From Floodgate managing partner Mike Maples:
Question: Was Vinod Khosla right when he claimed that 70% of VCs add negative value when they advise companies?
MM: The problem for a lot of VCs is they sometimes feel inadequate when they think that their primary skill is “picking.” Or even “just” being a company advocate or sounding board. Many went to great schools and have achieved great success before they became investors. Some were even awesome founders who created companies that went public and were legendary. VCs want to think they are “company builders”, not just investors.
Sometimes, in their quest to feel more successful they just die to show their “value add”. In so doing they sometimes subtract value because they create unhealthy co-dependencies with the companies they work with. And they offer “advice” that cannot possibly be well-informed enough to be helpful because they aren’t there enough to see what the company is really facing on the front lines.
I have seen many board meetings where the founder engages with such “advice” — not because the founder thinks it’s valuable, but because the founder views the day of the board meeting as a “sunk cost”….a requirement of the job that comes with raising money.
…I think that understanding where you add value vs. not is one of the most important aspects of succeeding in the [VC] business.
(1) Being aware of where you add value vs. not isn’t just a requirement for VCs — it’s true for everyone.
(2) Having clarity myself about where each board member adds value vs. not has significantly helped me get the most out of Seeking Alpha’s (excellent) board.