to counsel the founders on how to break the news with sensitivity while avoiding that panic. 

Being a high-touch VC is a long game. The payout may not come instantly, but both founders and VCs benefit from a relationship where they can grow together.