Part 6/20 - Twenty Questions You Will Be Asked By Venture Capitalists (If You Get That Far)

By Laurence K. Hayward

This is part six of a twenty part series on this topic.

6. What is it about your management team that makes them uniquely capable of executing on the business plan?

You've probably heard the statement that the three most important things in private equity investing are management, management and management. More specifically, VCs are typically looking for three things in management: experience in building successful businesses, experience in the industry (or with the product) and strong character. What comprises the latter? VCs look for managers who demonstrate passion, resourcefulness, integrity, perseverance, risk-taking ability and mental horsepower. Also, a quality sometimes overlooked (and hotly debated) is that of humility -- for example, will founders step aside and let someone with more experience lead the company if appropriate?

The depth of the management team is also important. For example, does the combined team have proficiency in operations, marketing, sales and finance? An effective management team often requires a balance of skills and temperaments. A visionary should be balanced with someone who closes the loop by executing ideas and concepts. Many VCs look for management teams that have a history of working together believing that this will mitigate human resource risks and inefficiencies between people who are still getting to know one another.

If a lack of financial capital precludes assembling the dream team of management at this time, leverage your business and personal contacts to build an advisory board (note this is a distinct group from the Board of Directors). The latter can add credibility and lend critical business experience and contacts. Select board advisors who will actively contribute and have a vested interest in seeing your business succeed (thereby justifying their continued effort and support). A word of caution, during the Internet bubble many entrepreneurs cited marquee names in their business plans in order to generate investor attention. However, in some cases these so-called advisors weren’t really actively involved in the companies. Investors will be skeptical. To gain the credibility associated with marquee advisors, identify the specific areas of participation and contribution.

Laurence K. Hayward is the Founder and CEO of TheVentureLab. To learn more about him follow the link here