Some of the most successful entrepreneurial stories to date involve just the right combination of formidable founders and awesome VCs.
Despite of my being critical of some bizarre and unfriendly-founder practices by certain Latin American VCs, I strongly believe that the road to success for most startups in the region depends on finding the right partner to team up with. Against today’s fast-paced and ultra-competitive backdrop, your VCs can sometimes become your most precious asset when scaling. In time, these investors become founder’s moral support and their biggest fans.
So how do you find “the one”?
Right is better than best
First, make sure to meet (not necessarily pitch) to as many VCs as possible. Although genuine prestige is earned through years of working hard for founders, the right VC may not always be the ‘best’ VC. When you meet, show interest — ask her about herself: her successes and failures, her strengths and weaknesses, her blog… There are always two sides to every story so quietly investigate her past; if things ended badly with another founder, ask why. Investors make just as many mistakes, if not more, as founders. Look for a group of portfolio founders you truly identify with. Look at your peers’ relationship with their partner-funds; this could be you and your partner further down the road. At the end of the day if it feels right, it probably is.
Learn from her experience
A VCs most valuable and sustainable added value is her experience. It is not about age and how long she has been in the business, nor is it about the brands in her Linked-in profile. It’s about expertise, shaped by trial, failure and success. Take advice about starting, scaling and exiting from Hernan Kazsah (Kaszek Ventures), Heberto Taracena (Capital Invent) and Nazar Yasin (Rise Capital). If you need a genuine connection to Silicon Valley, think of partners like Patrick Arippol (DGF Investimentos) and Fernando Lelo de Larrea (ALLVP). Martha Cruz (NXTP Labs), Hector Sepulveda (Nazca), and Esteban Mancuso (Velum Venture) are digital visionaries. Learn from the business acumen and experience Ricardo Elizondo (Ideas y Capital) and Diego Serebrinsky (Alta Ventures, serebrisky.com) have to offer.
Read between the lines
There is nothing as important in a VC offer as when she signs her name on the term sheet. VCs are by definition return-maximizing entities. The difference between a mediocre and an Awesome investor is how the latter maximize upside by helping the founder thrive. When reading a term sheet, look for signs of trust, respect for minority shareholders and appreciation of the hard work and risk involved in every endeavor. Terms that cause excessive dilution, demand complete governance control or provide unfair preference on the upside for the new investor are all bad signs.
Get to know each other
The due diligence process is the best, and sometimes only way, to really get to know a future partner. Every interaction with your potential investors are precious data points. Best investors will begin adding value before even writing a check, offering you a glimpse of what the future looks like. Other VCs offer Summer internships or Entrepreneur in Residence programs, ideal to understand a VC firm and their culture. Some partners like to grab dinner or a beer. Others are happy to go for a run, play squash or golf. Every excuse to get to know each other is a good one.
If you are ready to scale and have access to dumb capital, think twice. Awesome Latin American VCs want to partner with you to turn your potential into greatness. Finding “the one” can change the future of your venture. But if in the end, after giving your whole, everything goes wrong — you will probably have a partner ready to bet on you again. After all, you are in this together — for better or for worse, for richer or for poorer.