We’ve written in the past about the importance of optimizing for the specific VC you’ll be working with, rather than for the brand name. Each VC firm will allocate specific members of the team to tracking and supporting your company—typically some combination of the person who sourced the investment, a partner, and a junior team member. This team has the historical context on you and your company, feels emotional commitment to you and the opportunity, and is held accountable within their organization for the success of your company.
I would recommend building a relationship with a second point of contact at the firm, ideally an associate.
So much of venture capital is a human business. These team members are your points of contact into the fund, but they’re also the people who keep you and your needs top of mind. VC firms meet with talented execs looking for new opportunities, corporates hoping to invest in or find companies that can work with their business units, conferences looking for keynote speakers, LPs who want to understand which companies are outperforming and warrant growth capital, etc.
These opportunities are shared across the firm, and having a team who keeps you top of mind for the VP Sales candidate or Salesforce Ventures investment is a big asset.
But what happens if your VC champion leaves? This can happen for a variety of reasons; they’re leaving to start their own fund or to join a different fund, they’re leaving to start their own company, they’ve had a personal shock that requires them to stop working earlier than they’d planned, they’re going on parental leave, or countless other reasons.
What do I need to know?
Without further negotiation, the board (observer) seat belongs to the firm, not the individual. There have been complex negotiations to keep the original partner on the board when they leave to another firm, either by transitioning to an independent seat and having the original firm appoint someone new, or though more complex secondary buyouts so the original firm no longer holds shares.
This isn’t a particularly common occurrence at VC firms so there isn’t a standard operating playbook.
If the departure was on good terms, VCs will often keep the individual as a venture partner or advisor to the firm. This should minimize any interruption to you, as they’ll still hold board seats on the firm’s behalf. In this situation, I would recommend building a relationship with a second point of contact at the firm, ideally an associate. They’ll see it as an opportunity to build a long-term relationship with a portfolio company and demonstrate their ability to have impact. In return, you maintain a champion within the firm as your venture partner/advisor will miss out on some of the day-to-day information flows.
What shouldn’t I worry about?
It’s unlikely that future investors will care. If you continue to execute and outperform your competitors, VCs won’t be concerned that you had some turnover on your board that was out of your control. I’ve seen this concern raised in the past, and it’s more tied to company performance. If you’re underperforming and will need bridge capital or a significant time commitment—in that situation, all investors need to commit and collaborate to get the company to a good outcome, and if you lose your original champion, new investors may fear that the original firm won’t have bandwidth to help turn things around.
The good news is that the rules aren’t necessarily set in stone. This isn’t a particularly common occurrence at VC firms so there isn’t a standard operating playbook. The circumstances in which the person leaves, the industry qualifications of the rest of the firm to advise you, and your company’s performance all impact how smooth a transition you’ll experience.
Photo via Unsplash.